CHAPTER 1 GENERAL
PROVISIONS
Article 1156 – Definition of Civil
Obligation
1) Juridical necessity –
enforceable in court in case
of non-compliance (enforce-
ability) ; if not enforceable,
only a natural obligation
2) Essential requisites of a civil
obligation:
a) Passive subject – debtor or
obligor
b) Active subject – creditor or
oblige
c) Object or prestation – subject
matter
d) Juridical or legal tie – that
which binds the parties or
efficient cause
3) Forms – oral, in writing, partly
oral or in writing
General rule – no form is
required for validity except for
specific contracts i.e. sale of
real property
4) Sources of Obligations
a) Law
b) Contracts
c) Quasi-contracts
d) Crimes/delicts
e) Quasi-delicts
a) Law – are not
presumed; only those
expressly determined in
this code or in special
laws are demandable
(Art. 1158)
- Payment of taxes
b) Contracts –
stipulation of
parties; law
between the
parties;
characteristic of
compellability
(Art. 1159)
c) Quasi-contracts –
lawful, voluntary and
unilateral acts which are
enforceable to the end
that “no one shall be
unjustly enriched at the
expense of another”
- Solutio indebiti and
negotiorum gestio
d) Crimes/Delicts – “every
person criminally liable is
also civilly liable”
e) Quasi Delicts – damages
cause by act or omission
(fault or negligence); no
contractual relationship
between the parties
Art. 1163 to 1166 – obligation to give
2 Kinds of Object in an obligation to
give
a) Specific or determinate
- Particularly designated or
physically segregated from
others of the same class
b) Generic or indeterminate
- Cannot be pointed out with
particularity
Duties of debtor in obligation to give a
determinate thing
1) Preserve the thing – only
ordinary care or diligence
of a good father of a family
unless another standard of
 care is stipulated
2) Deliver the fruits of the thing
(Art. 1164)
- Creditor has a personal right
to the fruits at the time
obligation of debtor arises
- Creditor acquires real rights
only upon delivery;
Delivery transfers
ownership
3 Kinds of fruits
a) Natural fruits – spontaneous
products of the soil, and
products of animals
b) Industrial fruits – produced
by lands through labor
c) Civil fruits – derived by
virtue of a juridical relation
i.e rentals
3) Deliver the accessions and
accessories even not mentioned
(Art. 1166)
- Accessions are the fruits of
a thing or improvements
upon a thing i.e. trees on
land
- Accessories are things
joined to the thing for
embellishment, better use or
completion
i.e. car sound system
4) Deliver the thing itself
- Creditor can compel debtor
to make delivery or specific
performance (Art. 1165)
- Debtor is liable for
damages if there is (a)
delay and (b) double
promise to deliver,
even if a fortuitous
event caused the
damage.
Fortuitous event – an event which
cannot be foreseen, or though
foreseen is inevitable i.e. Acts of man
like robbery and Acts of God like
earthquake
- No person is responsible for
fortuitous event (Art. 1174)
except
a) Specified by law
b) Stipulated
c) Nature of the obligation
requires assumption of
risk.
Duties of debtor in obligation to deliver
a generic thing
1.)Deliver a thing which is of the quality
intended
- Not necessary to compel
delivery of specific
performance as creditor
can ask another to person
to perform the obligation
- However, creditor may
ask the performance of the
obligation
Art. 1167 to 1168 – obligation to do
and not to do
Remedies of the creditor in positive
personal obligation (to do)
1. Failure of the debtor to perform
his obligation
a) To have other persons
perform the obligation at the
expense of the debtor.
- Cannot compel
specific performance
as involuntary
servitude is prohibited
by the Constitution
(Section 18 [2], Art.
III)
b) If personal considerations
are involved, to recover
damages (Art. 1170)
2. Contravention or violation of
the terms or poor performance
 a) Decreed to be undone if still
possible to undo what was
done.
Remedies of creditor in negative
personal obligation (not to do)
-Duty of the debtor is to abstain from
the act; obligation is fulfilled in not
doing what is forbidden.
-Obligation is violated if the debtor do
what is forbidden.
-Remedy of the creditor is the undoing
of the forbidden thing plus damages.
-If not possible to undo, remedy is to ask
for damages.
Art. 1169 – When in delay
Ordinary delay – failure to perform an
obligation on time
Legal delay or default – failure to
perform an obligation on time even
after judicial or extrajudicial demand
is made.
-No legal delay in negative personal
obligation
Kinds of legal delay or default
a) Delay of the debtor to perform
his obligation (mora solvendi)
b) Delay of the creditor to accept
the performance of the
obligation (mora accipiendi)
c) Delay in reciprocal obligations
(compensation morae)
Demand is not necessary and debtor is
still in delay.
a) Stipulated
b) Provided by law i.e. payment of
taxes
c) Nature and circumstances of the
obligation i.e. wedding gown
d) Demand is useless i.e. when the
thing was lost due to negligence
of the debtor
e) In reciprocal obligations when
the other party fulfills or is
ready to fulfill his obligation
i.e. sale
Art. 1170 – grounds for liability for
damages
1) Fraud
2) Negligence
3) Delay
4) Contravention or violation of
the terms of the obligation.
1) Fraud
- incidental fraud or fraud in the
performance (damages)
- Not causal fraud or fraud
employed in getting ones
consent (voidable)
- any waiver of an action for
future fraud is void (Art.
