Law on “Obligations and Contracts”

Chapter 3: Different kinds of Obligation

Classification of Obligations:
 Primary Classification
1. Pure and conditional obligations
2. Obligations with a period
3. Alternative and facultative obligations
4. Joint and solidary obligations
5. Divisible and indivisible obligations
6. Obligations with a penal clause
 Secondary Classification
1. Unilateral and bilateral obligations
2. Real and personal obligations
3. Determinate and generic obligations
4. Civil and natural obligations
5. Legal, conventional, and penal obligations

Section 1: Pure and Conditional Obligations

Art 1179
Every obligation whose performance does not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is demandable at once.
Every obligation which contain a resolutory condition shall also be demandable, without
prejudice to the effects of the happening of the event.
Obligation under technicalities (Prestation)
 Pure, Conditional and Period
Pure Obligation
 Immediately demandable by the creditors and the debtor cannot be excused from not
complying with his prestation
 Does not contain any condition or term upon which the fulfillment is made to depend
General Rule: No condition and no period
Conditional Obligation
 Depends upon a future / uncertain event, or upon a past event unknown to the contracting
parties.
 Subject in one way or another to the fulfillment of a condition
Characteristics of a Condition:
1. Future and uncertain
2. Past but unknown
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Two principal kinds of condition

 Suspensive Condition
 Acquisition by rights by the creditor depends upon the happening of the event
which constitutes the condition, if such condition does not take place, it would be
of the conditional obligation had never existed.
 Fulfillment will give rise to an obligation
 GR: No fulfillment, no obligation
 Resolutory Condition
 The rights and obligations already existing are under threat of extinction upon the
happening or fulfillment of such condition.
 Fulfillment will extinguish an obligation
 GR: Fulfillment of condition, extinguish obligation
Art 1180
When the debtor binds himself to pay when his means permit him to do so, the obligation
shall be deemed to be one with a period, subject to the provisions of article 1197
When duration of period depends upon the will of debtor
1) Debtor promises to pay when his means permit him to do so
o What is left on debtor’s will is the duration of period and not whether he should
pay or not.
o If debtor and creditor cannot agree as to specific time for payment, the court shall
fix the same on the application of either party.
2) Other Cases:
o “Little by little”
o “As soon as possible”
o “From time to time”
o “At any time I have the money”
o “In partial payment”
o “When I am in a position to pay”
Art 1181
In conditional obligation, 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.
 Acquisition of rights
o Depends upon the happening which constitutes the condition
o Its efficacy or obligatory force is subordinate to the happening of a future and
uncertain event
o Suspensive Condition
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 Example: Promise to give a car after graduating from law school as cum
laude
 Loss of rights already acquired
o Conditions fulfilled produces the extinguishment or loss of rights already acquired
o Resolutory Condition
 Example: Donation by reason of marriage
- Celebration of marriage is a resolutory condition
- Did not push through – donation may be revoked
Art 1182
When the fulfillment of the condition depends upon the sole will of the debtor, the
conditional obligation shall be void. If it depends upon chance or upon the will of a third person,
the obligation shall take effect in conformity with the provisions of this code.
Classification of Conditions:
A. As to effect:
1) Suspensive – happening gives rise to the obligation
2) Resolutory – happening extinguishes the obligation
B. As to form:
1) Express – clearly stated
2) Implied – acts and merely inferred
C. As to possibility
1) Possible – capable of fulfillment
2) Impossible – not capable of fulfillment
D. As to cause or origin
1) Potestative – depends upon the will of one of the parties
2) Casual – depends upon chance of upon the will of a third person
3) Mixed – depends partly upon chance or partly upon the will of a third person
E. As to mode:
1) Positive – consists in the performance of an act
2) Negative – consists in the omission of an act
F. As to numbers
1) Conjunctive – several conditions and all must be fulfilled
2) Disjunctive – several conditions and only one or some of them must be fulfilled
G. As to divisibility
1) Divisible – susceptible of partial performance
2) Indivisible – not susceptible of partial performance
Potestative Condition
- Depends upon the sole will of the contracting parties
Where SUSPENSIVE CONDITION depends upon will of debtor
 Conditional obligation is VOID – because its validity and compliance is left to the debtor
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 Only the condition is VOID – if the obligation is pre – existing

