Kinds of Obligations

Notes from: De Leon, Hector S., and Hector M. De Leon. The Law on Obligations and
Contracts. Rex Book Store, 2014.

Different Kinds of Obligation

1. Pure and Conditional Obligations
2. Obligations with a Period
3. Alternative Obligations
4. Joint and Solidary Obligations
5. Divisible and Indivisible Obligations
6. Obligations with a Penal Clause

Meaning of pure obligation

● No condition
● No date (period)
● Immediately demandable
● Ex. I promise to pay you P100,000. [Note: There is no date or condition indicated.
This means you can ask me to pay you at any time.]

Meaning of conditional obligation

● Subject to the fulfillment of a condition.

Meaning of condition
● A future and uncertain event, upon the happening of which, the effectivity or
extinguishment of an obligation (or right) subject to it depends

Characteristics of a condition
● Future and uncertain; or
● Past but unknown
● A condition must not be impossible

Two principal kinds of condition

● Suspensive condition - fulfillment of which will give rise to an obligation or right.
Example: I will sell to you my land if I inherit the land.
Example: I will pay you P100,000 if you graduate as valedictorian of your class.
Example: I will resign from my job if I don’t win this court case.
● Resolutory condition - fulfillment of which will extinguish an existing obligation or
right.
Example: I will give you allowance of P3,000 a month until you pass the CPA board
exam.
Example: You can live in my house until you get promoted.
● In all the examples above, note that a condition is not sure to happen.

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 Suspensive Resolutory

If condition is fulfilled Obligation arises Obligation is extinguished

If condition is not fulfilled The tie of the law does not The tie of the law is
appear consolidated
Until the condition takes Existence of obligation is a Its effects flow, but hovers
place mere hope the possibility of termination

When obligation demandable at once

● When it is pure (See “Meaning of pure obligation”)
● When it is subject to a resolutory condition (the obligation starts at once and ends
when the resolutory condition happens)
● When it is subject to a resolutory period (discussed under “Obligations with a Period”)

Past event unknown to parties

● The law contemplates the knowledge to be acquired in the future of a past event
which is at the moment is unknown to the parties interested. Ex. I will give you
P1,000 if the Yamashita Treasure was really buried in the Philippines.

Article 1181. In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, shall depend upon the happening of the
event which constitutes the condition.

Examples
● Tom wrote in his will that he will give land to Harold if Tom dies within 2 years. If Tom
dies after 3 years, will Harold get the land? No. Why not? Under the suspensive
condition, land will be given if the condition happens within 2 years. The condition is
not fulfilled because the condition happened after 3 years. Therefore, there is no
obligation to give the land.
● Xavi promised to support Yuri until Yuri graduates from college. After Yuri graduates,
does he lose the right to support? Yes. What kind of a condition is this? Resolutory
Condition
● Rey owned a condominium unit which he leased to Earl subject to the condition that
if Rey needs to use the condo, the lease will be terminated. If Rey’s house burned
down and he needs to use the unit, can he terminate the lease of Earl? Yes.

Classification of conditions
As to cause or origin
● Potestative – depends on the will of one of the parties
● Casual - depends upon chance or will of a third person
● Mixed – partly upon chance, partly upon the will of third persons

Potestative condition
● A condition suspensive in nature and which depends upon the sole will of one of the
contracting parties

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 ● Examples:
○ I will pay if I want
○ I will pay you after I receive a loan from a bank
○ I will pay you after I recover what Xavi owes me

Where suspensive condition depends upon will of debtor (potestative condition)

● Conditional obligation is void
● There is no burden on the debtor and consequently, no juridical tie is created.
● If the obligation is a pre-existing one, only the potestative condition is void.
● Example: Kim borrowed P100,000 from Manny and says “I will pay you if I sell my
car” Is this conditional obligation valid? No. Kim is given the choice to sell or not to
sell her car. If she sells her car, then she will pay Manny. However, if she chooses not
to sell her car, then she is not obligated to pay Manny. Thus, her obligation to pay
back Manny becomes illusory. No juridical tie is created.

Where suspensive condition depends upon will of creditor (potestative condition)

● The obligation is valid
● Example: I will pay my debt if the creditor demands me to pay already.