1171) based on law and public
policy
- a past fraud can be subject of a
valid waiver of action.
2) Negligence
- voluntary act or omission,
there being no malice, which
prevents the normal fulfilment of the
obligation
- either
contractual negligence
(culpa contractual),
civil negligence
(culpa
aquiliana/quasi-
delict), or criminal
negligence (culpa
criminal)
- waiver of action for future
negligence is valid except those which
requires extraordinary care (common
carrier)
- waiver of action for past
negligence is also valid
- when negligence shows bad
faith or deliberate, considered
fraud (Art. 1173)
Other provisions
Art. 1175 – usurious transactions
(legally non-existent)
Art. 1176 – disputable presumption as
to the payment of interest and the
payment of a prior installment
-.Interest is presumed paid if the
principal is paid unless reserved.Later
installment is presumed paid if prior
installment is paid unless indicated that
prior installment is not paid.
-Presumption does not apply to the
payment of taxes
Art. 1177 – remedies of the creditor to
satisfy their claims (damages)
1) Levy the property of the debtor
(except those exempt from
attachment)
2) Redeem the property of the
debtor which is mortgaged.
3) Collect from the debtor of the
debtor
4) Ask for cancellation of the
contracts that defraud the
creditor.
Art. 1178 – transmissibility of rights
acquired in an obligation
-All rights acquired by virtue of an
obligation is transmissible except:
A. Prohibited by law i.e. partnership,
agency, and commodatum
B. Prohibited by stipulation (death of
the creditor)
CHAPTER 3 DIFFERENT KINDS
OF OBLIGATIONS
SECTION 1
Kinds of Obligations
1. Pure
2. Conditional
3. With a period
4. Alternative
5. Joint
6. Solidary
7. Divisible
8. Indivisible
9. With a penal clause
Pure Obligation
- Not subject to any condition
- No specific date mentioned for
its fulfillment
- Demandable at once
- Ex. A student borrows money
from a seatmate.
Conditional Obligation
Condition – future or uncertain
event, or a past event unknown
to the parties
Art. 1180 – Promise to pay when the
means permit is not a conditional
obligation but a one with a period
Art. 1181
2 Principal Kinds of Condition
a) Suspensive condition
(precedent or antecedent)
- Obligation is suspended
- Happening of the condition will
give rise to the obligation
- Ex. A bonus is given to a
Salesman who reach his quota.
b) Resolutory condition
(subsequent)
Obligation is demandable at once
- Happening of the condition will
extinguish the obligation
- Ex. The scholarship
foundation cancelled the
scholarship after the student
scholar fails to meet the grade
 requirement
Art. 1182 – Potestative condition –
happening of the condition depends on
one party
a) Suspensive potestative
condition depending on the sole
will of the debtor
- VOID
- Ex. I will pay my tuition if I
pass this course.
b) Suspensive potestative
condition depending on the sole
will of the creditor
- VALID
- Ex. I will deliver the books with
cover if you pay on time.
c) Resolutory potestative
condition depending on the sole
will of the debtor
- VALID
- Happening of the condition
merely causes extinguishment
of the obligation.
- Ex. I will continue to pay your
tuition fee if I remain an
employee of USC.
d) Resolutory potestative
condition depending on the sole
will of the creditor
- Same as resolutory condition in
Art. 1181
e) Casual condition - Suspensive
condition depending upon
chance or will of a third person
- VALID
- Ex. Contractor’s warranty
- Ex. I will let you occupy the
room if the present occupant
would leave.
Art. 1183 – Impossible conditions
- VOID
- If divisible, the part not affected
by the condition is VALID.
2 kinds of impossible condition
a) Physical impossibility
b) Legal impossibility
Art. 1184 – Positive Condition
- Obligation is extinguished:
a) Time expires
Ex. The seller will give the
agent additional 5%
commission if he is able to
sell within 30 days.
b) Indubitable that the event
will not happen
Ex. I will give you a
college scholarship if
you graduate as
valedictorian in high
school. The student
failed a subject in
fourth year.
Art. 1185 – Negative condition
- Obligation is effective:
a) Time has elapsed.
Ex. Return of deposit if the
lessee will not leave within
the contract period.
b) Evident that the event
cannot occur.
Ex. I will provide you
with a refrigerator if you
will not carry other
softdrinks. The client
disposes of all the
bottles of the
competitor.
Art. 1186
- Constructive fulfillment of
suspensive condition
- Creditor voluntarily prevents
fulfillment of the condition.
- Ex. The company
unreasonably increase the
quota of its salesmen after one
almost reach it.
 - Applies also to resolutory
condition if the debtor is
bound to return what he has
received upon the happening
of the condition. Debtor
prevents the fulfillment of the
condition.
- Ex. Employer provides daily
allowance for hotel expenses
to an employee if the latter
cannot find an apartment to
stay. Employee did not look
for a place so he will continue
to receive the daily allowance.
Art. 1187 - Retroactive effect of
fulfillment of suspensive condition
a) Obligation to give
- retroacts to the day the
obligation is constituted not
from the time condition is
fulfilled
- Ex. Teachers are promised a
salary increase at the start of
the school year provided the
CHED approves the
application for salary
increase. CHED approved
the application in
December. Increase in
salary is effective from
June.
