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Oblicon Study Guide (11)

Bachelor of Science in Accountancy (Polytechnic University of the Philippines)

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STUDY GUIDE 8
Obligations with a Penal Clause
I. Definitions
Define or give the meaning of the following:
1. Obligation with a penal clause;
 Obligation with a penal clause is one which contains an accessory undertaking to pay a
previously stipulated indemnity in case of breach of the principal prestation, intended
primarily to induce its fulfillment. (Article 1226).

2. Penal clause;
 Penal clause is an accessory undertaking attached to an obligation to assume greater
liability in case of breach. (Article 1226).

3. Joint penal clause.

 Joint penal clause or can also be called as cumulative penal clause is when both the
principal obligation and the penal clause can be enforced. (Article 1226).

II. Discussions
1. What are the purposes of incorporating a penal clause to an obligation?
According to Article 1226, the purposes of incorporating a penal clause to an
obligation are to insure their performance by creating an effective deterrent against
breach, making the consequences of such breach as onerous as it may be possible and to
substitute a penalty for the indemnity for damages and the payment of interests in case of
non-compliance; or to punish the debtor for the on-fulfillment or violation of his
obligation.

2. In an obligation with a penal clause, may the creditor still recover damages and interests
in addition to the stipulated penalty?
According to Article 1226, the creditor may still recover damages and interests in
addition to the stipulated penalty when so stipulated by the parties, or when the obligor
refuses to pay the penalty, in which case the creditor may recover legal interest thereon

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or when the obligor is guilty of fraud in the fulfillment of the obligation, in which case
the creditor may recover damages caused by such fraud.

3. In what cases may the debtor validly object to the enforcement of the stipulated penalty?
According to Article 1227, the debtor can object the enforcement of the stipulated
penalty when there is a performance already from the debtor or when the creditor has
decided to require fulfillment of the obligation.

III. Problems
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 P10,000. X wants to just pay the
penalty instead of delivering the horse. Has Y the right to refuse to accept the penalty
in lieu of the horse?
Yes, according to Article 1227, the debtor which is X cannot exempt himself from
the performance of the obligation by just paying the penalty. Therefore, Y has right to
refuse the penalty in lieu of the horse. Since the penalty is just an accessory obligation
attached to the principal obligation, X is not allowed to do the accessory obligation
without doing the principal obligation which is to deliver the horse. The debtor can
only exempt himself from the non-fulfillment of the obligation only when the creditor
expressly given him the right to do so.

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?
Yes, according to Article 1228, proof of actual damages suffered by the creditor is
not necessary in order that the penalty may be demanded. All the creditor has to prove
is that the debtor violated his obligations. Whether the creditor suffered an injury or
not, he has the right to enforce penalty if the debtor proven to violate his obligation.

3. In the same problem, suppose X was guilty of negligence in the fulfillment of his
obligation. Is X liable for damages in addition to the penalty?
No, since according to Article 1226, X can only recover damages when it was
stipulated by the parties, when the obligor refuses to pay the penalty, and when the
obligor is guilty of fraud. In this case, X was only guilty of negligence and not fraud.
X cannot be held liable for damages in addition to the penalty.

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