LAW

2. On March 30, 2020, Mr. Maginoo agreed to construct a Quarantine Facility in a 1 hectare land for a
private hospital, #No Patient Hospital, worth 50 Million Pesos to be completed and delivered in 15
calendar days to address the COVID 19 pandemic. A penalty clause was stipulated that should Mr.
Maginoo fail to accomplish the project on time he will be liable to the private hospital in the amount of
P 15 Million Pesos. After 1/3 has been accomplished through the project Mr. Maginoo told the owner of
the private hospital that he is offering to pay the Penalty instead of finishing the work. Give your
comments and observations bearing in mind the divisibility and indivisibilty of contracts, obligations
with a penal clause and other related rules if there are any.

Answer: In this case, the obligation of accomplishing this project is doesn’t need to be fulfilled at one
time therefore it is divisible. For Mr. Maginoo, he cannot just pay the penalty as a substitute for
noncompliance except when he is expressly given the right by the owner of the hospital to do so. The
purpose of the penalty is to secure the performing of obligation, if Mr. Maginoo is allowed to pay the
penalty, this would make the obligation an alternative one. Additionally, as the case stated that there
are already 1/3 that have been accomplish, it is an example of a partial performance. It is clearly unfair
for Mr. Maginoo to pay 15 Million as penalty. Since the owner has been benefited by the partial
performance the court may equitably mitigate the penalty.