MODULE NO.

6- OBLIGATIONS WITH A PERIOD

Law on Business Transactions (MGT 161)

ART. 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.
(1125a)

A period is a future and certain event upon the arrival of which the obligation (or right)
subject to it either arises or is terminated. It is a day certain which must necessarily come (like
the year 2005; next Christmas), although it may not be known when, like the death of a person.
(Art. 1193, par. 3.)

An obligation with a period is one whose consequences are subjected in one way or
another to the expiration of said period or term. (8 Manresa 158; see Lirag Textiles, Inc. vs.
Court of Appeals, 63 SCRA 374 [1975].).

Period vs. Condition

1. A period is a certain event which must happen sooner or later at a date known
beforehand, or at a time which cannot be determined, while a condition is an
uncertain event;
2. A period refers only to the future, while a condition may refer also to a past event
unknown to the parties;
3. A period merely fixes the time for the efficaciousness of the obligation. If suspensive,
it cannot prevent the birth of the obligation in due time; if resolutory, it does not
annul, even in fiction, the fact of its existence. On the other hand, a condition causes
an obligation to arise or to cease. Because of this difference, a period does not carry
with it, except when there is a stipulation expressly made by the parties, the same
retroactive consequences that follow a condition (see 8 Manresa 159-160.);
4. A period which depends upon the will of the debtor empowers the court to fi x the
duration thereof (Art. 1197, par. 2.), while a condition which depends upon the sole
will of the debtor invalidates the obligation (Art. 1182.); and
5. Unless there is an agreement to the contrary, the arrival of a period does not have
any retroactive effect, while the happening of a condition has retroactive effect. Like
 a condition (see Art. 1183.), a period must be possible. If the period is impossible
(e.g., February 30, because it will never come; within 24 hours to deliver a ship in
foreign country because it is too short), the obligation is void.

Kinds of Period:

(1) According to effect:

(a) Suspensive period (ex die). — The obligation begins only from a day certain upon the arrival
of the period (Art. 1193, par. 1.); and

(b) Resolutory period (in diem). — The obligation is valid up to a day certain and terminates
upon the arrival of the period. (par. 2.)

(2) According to source:

(a) Legal period. — When it is provided for by law;

(b) Conventional or voluntary period. — When it is agreed to by the parties (Art. 1196.); and

(c) Judicial period. — When it is fixed by the court. (Art. 1197.)

(3) According to definiteness:

(a) Definite period. — When it is fixed or it is known when it will come (Art. 1193, par. 3.); and

(b) Indefinite period. — When it is not fixed or it is not know when it will come. Where the period
is not fixed but a period is intended, the courts are usually empowered by law to fix the same.
(see Art. 1197.)

ART. 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. (n)

See discussion on Art. 1189.

ART. 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. (1126a)

Article 1195 applies only to obligations to give. It is similar to Article 1188, paragraph
2, which allows the recovery of what has been paid by mistake before the fulfillment of a
suspensive condition. The creditor cannot unjustly enrich himself by retaining the thing or
money received before the arrival of the period.

The presumption, however, is that the debtor knew that the debt was not yet due. He
has the burden of proving that he was unaware of the period. Where the duration of the period
depends upon the will of the debtor (see Art. 1197, par. 3.), payment by him amounts, in effect,
to his determination of the arrival of the period. The obligor may no longer recover the thing
or money once the period has arrived but he can recover the fruits or interests thereof from
the date of premature performance to the date of maturity of the obligation.

Article 1195 has no application to obligations to do or not to do because as to the

former, it is physically impossible to recover the service rendered, and as to the latter, as the
obligor performs by not doing, he cannot, of course, recover what he has not done. (see 8
Manresa 166.)

ART. 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 other circumstances it should appear that the period
has been established in favor of one or of the other. (1127)

In an obligation subject to a period fixed by the parties, the period is presumed to have
been established for the benefit of both the creditor and the debtor. This means that before
the expiration of the period, the debtor may not fulfill the obligation and neither may the
creditor demand its fulfillment without the consent of the other especially if the latter would be
prejudiced or inconvenienced thereby.