Casual condition
● Depends on chance or will of third persons
● Obligation is valid
● Example: Phil is a contractor who built Rebecca’s house. He promised Rebecca that
he will repair any damage to her house in case an earthquake occurs within 10 years
from completion

Mixed condition
● Depends partly upon chance and partly upon the will of a third person
● Example: Contractor shall repair any damage caused by an earthquake IF a panel of
arbitrators found that construction defects contributed to the damage.

Article 1183. Impossible conditions, those contrary to good customs or public policy and
those prohibited by law shall annul the obligation which depends upon them. If the
obligation is divisible, that part thereof which is not affected by the impossible or unlawful
condition shall be valid.

Impossible conditions
● Refers to suspensive conditions and applies if impossibility existed at the time the
obligation was created
● Impossible conditions annuls the obligation
● If impossibility occurs after obligation was created, obligation is extinguished

Two kinds of impossible conditions

● Physically impossible conditions
● Legally impossible conditions

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 ● Example:
○ Physically impossible –
Example: I will pay you if it will not rain for one year in the Philippines
Example: I will pay you P10k if you can fly.
○ Legally impossible- contrary to law, morals, good customs, public order or
public policy
Example: I will pay you if you kill this person.
Exempe: I will pay you if you slap my father during the party (NOTE: slapping
someone in public is a crime called slander by deed)

Effect of impossible conditions.

● Both the obligation and the condition are void.

Positive condition
● The obligation is extinguished:
○ As soon as the time expires without the event taking place; or
○ As soon as it has become indubitable that the event will not take place
although the time specified has not expired
● Example:
○ Rex will pay Ben P10,000 if Ben marries Carla before Ben reaches 23.
○ If Ben dies at 22, Rex will not pay.
○ If Ben marries Carla at 22 years old, Rex will pay.
○ If Ben marries Carla at 23 years old, Rex will not pay.

Negative condition
● The obligation shall become effective and binding:
○ From the moment the time indicated has elapsed without the event taking
place; or
○ From the moment it has become evident that the event cannot occur,
although the time indicated has not elapsed.
● Example:
○ Rex will pay P10,000 to Ben if Ben is not married to Carla on or before
December 30.
○ If Carla dies on November 30, Rex will pay.
○ If Ben and Carla marry on December 28, Rex will not pay.
○ If Ben and Carla marry on December 30 Rex will not pay.
○ If Ben and Carla marry on December 31, Rex will pay.

Constructive fulfillment of suspensive condition

● 3 requisites:
○ The condition is suspensive
○ The obligor actually prevents the fulfillment of the condition; and
○ He acts voluntarily
● The condition is deemed fulfilled
● He should not profit from his own fault or bad faith.
● Example

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 ○ Your classmate tells you that she will give you P10,000 if you get a perfect
score in the next quiz scheduled on Tuesday. She wants to prevent you from
fulfilling the condition so she tells you that the quiz was moved to Wednesday.
You failed to take the quiz because of her. Are you entitled to the P10,000?
Yes, under constructive fulfillment of suspensive condition.

Retroactive effects of fulfillment of suspensive condition

● In obligations to give – Once the condition is fulfilled, its effects shall retroact to the
day when the obligation was constituted.
● Example
○ On January 20, Sally promised to sell land to Bea if Bea loses in a case
involving recovery of land.
○ On April 10, Sally sold the land to Carla.
○ On April 15, Bea found about the sale to Carla. Bea demanded that Sally
should immediately sell the land to her. Can Bea do that? No, because the
condition has not yet been fulfilled (Condition: if Bea loses in a case involving
recovery of land)
○ On December 4, Bea lost her case.
○ Who between Bea and Carla have a better right? Bea. Once the condition is
fulfilled, its effects shall retroact to the day when the obligation was
constituted.
○ If Bea sold her right to Diane on May 15, who would have a better right
between Diane and Carla? Diane because she derives her right from Bea
who has a better right.