Where SUSPENSIVE CONDITION depends upon will of creditor
 Obligation is VALID
Where RESOLUTORY CONDITION depends upon will of debtor
 Obligation is VALID
 Position of the debtor when it comes to resolutory is the same as the creditor when it
comes to suspensive condition
 Example: Pacto de retro
Casual Condition
- Depends upon chance or will of a third person
 Suspensive Condition – VALID
Mixed Condition
- Suspensive condition – depends partly upon chances or partly upon the will of third
person
= Valid
- Obligation still depends upon that part of the condition whose fulfillment depends upon
the will of the debtor
= Void
Art 1183
Impossible conditions, those contrary to good customs or public policy and those
prohibited by law shall annul the obligation which depends upon them. If the obligation is
divisible, that part thereof which is not affected by the impossible or unlawful condition shall be
valid.
The condition not to do an impossible thing shall be considered as not having been
agreed upon.
 Refers to suspensive condition – since it applies only to where impossibility already
existed at the time the obligation was constituted
Two kinds of Impossible Conditions
1. Physically impossible conditions – Nature of things: cannot exist / cannot be done
2. Legally impossible conditions – contrary to law, morals, good customs, public order or
public policy.
Effect of Impossible Condition
a. Conditional obligation is VOID – impossible conditions annul the obligation which
depends upon them and the reason behind why it is void is that the obligor knows his
obligation cannot be fulfilled.
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b. Conditional obligation is VALID – if the condition is an act of not to do, it is disregarded,

and the obligation is rendered pure and valid.
c. Only the affected obligation is VOID
Not affected by impossible condition = VALID
d. Only the condition is VOID – if the obligation is pre-existing and do not depend on
impossible condition.
Art 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.
Positive Condition
- The happening of an event at a determinate time
- Obligation is extinguished:
1) As time expires without the event taking place
2) If it becomes indubitable although time has not yet expired
EXAMPLE:
 X obliges to give B 10k if B marry C before he reaches 23 yrs. Old
i. X is liable if B marries before 23
ii. Not liable if B marries C on or after 23
iii. Not liable if B dies or if no marriage took place
Art 1185
The condition that some event will not happen at a determinate time shall 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, bearing in mind the nature of the obligation.
Negative Condition
- Event will not happen at a determinate time
- Obligation shall become effective and binding:
1) Time indicated has elapsed w/o the event taking place
2) Become evident that event cannot occur although time has not yet elapsed
3) No time fixed – considered to arrive at the intention of the parties
EXAMPLE:
 X obliges to give B 10k if B is not yet married to C on December 30
i. X is not liable if B marries C on or prior December 30
ii. X is liable if B marries C after December 30
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iii. X is liable if C dies on or prior December 30 since the obligation becomes

effective and is evident to be effective automatically.

Art 1186
The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment
Constructive Fulfillment of Suspensive Condition
3 Requisites – the actual prevention of debtor and not another cause
1. Condition is SUSPENSIVE
2. Obligor actually PREVENTS THE FULFILLLMENT of the condition
3. He acts VOLUNTARILY
*as long as the acts of the obligor is not malice or fraud.
EXAMPLE:
X agreed to give Y commission if he sells X’s land based on its terms as Y found a buyer,
X sold the land to a buyer on a much lower price without the aid of Y.
- Condition of commission payment was prevented by X
Constructive Fulfillment of Resolutory Condition
- Debtor is bound to return what he has received upon the fulfillment of the condition
Art 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 effect of fulfillment of suspensive condition
i. To Give – demandable only upon the fulfillment of the condition
o Condition is fulfilled – effect shall retroact to the day when obligation was
constituted
ii. To do / Not to do – no fixed rule provided
o Retroactivity is still applicable
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o Courts are empowered by the use of sound discretion and bearing in mind the
intent of the parties and to determine the retroactive effect of the suspensive
condition that has been complied with

Retroactive effect as to fruits and interest

i. Reciprocal Obligation
o No retroactivity – because it is mutually compensated
o Once the condition is not yet fulfilled – no right on fruits and interests
ii. Unilateral Obligation
o No retroactive effect because they are gratuitous
o Example: Donation – debtor must deliver the thing and has the right to keep the
fruits and interest as long as the period of which is during the pendency and
unless a contrary intention by the debtor may be inferred.
Art 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 fulfillment of suspensive condition
I. Right of Creditor
o May take or bring appropriate action for the preservation his right
o Paragraph 1: analogy to obligations subject to resolutory condition where both
parties must return what both have received.
II. Right of Debtor
o Solutio Indebiti – to recover what he has paid by mistake
o Based on the Principle: “no one shall enrich himself at the expense of others”
o Note: payment before fulfillment of condition must be “by mistake”, the debtor is
deemed to have impliedly waived the condition = no recovery
Art 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;
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(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 the 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 no other right than that
granted to the usufructuary.
Improvement, Loss or Deterioration of the Thing
 Requisites:
1) Real obligation – obligation to give
2) Specific or determinate thing
3) Subject to Suspensive condition
4) Condition is fulfilled
5) Loss, deterioration, or improvement of thing during pendency of condition
 Kinds of Loss
1. Physical loss – thing perishes
2. Legal loss – goes out of commerce / legal becomes illegal
3. Civil loss – disappears in a way that its existence is unknown
 Rules in case of loss, deterioration, or improvement of thing during pendency of
suspensive condition:
1) Loss w/o debtor’s fault (fortuitous event)
o GR: obligation is extinguished, and debtor is not liable
2) Loss through debtor’s fault
o Debtor is entitled to pay damages
3) Deterioration w/o debtor’s fault – value is reduced or impaired
o Creditor will suffer deterioration or impairment
4) Deterioration through debtor’s fault
o Rescission with damages – Value of the thing + Incidental fee
o Fulfillment with damages – thing / obligation + impairment amount +
incidental damages
5) Improvement by nature or time
o Benefits the creditor in as much as the creditor would suffer deterioration
through fortuitous event.
o Compensated in case of impairment
6) Improvement at the expense of debtor
o Has the right granted to usufructuary with respect to improvements.
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o Usufruct – right to enjoy the use and fruits of the thing.