- No retroactive effect as to
fruits and interests in
reciprocal obligations; deemed
mutually compensated.
- Ex. Sale of taxi. Interest on
the selling price and income
from rentals of taxi is deemed
set-off
- No retroactive effect also as to
fruits and interests in unilateral
obligations unless there is a
clear intention to give the
fruits and interest; gratuitous
in nature.
- Ex. Reimbursement of tuition
fee if student tops the board
exam. Student cannot ask for
interest on the tuition fee paid
as the intention to return only
the tuition fees paid.
b) obligation to do or not to do
- no fixed rule, discretionary on
the courts to apply retroactive
effect of suspensive condition
- intention of the parties is taken
into consideration
- Ex. A week before, a
contractor submitted a
quotation for the repair of the
wall of the house on the
condition it will not rain on the
coming weekend. On
weekend, it did not rain but the
prices of materials increase.
Quoted price prevails despite
the increase.
Art. 1188 – Creditor’s rights pending
the happening of the suspensive
condition.
Bring action to preserve the thing.
- Ex. In case of sale of land,
cause the annotation in the
Registry of Property.
a) Debtor can recover payment by
mistake before the happening of
the condition.
Art. 1189 – Rules in case of loss
(before the happening of the suspensive
condition)
Kinds of loss
a) Physical loss – thing perishes
i.e. house gutted by fire
b) Legal loss – goes out of
commerce i.e. sale of firearms
when a law is pass declaring
it illegal.
c) Civil loss – disappears or
cannot be recovered i.e. a
ship that sank in the bottom
of the sea.
Rules:
1) Lost without debtor’s fault –
obligation is extinguished
2) Lost through debtor’s fault –
debtor liable to pay damages
3) Deteriorates without debtor’s
fault – borne by the creditor
4) Deteriorate with debtor’s fault
– creditor may choose between
rescission or fulfillment of the
obligation, with damages in
either case.
5) Improve by nature, inure to the
benefit of the creditor
6) Improve at debtor’s expense
– debtor shall have
usufructuary rights (remove
the improvements without
destroying the principal thing;
not subject to reimbursement)
Art. 1190 – effects of fulfillment
of resolutory condition.
a) Obligation to give
- Return to each other what
they have received including
the fruits and interest. Except
when it is with a third person
in good faith, the remedy is
restitution.
- Ex. A scholar who violates the
scholarship contract shall
return the school fees paid
plus interest.
b) Obligation to do or not to do
- The courts shall determine the
retroactive effect of the
fulfillment of the resolutory
condition.
- Ex. Salesman is allowed to use
company car provided he
reached the quota. If quota is
not reached, salesman must
return the car but is not
required to pay rental because
the intention is to use the car
for company’s business.
Art. 1191 – Reciprocal obligations
Alternative remedies in reciprocal
obligations if one party fails to
perform his obligation (needs time
and not refusal to perform):
a) Ask for specific performance
with damages
Action for rescission with damages
(implied); different from rescission
due to lesion, defect in consent or
violation of contract.
Ex. Sale of taxi – the buyer is
ready with the payment but the
seller needs time to deliver the car
as it is not returned by the taxi
driver.
Limitations on the right to demand
rescission:
- Must be granted by the court
(judicial rescission) except
when automatic rescission is
expressly stipulated
(extrajudicial rescission).
However, notice must be given
to the other party. If there is
objection, resort to court is
necessary. Ex. Violation of
lease contract.
- The court has discretion to
allow the party in default a
term or period to perform the
obligation.
- Rescission is not available if the
thing is in the hands of a third
person in good faith.
- There must be substantial
breach of contract.
- Right of rescission may be
waived such as the acceptance
of a security.
Art. 1192 – both parties are guilty of
breach
a) First infractor known
 o Liability for damages of
the first infractor is
equitably tempered.
b) First infractor is not known
o Contract is extinguished,
each shall bear his own
damage.
CHAPTER 3 SECTION 2
Art. 1193 Obligation with a period
- A future or day certain has been
fixed for the fulfilment of the
obligation.
- Day certain means it must
necessarily come although it
may not be known when. Ex.
Death
- If it is uncertain whether the
day will come or not, then it is
a conditional obligation. Ex.
Graduation.
- Obligation is demandable when
the day comes
- ex. “30 days from the signing
of the agreement”
KINDS OF PERIOD
1) Suspensive period –
obligation begins only
from a day certain upon
arrival of the period. Ex.
Pay the tuition fee when
the student reached
college.
2) Resolutory period –
obligation is valid up to a
day certain and terminates
upon arrival of the period.
Ex. Giving of financial
support until reaching
majority age.
3) Legal period – provided by
law. Ex. payment of taxes.
4) Conventional period –
agreed by the parties. Ex.
payment of loan.
5) Judicial period – fixed by
the court. Ex. when to move
out of the leased premises.
6) Definite period – fixed
period.
7) Indefinite period – not fixed
period.
Art. 1194 – same rules in
Art. 1189 for loss,
deterioration or
improvement of the thing.
Art. 1195 – payment by
mistake as the period has
not yet arrived.
- Debtor is entitled to recover
the payment plus fruits and
interest. But debtor is
presumed to know the period
and must prove that he was
unaware of the period.
- NO RECOVERY in personal
obligation (obligation to do) as
it is physically impossible to
recover services rendered.