Effects of fulfillment of resolutory condition

● General rule: In obligations to give – Parties are obliged to return to each other what
they have received under the obligation
● EXCEPTION - When the intention of the parties is otherwise
● Example
○ I promise to give you P2,000 every month until you graduate so you have
extra spending money with no requirement to pay me back. After you
graduate, does that mean you have to give me back everything I gave you?
No. The intention was for you to spend the money with no requirement to pay
me back.

Remedies in reciprocal obligations

What happens when the condition is fulfilled but the other party does not comply with their
obligation? What can we do?
● File an action for specific performance (fulfillment) with damages
● File an action for rescission (cancellation) with damages (Article 1191)
● Example:
○ Ana agreed to sell to Lou her car for P150,000 if Lou gets promoted.
○ Lou gets promoted and called Ana to buy the car.
○ Ana refused.

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 ○ What are the remedies available to Lou? Lou can ask for fulfillment or
cancellation.
● Remedies are alternative. Exception: Creditor may seek rescission even after he has
chosen fulfillment if the latter should become impossible (due to loss or damage)

Limitations on right to demand rescission

● Generally, rescission is judicial. This means that in rescission, you have to file a case
in court.
● If a third person who acted in good faith is involved, rescission is not available as a
remedy.
● Rescission shall not be granted for slight breaches of contract. The breach should be
material or substantial.
● The right to rescind may be waived, expressly or impliedly.

Rescission without judicial decree

The following are instances where there may be rescission even without a court case:
● Where automatic rescission expressly stipulated. This means the parties agreed in
the contract that there can be rescission without need of filing a case in court.
● Where contract still executory. This means that the contract has not yet been
performed.
● No performance by both parties but one is willing to comply.

Article 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.

Meaning of obligation with a period

● One whose effects or consequences are subjected to in one way or another to the
expiration or arrival of said period or term

Meaning of period or term

● 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.
● A day certain which must necessarily come, although it may not be know when, like
the death of a person

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 Period Condition

As to fulfillment Certain event Uncertain event

As to time
As to influence on the
obligation
As to effect, when left to
debtor’s will
As to retroactivity
Future Future or past event
unknown to parties
Fixes time for Causes an obligation either
efficaciousness of the to arise or to cease
obligation
Empowers the court to fix Invalidates the obligation
the duration
Unless there is an Has retroactive effect
agreement to the contrary,
arrival of period does not
have retroactive effect

Note: A period must be possible. If the period is impossible, then the obligation is void.

Kinds of Period
According to effect
● Suspensive period (ex die) – obligation begins only from a day certain upon the
arrival of period
Example: I will pay back my debt on or before December 31, 2021.
Example: I will deliver to you my car on the next full moon.
Example: I will give you this diamond ring when my father dies.
● Resolutory period (in diem) – obligation is valid up to a day certain and terminates
upon arrival of the period
Example: I will give you P1,000 everyday until Easter Day.
Example: I will give you three meals a day until the end of the semester.
Example: I will lend you my car until May 1, 2021.
● In the examples above, note that the period is a day that is sure to arrive. It’s not
always an exact date but surely that day will arrive.

Article 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.

Payment before arrival of period

● Example: Sometime in 2015, Dina borrowed from Con P10,000 and promised to pay
on March 31, 2017. By mistake, Dina paid on March 31, 2016. Can Dina still get back
what was paid to Con? Yes

Article 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

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 of the same or other circumstances it should appear that the period has been established
in favor of one or of the other.

Presumption as to benefit of period

● Before the expiration of the period, the debtor may not fulfill the obligation and neither
may creditor demand its fulfillment without consent
● Rebuttable presumption
● Example: On January 1, Dina borrowed from Con P10,000 at 15% interest payable
on December 31. Can Dina compel Con to accept payment today (early payment)?
No.

Exceptions to the general rule on mutual benefit

1. Term is for the benefit of the debtor alone
○ Debtor cannot be compelled to pay prematurely
○ Debtor can pay prematurely if he desires to do so
Example: On January 1, Dina borrowed from Con P10,000 at 15% interest payable
on December 31.The period was for the benefit of Dina. Can Dina compel Con to
accept payment today? Yes. Can Con compel Dina to pay today? No.

