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Obligations and Contracts (Chapter 3 Sec 1)
Obligations and Contracts (Chapter 3 Sec 1)
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
Law on “Obligations and Contracts”
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
Law on “Obligations and Contracts”
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
(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.
Law on “Obligations and Contracts”
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
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”