Art. 1196 – Rebuttable presumption as
to benefit of period
- Presumed for the benefit of
both creditor and debtor.
Creditor cannot collect or
debtor cannot pay before the
arrival of the period. Ex.
Banks imposed a penalty for
early termination of loan.
Exceptions to the General Rule:
- For the benefit of the debtor
alone – debtor can pay early.
Ex. “on or before”
- For the benefit of the creditor
alone – may demand
fulfilment even before the
arrival of the term but cannot
be forced to accept payment
before the arrival of such
period. Ex. Acceleration
clause.
 Art. 1197 – Obligation has no period
but period was intended.
- Court is authorized to fix the
period:
1) No period was fix but
period is intended. Ex.
construction of a house
2) Duration of the period
depends upon the will of
the debtor. Ex. obligation
to pay money.
Art. 1198 – when debtor losses right to
make use of the period.
1) Debtor becomes insolvent
unless he gives guaranty or
security for the debt
2) Debtor does not furnish the
promised guaranty or security
3) Debtor impairs the guaranty or
security unless he gives a new
one
4) Breach of contract
5) Attempts to abscond
CHAPTER 3 SECTION 3
Art. 1199 Alternative Obligation
Obligation with several prestations
which are due but the performance of
one is sufficient as determined by the
choice of the debtor in general.
- Requires complete
performance of one
prestation. No partial
performance of all prestations.
- Ex. Trip to Paris or car.
Art. 1200 – right of choice
- Belongs to the debtor unless
expressly granted to the
creditor.
- No right to choose impossible
obligations, unlawful or not the
object of the obligation.
- No more right to choose if only
one is practicable (Art. 1202).
Art. 1201 choice must be
communicated, otherwise obligation
remains alternative.
- Concurrence of creditor is not
required.
- Notice either oral or in writing.
Art. 1203 – Debtor can rescind
contract if through creditor’s fault,
debtor cannot make a choice. Ex. Car
or cash. Creditor sold the car to another
person. Debtor may choose car plus
damages.
Art. 1204 & 1205 - Effects of loss of
objects of obligation (right of choice
belongs to debtor)
a) All are lost – indemnity
for damages; basis of
indemnity is the value of
the last thing which is
disappeared plus other
damages
b) Some are lost – no
liability since the debtor can
still performed the obligation.
Art. 1205 – Rules in case of loss
when the right of choice belongs
to the creditor.
a) Lost through fortuitous event –
creditor can choose from the
remaining. If all are lost,
obligation is extinguished
(determinate thing)
- Lost through debtor’s fault –
choose the lost item or the
existing items plus damages
in either case.
Art. 1206 – Facultative Obligation

- Only one prestation is agreed
upon, but the obligor may
render another in substitution.
- Ex. Trip to Paris or convert to
cash.
- No liability in case of loss of
the substitute except when
substitution is made prior to
the loss.
CHAPTER 3 SECTION 4
Art. 1207, 1208 – Joint and Solidary
Obligation (2 or more
debtors/creditors)
Joint obligation – pro rata demanded
(creditor) or fulfilled (debtor). Ex. bed
spacer rental
1) Solidary obligation – one
debtor is bound to pay or
one creditor may demand
fulfilment the whole
obligation. Ex. Co-maker
2) Solidarity exists only
when (a) agreed, (b)
law, (c) nature of the
obligation requires
solidarity
3) If not clear, presume joint
obligation as it imposes lesser
burden.
4) Words to indicate joint
obligation: pro rata,
proportionately, “we promise
to pay” signed by 2 or more
persons.
5) Words to indicate solidary
obligation: jointly and/or
severally, solidaria, in
solidum, together and/or
separately, individually
and/or collectively, “I
promise to pay” signed by 2
or more persons.
Art. 1209 – Joint indivisible obligation
1) Indivisible – object is not
physically divisible into parts.
2) Enforced by collective acts of
the creditors or proceeding
against all the debtors.
3) If there are damages
claim, the other debtors
are not liable for the
share of insolvent
debtors.
Art. 1210 – indivisibility vs. Solidarity
1) Indivisibility is not solidarity
nor solidarity implies indivisibility
Art. 1211 – Solidarity with
different stipulations
1) Solidary debtors may not be
bound in the same manner,
same period or same conditions
2) Ex. One debtor pays on
instalment while another
pays outright; one debtor pay
in 1 year while another pays
in 2 years.
Art. 1212 – Solidary creditors may
do acts that are useful and not
prejudicial to the other creditors
1) Ex. collect from 1 debtor the
whole obligation (useful)
2) To waive action against a
debtor (prejudicial)
3) Assign his rights to another
(Art. 1213)
Art. 1213 – Solidary creditors cannot
assign his rights without the consent of
the others.
Ex. A is indebted to solidary
creditors B and C, C, cannot assign
his rights to D, without the consent of
B. the reason rest on the extra
ordinary mutual trust and confidence
among solidary creditors and it may
happen that the other creditor may
 not want dealings with the person to
whom the debts will be assigned.
Art. 1214 – To whom payment is made
-To any solidary creditor
-Otherwise, to one who made a
judicial or extrajudicial demand
(avoid confusion or
acknowledge a diligent creditor)
Art. 1215 – Liability in case of
novation, compensation, confusion or
merger (extinguishment of obligation)
by a solidary creditor
1) Solidary creditor is liable to the
others to give their share in the
credit corresponding to them.