In a reciprocal contract like a lease, the period must be deemed to have been agreed
upon for the benefit of both parties, absent language showing that the term was deliberately
set for the benefit of the lessee or the lessor alone. (Fernandez vs. Court of Appeals, 160 SCRA
577 [1988]; Buce vs. Court of Appeals, 332 SCRA 151 [2000].)

The presumption, of course, is rebuttable. (Osorio vs. Salutillo, 87 Phil. 356 [1950].)

The tenor of the obligation or the circumstances may, however, show that it was the
intention of the parties to constitute the period for the benefit of either the debtor or the
creditor. The benefit of the period may be the subject of express stipulation of the parties.

(1) Term is for the benefit of the debtor alone. — He cannot be compelled to pay
prematurely, but he can, if he desires, do so.
(2) Term is for the benefit of the creditor. — He may demand fulfillment even before the
arrival of the term but the debtor cannot require him to accept payment before the
expiration of the stipulated period.
Acceleration by debtor of time of payment.

The payment of interest may not be the only reason why a creditor may not be bound to
receive payment before maturity. There may be other reasons, to wit: “that the creditor may
want to keep his money invested safely instead of having it in his hands,” and “that the creditor
by fixing a period, protects himself against sudden decline in the purchasing power of the
currency loaned especially at a time when there are many factors that may influence the
fluctuation of the currency.”

All available authorities on the matter are agreed that unless the creditor consents, the
debtor has no right to accelerate the time of payment even if the premature tender included
an offer to pay principal and interest in full. (De Leon vs. Santiago Syjuco, Inc., 90 Phil. 311
[1951].)

Thus, in a case, after holding that the creditor could not be obliged to accept payments
before the expiration of the period (5 years) agreed upon, the Supreme Court said: “The
creditors evidently stipulated that repayment could not be made within five (5) years because
they wanted to derive some advantage from the change of currency which they foresaw or
waited. The creditors wisely provided against repayment in Japanese Notes that were then of
little value making the calculation that after five (5) years, the Japanese would not be here and
the said notes would have ceased to be lawful currency.” (Nicolas vs. Matias, 89 Phil. 126
[1951].)

Partial Acceptance

The acceptance of a partial payment by a creditor amounts to a waiver of the period

agreed upon during which payment should not be made. If no explanation is given why the
creditor received such partial payment before the maturity of the obligation, it may be
presumed that his relinquishment was intentional, and his choice to dispense with the term,
voluntary. It is not a mere forbearance. (Lopez vs. Ochoa, 103 Phil. 950 [1958].)

Computation of Period According to the Civil Code:

“When the law speaks of years, months, days or nights, it shall be understood that years are of
three hundred sixty-fi ve (365) days each; months of thirty (30) days; days of twenty-four (24)
hours; and nights from sunset to sunrise.

If months are designated by their name, they shall be computed by the number of days which
they respectively have.

In computing a period, the first day shall be excluded, and the last day included.” (Art. 13
thereof.)

If the last day is a Sunday or a legal holiday, the time shall not run until the end of the next day
which is neither Sunday nor a holiday.
A year is equivalent to 365 days regardless of whether it is a year or a leap year. (National
Marketing Corporation vs. Tecson, 29 SCRA 70 [1969].)

However, the Administrative Code Provides:

“Legal Periods — “Year’’ shall be understood to be twelve calendar months; “month’’ of thirty
days, unless it refers to a specific calendar month in which case it shall be computed according
to the number of days the specific month contains; “day,’’ to a day of twenty-four hours; and
“night’’ from sunset to sunrise.’’ (Chap. VIII, Book I, Sec. 31 thereof.)

A calendar month is “a month designated in the calendar without regard to the number of days
it may contain. “It is the “period of time running from the beginning of a certain numbered day
up to, but not including, the corresponding numbered day of the next month, and if there is
not a sufficient number of days in the next month, then up to and including the last day of that
month.’’

