Obligations and Contracts

Expanded Syllabus
 
Module 3: C. Different Kinds of Obligations

Classification of Obligations

a. Pure and Conditional Obligations (Art. 1179-1192)

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 contains a resolutory condition shall also be
demandable, without prejudice to the effects of the happening of the event. 
 
Pure Obligation – one which does not contain any condition or term
upon which its fulfillment is made to depend. Therefore, it is immediately
demandable.
 
Conditional Obligation – kind of obligation which consequences are
subject in one-way or another to the fulfillment of a condition.

b. With a Period or a Term (Art. 1193-1198)

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.
 
Period - is a future and certain event upon the arrival of which, the
obligation subject to it either arises or is extinguished.

c. Alternative and Facultative (Art. 1199-1206)

Art. 1199. A person alternatively bound by different prestations shall

completely perform one of them.  The creditor cannot be compelled to
receive part of one and part of the other undertaking.
 
ALTERNATIVE OBLIGATION – an obligation where the debtor is
required to fulfill ONLY ONE of the several prestations to extinguish the
obligation.
 
 FACULTATIVE OBLIGATION – an obligation where the debtor is bound to
perform ONLY ONE prestation, with a reserved right to choose another
prestation as SUBSTITUTE for the principal.

d. Joint and Solidary (Art. 1207-1222)

Art. 1207. The concurrence of two or more creditors or of two or more

debtors in one and the same obligation does not imply that each one of the
former has a right to demand, or that each one of the latter is bound to
render, entire compliance with the prestation. There is a solidary liability
only when the obligation expressly so states, or when the law or the nature
of the obligation requires solidarity.
 
JOINT – entire obligation is to be paid or performed proportionately by
the debtors;
 
SOLIDARY – each one of the debtors are obliged to pay the entire
obligation, each one of the creditors has the right to demand from any of
the debtors, the fulfillment of the entire obligation;
 
e. Divisible and Indivisible (Art. 1223-1225)

Art. 1223. The divisibility or indivisibility of the things that are the object
of obligations in which there is only one debtor and only one creditor does
not alter or modify the provisions of Chapter 2 of this Title.
 
DIVISIBILITY – refers to the susceptibility of an obligation to be
performed partially.
 
INDIVISIBILITY – refers to the non-susceptibility of an obligation to
partial performance.

f.  With a Penal Clause (Art. 1226-1230)

Art. 1226. In obligations with a penal clause, the penalty shall substitute
the indemnity for damages and the payment of interests in case of
noncompliance, if there is no stipulation to the contrary. Nevertheless,
damages shall be paid if the obligor refuses to pay the penalty or is guilty of
fraud in the fulfillment of the obligation. 
 
The penalty may be enforced only when it is demandable in accordance
with the provisions of this Code.
 
PENALTY CLAUSE
 
PURPOSES of PENALTY CLAUSE:
 
1. To ensure performance by creating an effective deterrent against
breach, making the consequences of such breach as onerous as it may be
possible. (REPARATION)
 
2. To substitute a penalty for the indemnity for damages and the payment
of interest in case of non-compliance or to punish the debtor for the non-
fulfillment or violation of his obligation. (PUNISHMENT)
 
 

LESSON 1. Pure and Conditional Obligations

•   Pure Obligations (Art. 1179, par. 1)

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 contains a resolutory condition shall also be
demandable, without prejudice to the effects of the happening of the event. 
 
Pure Obligation – one which does not contain any condition or term
upon which its fulfillment is made to depend. Therefore, it is immediately
demandable.

•   Conditional Obligations (Art. 1181)

-   Concept
 Conditional Obligation – kind of obligation which
consequences are subject in one way or another to the
fulfillment of a condition.
 
-   Condition v. Period or Term
 Condition – future and uncertain event upon which the
existence or extinguishments of an obligation is made to
depend
 
 Period - is a future and certain event upon the arrival of which,
the obligation subject to it either arises or is extinguished.
 
 •   Kinds of Conditions
a. As to the effect on the obligation (Art 1181)
i.    Suspensive Condition or Condition precedent - Its fulfillment
gives rise to the obligation, if not fulfilled, no obligation will
arise.