Art. 1216 – Right of creditor to proceed
against any solidary debtor.
1) If one solidary debtor has not
paid in full, creditor can still
proceed against the other
solidary debtor.
Art. 1217 – Effect of payment by a
solidary debtor
1) If payment is full, obligation is
extinguished.
2) The solidary debtor who
paid can demand
reimbursement from his
co-debtors their
proportionate share in
the obligation.
3) The solidary creditor who
received payment is liable to give to
his co-creditor their share. Art. 1218 –
Effect of payment after obligation
becomes illegal or prescribed.
1) Solidary debtor is not entitled to
reimbursement
Art. 1219 – Effect of remission of
obligation of one solidary debtor made
by the solidary creditor
1) If payment is made first by the
other solidary debtor, the
remission has no effect. Paying
debtor is entitled to
reimbursement.
Art. 1220 – Remission of the whole
obligation through one solidary debtor
1) Solidary debtor is
not entitled to ask for
reimbursement from his co-
debtors. Art. 1221 – Rules
in case of loss or prestation
becomes impossible
1) Same rules in case of loss
2) Solidary debtors who are
not guilty can recover from the
guilty co-debtor.
Art. 1222 – Defenses available to a
solidary debtor
1) Defenses derived from the
nature of the obligation – Ex.
payment by a co-debtor
2) Defenses personal to the
solidary debtor – Ex. his
minority or incapacity
Defenses personal to the other solidary
debtors – Ex. minority or incapacity of
the other debtor regarding the latter’s
share of the obligation.
CHAPTER 3 SECTION 5
Art. 1223 – Divisible and indivisible
Obligations
7) Divisible obligation – delivery
or performance is capable of
partial fulfilment.
8) Indivisible obligation – delivery
or performance is not capable of
partial fulfilment.
9) Test – purpose of the obligation
or intention of the parties.
 10) Object is physically
divisible but is
indivisible if provided by
law or intended by the
parties (Art. 1125)
11) Ex. payment of money - money
is divisible but intention is to
pay as a whole.
12) Object is not physically
divisible, the obligation is
always indivisible.
13) Ex. delivery of a car – not
physically divisible.
Art. 1224 – Effect of non-compliance
by a debtor in a joint indivisible
obligation.
1) Ex. delivery of car.
2) Creditor can demand damages
to the debtor who does not
comply with the obligation.
3) Debtors who are willing to
comply are not liable beyond
the corresponding portion of
the price of the thing or the
value of the services.
Art. 1225 – Divisible or indivisible
Obligations deemed indivisible:
1) To give definite things. Ex.
Deliver a car
2) Not susceptible of partial
performance. Ex. Host a
wedding.
3) Provided by law. Ex. payment
of taxes
4) Intention of the parties. Ex.
payment of money
Obligation deemed divisible:
4.) Execution of a certain number
of days of work. Ex. Construct a
house
5) Accomplishment of work by
metrical units. Ex. Make a table
with a specified dimension.
6) Susceptible of partial
performance. Ex. paying a debt
by installment.
CHAPTER 3 SECTION 6
Art. 1226 – Obligation with a penal
clause
14) A penal clause is an
accessory undertaking to
pay indemnity in case of
breach of the obligation.
The penalty shall substitute the
indemnity for damages and interest.
15) The debtor is liable for damages
and interest aside from the
penalty in the following:
a) Agreement
b) Refusal to pay the penalty
c) Fraud.
16) Ex. Failure of the contractor
to complete a government
project on time, a penalty per
day of delay is imposed on
the contractor.
17) Penalty cannot be imposed if
obligation was not performed
due to fortuitous event.
18) Penalty
maybe reduced if
unconscionable or
there is partial
performance.
Art. 1227 – Penalty not a
substitute for performance.
4) Debtor cannot pay penalty as
a substitute for performance
except when reserved for him.
Ex. Remove the garbage after
vacating the leased premises
or pay penalty taken from the
 security deposit.
5) Creditor cannot
demand fulfilment and
penalty at the same
time unless it is clearly
granted to him. Ex.
construction of a house
with penalty for delay.
Art. 1228 – Penalty can be
demanded even without proof of
actual damages. Ex. penalty for
delay.
Art. 1229. When Penalty may be
reduced by the courts
1) When there is partial or
irregular performance.
2) When the penalty is iniquitous
or unconscionable. Ex. 50%
penalty .
A rt. 1230 – Effect of nullity of
penal clause
1) Accessory follows the principal.
2) If penal clause is void, the
principal obligation remains.
3) If principal obligation is void,
the penalty is void.
CHAPTER 4 PAYMENT
PERFORMANCE
SECTION 1
Art. 1231 Causes of extinguishment of
obligations
1) Payment or performance
2) Loss
3) Condonation or remission
4) Confusion or merger
5) Compensation
6) Novation
7) Other causes i.e.
annulment,
rescission,
fulfilment of a
resolutory
condition, &
prescription
Art. 1232 Meaning of payment
1. Delivery of money or
2. performance of the obligation
a) giving of a thing
b) doing an act
c) not doing an act
Art. 1233 – Extinguishment of debt
1. Debt includes to deliver money,
to deliver a thing, to do an act,
or not to do an act.
2. Debt is extinguished if thing
or service is completely delivered or
rendered.