To illustrate: One calendar month from December 31, 2007 will be from January 1, 2008 to
January 31, 2008; one calendar month from January 31, 2008 will be from February 1, 2008
until February 29, 2008.

Under the Administrative Code, a year is composed of 12 calendar months, the number of days
being irrelevant, whereas under the Civil Code a year is equivalent to 365 days, whether it be
a regular year or a leap year. There exists a manifest incompatibility in the manner of computing
legal periods. The Administrative Code of 1987 being the more recent law governs the
computation of legal periods. (Comm. Of International Revenue vs. Primetown Property
Group, Inc., 531 SCRA 436 [2007].)

ART. 1197. If the obligation does not fi x 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 fi x 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. (1128a)

The period mentioned in the above provision refers to a judicial period as distinguished
from the period fixed by the parties in their contract which is known as contractual period.

If the obligation does not state a period and no period is intended, the court is not
authorized to fix a period. The courts have no right to make contracts for the parties.

Exceptions:
 Under Article 1197 (pars 1 and 2), there are two cases when the court is authorized to fi
x the duration of the period.

Article 1197 is part and parcel of all obligations contemplated therein. Hence, whenever
the court fixes the term of an obligation, it does not thereby amend or modify the same. It
merely enforces or carries out the intention of the parties. (Deudor vs. J.M. Tuazon and Co.,
Inc., 2 SCRA 129 [1961].) It cannot arbitrarily fi x a period out of thin air for the law expressly
prescribes “that the courts shall determine such period as may under the circumstances have
been probably contemplated by the parties.” (Art. 1197, par. 3.)

On obligations coming within the purview of Article 1197, the only action that can be
maintained is to ask the court first to determine the term within which the obligor must comply
with his obligation for the reason that fulfillment of the obligation itself cannot be demanded
until after the court has fixed the period for its compliance and such period has arrived. The
duration of the period should be fixed in an action brought for that express purpose separate
from the action to enforce payment but such technicality need not be adhered to when a prior
and separate action would be a mere formality and would serve no other purpose than to
delay. (Concepcion vs. People, 74 Phil. 63 [1942]; Gonzales vs. De Jose, 66 Phil. 369 [1938];
see Tiglao vs. Manila Railroad Co., 98 Phil. 181 [1956]; Calero vs. Carrion, 107 Phil. 549 [1960];
Borromeo vs. Court of Appeals, 47 SCRA 65 [1972]; Pages vs. Basilan Lumber Co., 104 Phil.
882 [1958].)

Period fixed cannot be changed by the courts.

(1) If there is a period agreed upon by the parties and it has already lapsed or expired,
the court cannot fi x another period. (Gonzales vs. Jose, 66 Phil. 369; Millar vs. Nadres, 74 Phil.
307 [1903]; Millare vs. Hernando, 151 SCRA 484 [1987].)

(2) From the very moment the parties give their acceptance and consent to the period
fixed by the court, said period acquires the nature of a covenant, because the effect of such
acceptance and consent by the parties is exactly the same as if they had expressly agreed upon
it, and having been agreed upon by them, it becomes a law governing their contract. The
period fixed in a final judgment is res judicata and as such forms an integral part of the
imperfect contract which gave rise to its designation by the court, and thence, forward part of
a perfect and binding contract. Consequently, the court cannot change it. (Barretto vs. City of
Manila, 11 Phil. 624 [1908].) However, the parties may modify the term by a new agreement.

ART. 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. (1129a)

The general rule is that the obligation is not demandable before the lapse of the period.
However, in any of the five (5) cases mentioned in Article 1198, the debtor shall lose every right
to make use of the period, that is, the period is disregarded and the obligation becomes pure
and, therefore, immediately demandable.

The exceptions are based on the fact that the debtor might not be able to comply with
his obligation.

(1) When debtor becomes insolvent.

(2) When debtor does not furnish guaranties or securities promised.
(3) When guaranties or securities given have been impaired or have disappeared.
(4) When debtor violates an undertaking.
(5) When debtor attempts to abscond.