Art 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 received.
In case of 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 obligation 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. (1123)
Effects of fulfillment of Resolutory Condition
 Obligations to give
o When the condition is fulfilled = obligation is extinguished, and there will be an
obligation to return to each other what they have received and return to status quo
o Thing to be returned is legally in possession of third party who acted in good faith
= restitution is against the other
o Mutual restitution is absolute = applies not only to the thing/s received but also to
the fruits and interests
o Retroactivity admits exceptions according as the obligation is bilateral or
unilateral = mutually compensated
o The only possible exception for suspensive and resolutory condition is when the
intention of the parties is otherwise.
 Obligation to do / not to do
o The court shall determine the retroactive effect of the fulfillment.
o In the exercise of discretion, the court may disallow retroactivity by taking in
account the circumstances of each case.
 Resolutory Condition – applicable on this article with the obligation to return
o Happening has the same effect as when the condition is suspensive.
o Involves reciprocal obligation
o Debtor becomes creditor and creditor become debtor when having the obligation
to return
o Pending the fulfillment of the condition, parties are entitled to the rights granted
by article 1188
Art 1191: Reciprocal Obligation & Juridical Rescission
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.
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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. (1124)
 Art 1191 governs where there is non – compliance by one of the parties in case of
reciprocal obligation

Kinds of Obligation according to person obliged:

1. Unilateral – only one party is obliged to comply with the prestation
2. Bilateral – mutually bound to each other and may be reciprocal or non – reciprocal
o Reciprocal Obligation – arise from same cause and in which each party is debtor
and creditor of each other.
*Fulfillment = as of suspensive condition
*Non – Fulfillment = tacit or implied resolutory condition / giving a right
to demand rescission
*Example: Contract of Sale
o Non – Reciprocal Obligation – do not impose / do not depend simultaneous and
correlative performance on both parties
 Obligations are not related to the other party’s obligation
 Example: contract of loan or contract of commodatum
Remedies in reciprocal obligation
1. Choice of remedies
o Specific performance or fulfillment with damages
o Action for rescission with damages
2. Remedy of rescission for non – compliance = Breach
o Principal action must be distinguished from subsidiary action by reason of lesion
or damage under article 1381 and from cancellation of a contract based
o When party demands rescission = treats the non – fulfillment by the other party’s
obligation as resolutory condition.
Court may grant guilty party term for performance
 The court shall order the rescission claimed unless there should be “just cause” for
granting the party in default.
 Exception: guilty party is willing to comply with his obligation.
Remedies are alternatives
 Only one remedy can be chosen and not both
 If fulfillment is chosen, he may also seek rescission if the latter should become
impossible.
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 But if rescission is chosen, he cannot demand fulfillment

Limitations on right to demand rescission
1) Resort to the courts – judicial rescission
o “no person can take justice or the law in his own hands and decide by himself
what are his rights in the matter.
2) Power of court to fix period
o If there is a just cause reason and as where the default incurred was not willful or
could be excused in view of circumstances

3) Right of third person – if subject matter is in its hands and acted in good faith
o Rescission is not allowed
4) Substantial violation
o GR: rescission will not be granted for slight breach
o “violation shall be substantial”
5) Waiver of right
o “right to rescind may be waived, expressly or impliedly”
Rescission w/o judicial decree
a) Automatic rescission is expressly stipulated
 Violation of contract / breach = cancellation
 Right to rescind is not “implied” but expressly recognized
 There must be at least a written notice sent to the other party to have extra –
judicial rescission which contains a legal effect where such party does not oppose
it.
b) Contract still executory - Art 1169, last paragraph – delay
 It is not necessary that there be a stipulation where automatic rescission is allowed
 Extrajudicial rescission = final decision of the court can finally settle whether the
rescission was proper or not.
Art 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
 First infractor known
 Liability of the 1st should be equitably reduced
 First infractor cannot be determined
 Deemed extinguished and each shall bear own damages
Law on “Obligations and Contracts”