Art. 1234 – Effect of substantial
performance in good faith
1. Obligor can recover as if
completely performed less
damages suffered by the
obligee.
2. Justification: Based on fairness.
OR 3. 1st requisite: There is substantial
performance.
4. 2nd requisite: Obligor is in good
faith.
5. Ex. seller was able to
deliver only 400 sacks
of rice out of 500 due
to government
restriction (good
faith). Seller can
demand payment of
the price for 400
sacks.
Art. 1235 – Effect of acceptance (or
without protest or objection) despite
incomplete or irregular performance
1. Based on estoppel.
2. Obligation is deemed fully
complied with.
3. Ex. Delivery of a car without
tire jack. Buyer accepted as he
has an extra tire jack.
Art. 1236 – From whom creditor must
accept payment
1. Creditor is bound to accept
payment or performance from
the following:
a. Debtor
b. Any person interested in the
fulfilment of the obligation
(guarantor)
c. A third person authorized to
make payment.
8) If a third person pays without
the knowledge or against
debtor’s will – he can recover
only the amount paid (right of
reimbursement). No right of
subrogation.
2. If a third person pays with the
knowledge of the debtor – he
can recover the amount paid
plus right of subrogation or
acquires the rights of a
creditor, i.e. mortgage,
guaranty or penalty (Art.
1237)
Art. 1238 No intention to be
reimbursed – considered a donation.
1. Donation requires debtor’s
consent.
2. Whether with consent or not,
payment is valid as far as the
creditor is concerned.
Art. 1239 – payment by a person
who has no right to freely dispose
of the thing or capacity to alienate
is VOID
1. Free disposal – not subject to
any claim, lien or encumbrance.
Ex. mortgage or pledge.
2. Capacity to alienate –
incapacitated to contract. Ex.
minor.
3. Payment can be recovered.
Art. 1240 – to whom payment is made.
1. Creditor
2. Successor in interest. Ex. heirs.
3. Authorized representative
Art. 1241 – Effect of payment to an
incapacitated person (minor) and effect
of payment to a third person.
1. Valid if thing is kept or
beneficial to him (incapacitated
person)
2. Valid if it redounded to
the benefit of the creditor.
Ex. creditor is indebted to
the third person.
3. No proof of benefit is required:
a) Third person acquires
creditor’s rights
b) Ratification by the creditor
c) Estoppel (debtor is made to
believe third person is
authorized to receive
payment)
Art. 1242 – Effect of payment in
good faith to third person in
possession of credit
1. Payment is valid. Obligation is
extinguished.
2. Ex. check payable to cash or
promissory note payable to
bearer.

Art. 1243 Effect of payment by a
debtor judicially ordered not to
pay.
1. NOT VALID
2. Ex. two persons claim
ownership of the thing leased.
The court ordered the lessee not
to pay the lessor. If the lessee
pays, his payment is not valid.
If the other person (not the
lessor) is declared the owner,
the lessee must again make
payment to him.
Art. 1244 – Creditor cannot be
forced to accept another object
even if it is more valuable.
(determinate thing)
1. Ex. obliged to deliver a Kia
vehicle. Debtor cannot be
compel creditor to accept a
Ferrari.
Art. 1246 – Creditor cannot
demand a superior quality or
debtor deliver an inferior quality
than agreed (generic thing)
Art. 1247 – Extrajudicial expenses
of payment.
1. Payable by the debtor. Ex.
notarial fees.
2. Judicial expenses are paid by
the losing party.
Art. 1248 – No partial
performance.
1. Creditor cannot be forced
to accept partial payment.
Ex. Debtor begs creditor
that he pays on
installment.
2. Debtor cannot be required to
make partial payments. Ex.
Due one year after and
creditor demands payment
every month.
Art. 1249 – Payment must be legal
tender.
1. Legal tender – creditor can be
compelled to accept as
payment.
2. Parties can agree on the
currency other than Philippine
peso.
3. There is also legal tender for
coins.
Art. 1250 – Effect of extraordinary
inflation or deflation
1. Payment shall be based on
the value of the currency at
the time of the
establishment of the
obligation
2. Payment is based on the current
value of the currency if there is
an agreement.
3. Ex. loan by the corp. in US
dollars and payable in US
dollars.
Art. 1251 – Where payment is
made
1. Place designated.
2. Where the thing is situated.
3. Domicile of the debtor.
SPECIAL FORMS OF
PAYMENT
A. Art. 1245 – Dation in payment
1. Payment by conveying
ownership of a thing. Debtor is
not insolvent. Only one
creditor.
B. Art. 1252 – Application of
payment
1. Debtor has two or more debts
of the same kind to one creditor
 and all debts are due.
2. Debtor can choose what debt is
paid if his payment is not
enough.
3. If debtor does not choose,
creditor can specify in the
receipt what debt is paid.
4. If creditor does not
specify, the most
onerous debt is paid
(Art. 1254). If the
same burden,
proportionately (Art.
1254).
Art. 1253 – Interest is paid ahead
of the principal amount.
C. Art. 1255 – Payment by
cession.
1. Payment by conveying
ownership of a thing.
2. Difference with dation in
payment, in cession debtor is
insolvent, two or more
creditors.
D. Art.1256 – Tender of payment
and consignation
1. Tender of payment – debtor
offering the creditor payment of
the obligation.
2. Consignation – depositing
the payment in court (Art.