•   Retroactive effect when condition is fulfilled (Art. 1187)

 
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.
 
1. In obligations to give — an obligation to give subject to a
suspensive condition becomes demandable only upon the
fulfillment of the condition. However, once the condition is
fulfilled, its effects shall retroact to the day when the obligation
was constituted.
 
2. In obligations not to do — With respect to retroactive effect of
the fulfillment of a suspensive condition, in obligations to do or not
to do, no fixed rules is provided. The courts are empowered by the
use of sound discretion and bearing in mind the intent of the
parties, to determine in each case, the retroactive effect of the
suspensive condition.
 

•   Rights of the creditor and debtor before fulfillment of the

condition (Art. 1188)
 
 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. 
 
1. Rights of Creditors — he may take or bring appropriate actions
for the preservation of his right, as the debtor may render nugatory
the obligation upon the happening of the condition.
 
2. Rights of debtor — He is entitled to recover what he has paid
by mistake prior to the happening of the suspensive condition
 
ii.   Resolutory Condition or Condition subsequent - In obligations
subject to a resolutory condition, the happening of the event
which constitutes the condition produces the extinguishment or
loss of rights already acquired

b. As to the cause or origin (Art 1182)

i.    Potestative
-    A condition suspensive in nature and which depends upon the
sole will of one of the contracting parties
 
•   Effect of fulfillment of condition depends solely on the will of
the debtor
-   Conditional depends solely upon the will of the DEBTOR,
the conditional obligation shall be void because its validity
and compliance is left to the will of the debtor and
therefore, it cannot be easily demanded.
 
•   Debtor's promise to pay when he can is not a condition (Art
1180)
-    The obligation shall be deemed to be one with a period. In
this case, what depends upon the debtor’s will is not
whether he should pay or not for indeed he binds himself
to pay. What is left only to his will is the duration of the
period. If the debtor and the creditor cannot agree as to the
specific time for payment, the court shall fix the same on
the application of either party. (Art. 1197, par. 2.)
 
 
 ii.    Casual
-    The condition depends upon chance or upon the will of a third
person
 
iii. Mixed
-    The condition depends partly upon chance and partly upon
the will of a third person.
 
c. As to possibility (Art. 1183)
1. Possible - the condition is capable of fulfillment, legally and
physically
2. Impossible - the condition is not capable of fulfillment, legally or
physically
 
d. As to mode: positive or negative (Art. 1184-1185)
1. Positive - the condition consists of the performance of an act.
2. Negative - the condition consists of the omission of an act.

•   Rules in case of loss, deterioration or improvement pending the

happening of the condition (Art. 1189 - 1190)
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;
 
(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 it 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.
 
a. Definition of loss, deterioration and improvement
 
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.
 
b. Effect of loss or deterioration 180

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)

Payment before arrival of period.

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.
Under the former provision, the debtor could recover only the
fruits or interests but not the thing or sum given or paid in
advance. This rule was deemed unjust and “contrary to the
manifest intention of the parties.’’ (see Report of the Code
Commission, pp. 130-131.)

Debtor presumed aware of 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.
 No recovery in personal obligations.
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.)
 
•   Without debtor's fault
 Extinguished, unless there is a stipulation to the contrary.
Mode of extinguishment Art 1262 Par 1
 Not liable for damage, creditor must accept the thing in
impaired condition
 
•   With debtor's fault
 Liable to damages upon fulfillment of condition
 May demand the thing OR ask for rescission, in either case,
creditor may recover damages
 
 
c. Effect of improvement
 
•   By nature or time
 Governed by Art 579 (useful improvements or for mere
pleasure, remove if possible to remove without damage to
property) and Art 580 (set off the improvements he may
have made against any damage)
 
•   Due to debtor's effort and expense
 Inures to the benefit of the creditor by virtue of principle of
retroactivity of conditional obligations At debtor’s expense
Only usufructuary rights; 
 
•   Effect of prevention of the fulfillment of the condition by the obligor (Art.
1186)
1. The condition is suspensive;
2. The obligor actually prevents the fulfillment of the condition;
3. He acts voluntarily