1258) if creditor does not
accept payment.
3. Effect of consignation –
obligation is extinguished.
4. When no need to make a tender
of payment
a) Creditor is absent or
unknown
b) Creditor is incapacitated.
c) Creditor refuses to give a
receipt
d) Two or more persons claim
the same right to collect
e) Title of the obligation has
been lost.
Art. 1257 – Requirement of Notice to
persons interested in the fulfilment of
the obligation.
1. Persons interested in the
fulfilment of the obligation
are: guarantors, mortgagees,
solidary debtors, solidary
creditors.
2. Absence of notice –
consignation is void.
Art. 1259 – expenses of consignation
chargeable to the creditor.
Art. 1260 – Rights of the debtor after
consignation
Ask the judge to order the
cancellation of the obligation.
1. May withdraw the amount
consigned if not yet
withdrawn by the creditor
or before the judge declared
the cancellation of the
obligation.
Art. 1261 – Effect of withdrawal of
thing consigned with authority from
creditor.
1. Creditor losses preferential right
over the thing.
2. Co-debtors, guarantors and
sureties are released from liability.
CHAPTER 4 SECTION 2
LOSS
Art. 1262 Loss of the thing
(determinate thing)
1. Obligation is extinguished:
a) Loss is without fault of the
debtor
b) Debtor is not guilty of delay
c) Loss due to fortuitous event
 2. Obligation is not extinguished
(even w/o fault or delay):
a) Provided by law
b) Agreed by parties
c) Nature requires assumption
of risk
d) Arises from a crime. Ex.
return of stolen item (Art.
1268)
Art. 1263 Loss of the thing (generic or
indeterminate)
1. Obligation is not extinguished
even due to fortuitous event.
2. Based on the principle
“generic thing never perishes”
Art. 1264 Effect of partial loss
1. Discretionary on the court to
determine whether or not the
obligation is extinguished.
2. Ex. Delivery of a race horse that
suffered a leg injury.
Art. 1265 Presumption who is at
fault in case of loss (disputable)
1. Debtor’s fault if in his
possession.
2. Creditor need not prove
debtor’s fault.
3. Exceptions: earthquake,
flood, storm or other natural
calamity.
Art. 1266 Effect of impossibility
of performance
1. Obligation is extinguished.
2. Legal or physical impossibility
takes place after the obligation
is agreed.
3. If impossible from the
beginning, VOID.
4. Ex. of legal impossibility -
Delivery of full face helmets
after being banned by law.
5. Ex. of physical
impossibility – To
perform (sing) at a
wedding after operated
in the throat.
Art. 1267 Effect of difficulty of
performance
1. A fortuitous event made the
performance difficult.
2. Ex. Construction of a house
when the roads leading to the
site was damage beyond
repair by earthquake.
Art. 1269 Right of creditor against third
persons.
1. Against third persons who cause
the loss or destruction. Ex. To sue
for damages.
CHAPTER 4 SECTION 3
CONDONATION or REMISSION
Art. 1270 Meaning of condonation or
remission
3. Gratuitous abandonment of
creditor’s right against the
debtor.
4. Comply with the form of
donation.
5. Accepted by the debtor.
6. Not inofficious.
Ex. Creditor has no other
properties left.
Art. 1271 Delivery of document
evidencing the credit
1. Debt is presumed renounce.
2. Disputable presumption.
3. Debtor or his heirs can
prove that delivery of
document was due to
 payment. Ex. when heirs of
creditor questioned the
donation.
Art. 1272 Debtor possesses the
document evidencing the credit
1. Presumed voluntarily given to
him. (disputable)
2. If no payment, presumed
condone or remitted.
Art. 1273 Effect of renunciation of
principal debt on the accessory
obligation.
1. Accessory obligation is
extinguished. Ex. Real estate
mortgage.
2. Renunciation of the
accessory obligation
(mortgage) does not
automatically extinguish
principal debt. Ex. return of
jewelry pledge.
Art. 1274 Presumption in case thing
pledged is found in possession of
debtor.
1. Accessory obligation is
remitted.
2. Principal debt is not
automatically extinguished.
CHAPTER 4 SECTION 4
CONFUSION or MERGER
Art. 1275 Meaning of confusion or
merger
7. A person becomes
creditor and debtor at
the same time over the
same obligation.
Art. 1276 Effect of merger to
guarantors
4. Obligation of the guarantors are
extinguished.
5. Reason: Accessory follows the
principal.
6. Effect of merger
in the person of the
guarantor, principal
obligation remains.
Art. 1277 Effect of merger in
joint obligation
3. Affects the co-debtor only
whom the two characters of
creditor and debtor are merged.
4. While in solidary obligation,
extinguishes the entire
obligation.
CHAPTER 4 SECTION 5
COMPENSATION
Art. 1278 Meaning of
compensation
7. Two persons are debtor and
creditor of each other.
Art. 1279 Requisites of
compensation
7. The parties are bound
principally to each other.
8. Either debt is sum of money or
thing of the same kind and
quality.
9. Both debts are due.
10. Liquidated (determine) and
demandable.
11. No controversy (3rd party
claim) commenced by third
persons.
Art. 1280 Effect of compensation
to the guarantor
5. Compensation extinguishes
the accessory liability of the
guarantor.

Art. 1281 Two kinds of
compensation
1. Total compensation - debts of
same amount
2. Partial compensation – debts of
different amounts
Art. 1282 Compensation of debts
not due
1. Voluntary compensation – by
agreement of the parties.
Art. 1283 Judicial compensation
1. The party claiming
compensation must prove his
right to damages and amount
thereof.
Art. 1284 Compensation of rescissible
or voidable contracts
1. Reason: Rescissible or voidable
contracts are valid until
annulled.
Art. 1285 Effect of compensation when
debt is assigned.
1. Compensation before
assignment – the debtor
can raise the defense of
compensation; assignee’s
remedy is against the
assignor of the debt.
2. Compensation after
assignment –
a) With consent of the
debtor – debtor cannot
claim compensation
against the assignee or
debtor is liable for the
full amount against the
assignee
b)With the knowledge but
without consent of the debtor
– debtor can claim
compensation only on debts
that are due; as to debts not
yet due, debtor cannot claim
compensation
c) Without knowledge of the
debtor – debtor can claim
compensation on debts due
and not yet due.
Art. 1286 Compensation of debts
payable at different places
1. Applies to legal
compensation.
2. There shall be
indemnity for expenses
of exchange (currency)
or transportation to the
place of payment.
Art. 1287 When legal compensation is
not allowed
1. Depositum
2. Commodatum
3. Claim for support
4. Civil liability arising
from penal offense
Art. 1289 Compensation of
several debts
1. Rules on application of
payment applies to
compensation Art. 1290
Requisites of legal
compensation
1. All requisites in Art.
1279 are present.
2. No consent is required
from the parties.
CHAPTER 4 SECTION
5 NOVATION
Art. 1291 Meaning of novation
9. Extinguishing an obligation by
creating a new one substituting
it.
 10. Kinds of novation:
According to origin
a) Legal – by operation of law
b) conventional – by
agreement of the parties
According to subject
a) Personal – object is changed
b) Real – parties are changed
11. How novation effected:
a) Changing the object or
principal conditions
b) Substituting the person of
the debtor
c) Subrogating a third person
in the rights of the creditor
Art. 1292 Requisites of novation
12. Requisites
a) Valid obligation
b) Capacity and intention to
modify the obligation
c) Extinguishment of
old obligation and
Creation of new
obligation (every
point incompatible)
d) Old and new obligation be
incompatible
13. Ex. To deliver a truck instead
of a car.
Art. 1293 Kinds of personal novation
6. Substitution – change in the
debtor
a) Expromission – without
knowledge or consent of the
debtor
b) Delegacion – with
knowledge or consent of all
parties
7. Subrogation – change in the
creditor Art. 1294 Effect of
Expromission
3. Change in the person of the
debtor without knowledge or
consent of the latter.
4. New debtor’s insolvency or
non-fulfillment of the
obligation will not revive the
liability of the original
debtor.
Art. 1295 Effect of delegacion.
2. Change in the person of the
debtor with the knowledge
and consent of the creditor,
old and new debtor.
3. New debtor’s insolvency or
non-fulfillment of the
obligation will not revive the
liability of the original debtor
EXCEPT insolvency is (a)
public knowledge or (b)
known to the old debtor
when the debt was delegated.
Art. 1296 Effect of novation on
accessory obligation
1. Accessory obligation is
extinguished. Reason: accessory
follows the principal
2. EXCEPTION: Not
extinguished if accessory
obligation benefits a third
person unless the latter gives
consent.
3. Ex. A owes B P2,000 plus
interest at 12%. B owes C
P240. The parties agreed that
A pays C P240. Later A and B
agreed to novate their contract
and instead deliver a TV. A’s
obligation to pay C P240
remains.
Art. 1297 Effect where new
obligation is void
2. The original obligation
subsists unless the parties
agreed that it is
extinguished in any event.
3. If the new obligation
is voidable, there can
 be novation. But if
new obligation is
annulled, same effect
as void obligation.
Art. 1298 Effect if old obligation is
void or voidable
3. The new obligation is void
if the old obligation is void.
4. If the old obligation is
voidable, there is
novation until the old
obligation is declared
void. Also novation is
valid if old obligation is
ratified.
Art. 1299 Effect if old
obligation is subject to a
resolutory or suspensive
condition
1. The new obligation is
subject to the same
resolutory or suspensive
condition.
2. EXCEPT when
otherwise agreed. Art.
1300 Kinds of
subrogation
5. Conventional – by
agreement of the parties
6. Legal – by operation of
law
Art. 1301 Requisites of
conventional obligation
2. Consent of all parties is
required.
Art. 1302 Presumption of
legal subrogation
When a creditor pays another
creditor who is preferred, even
without the debtor’s knowledge.
3. When a third person, not
interested in the
obligation, pays with the
express or tacit approval
of the debtor.
4. When, even without the
knowledge of the debtor, a
person interested in the
fulfilment of the obligation
pays, without prejudice to the
effects of confusion as to the
latter’s share. (guarantor)
Art. 1303 Effect of total
subrogation
1. Transfer all the rights
of the old creditor to
the new creditor
against the debtor or
guarantors.
2. If conventional
subrogation – depends on
the agreement of the
parties.
Art. 1304 Effect of partial subrogation
1. Old creditor remains a creditor
for the balance of the
obligation.
2. In case of insolvency of the
debtor, old creditor is preferred
over the new creditor.