2. Term is for the benefit of the creditor –

○ Creditor can demand fulfillment prematurely
○ Debtor cannot compel creditor to accept payment prematurely
Example: On January 1, Dina borrowed from Con P10,000 at 15% interest payable
on December 31.The period was for the benefit of Con. Can Dina compel Con to
accept payment today? No. Can Con compel Dina to pay today? Yes.

When obligation can be demanded before lapse of period (immediately demandable)

1. When debtor becomes insolvent - What does insolvent mean? Unable to pay his
liabilities as they fall due in the ordinary course of business or has liabilities that are
greater than the assets. Example: If the debtor in an obligation with a period
becomes insolvent, then the creditor can disregard the period and demand payment
ASAP.
2. When debtor does not furnish guaranties or securities promised - What are
guaranties or securities? Ex. Sangla/pledge, mortgage of house. Example: If the
debtor in an obligation with a period promises to mortgage his house as security for
his debt but fails to do so in a timely manner, then the creditor can disregard the
period and demand payment ASAP.
3. When guaranties or securities given have been impaired or have disappeared -
Example: If the debtor in an obligation with a period mortgaged his car as security for
his debt but the car was taken by another creditor, then the creditor can disregard the
period and demand payment ASAP.
4. When debtor violates undertaking - Example: The debtor in an obligation with a
period promises that for so long as his debt is unpaid, he will not leave the country. If
the creditor leaves the creditor in violation of his undertaking, then the creditor can
disregard the period and demand payment ASAP.

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 5. When debtor attempts to abscond - Abscond: Changed addresses without notifying
creditor. Example: The debtor goes missing and trying to hide from the creditor.
Note: These exceptions are based on the fact that the debtor might not be able to comply
with his obligation

ARTICLE 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.

Meaning of alternative obligation

● One wherein various prestations are due
● But the performance of one of them is sufficient
● As a general rule, choice belongs to the debtor.
● Example:
D borrowed from C P10,000. It was agreed that D could comply by giving:
a. P10,000; or
b. TV; or
c. Painting the house of C
Can D pay P5,000 and paint the second floor of the house of C? No. Performance of
one is sufficient. One cannot choose half of this and half the other one.

Article 1200. The right of choice belongs to the debtor, unless it has been expressly
granted to the creditor.
The debtor shall have no right to choose those prestations which are impossible, unlawful
or which could not have been the object of the obligation.

Example
● D borrowed from C P10,000. It was agreed that D could comply by giving:
a. P10,000; or
b. TV; or
c. Painting the house of C
● Agreement is silent, who has right of choice? Debtor.
● What if there is a delay in choosing? Still the debtor.

Article 1201. The choice shall produce no effect except from the time it has been
communicated.

Communication of notice that choice has been made

● Once notice is given, the obligation ceases to be alternative and becomes simple.
● After notice, choice is irrevocable
● No requirement as to form of notice – orally or written
● Example:
○ Sean promised Ben to deliver his car or his horse to Ben.
○ Sean wrote to Ben and told him he is delivering the car.

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 ○ If the car is lost, can Sean deliver the horse? No.

Meaning of facultative obligation

● One where only one prestation has been agreed upon but the obligor may render
another in substitution
● Example: I will give you my piano but I may give my LCD TV as a substitute

Joint obligation
● The whole obligation is to be paid or fulfilled PROPORTIONATELY by the different
debtors; or
● The whole obligation is to be demanded PROPORTIONATELY by the different
creditors
● Example: Ana, Bea and Con gave P1M each or a total of P3M which they lent to
Des, Eli and Fay. It was a joint obligation. This means, Ana can collect a total of P1
million from the debtors because this is her proportionate share in the money lent.
This also means that Ana, Bea and Con can only collect a total of P1M from Des
which is her proportionate share in the money borrowed.

Solidary obligation
● One of the debtors is bound to render entire compliance with the prestation; or
● One of the creditors has a right to demand from any of the debtors, entire compliance
with the prestation
● Example: Ana, Bea and Con gave P1M each or a total of P3M which they lent to
Des, Eli and Fay. It was a solidary obligation. This means, Ana can collect the entire
P3M from Des. Any one creditor can collect the entire debt. Any one debtor may be
required to pay the entire debt.

Collective obligation presumed to be joint

Example: A, B, and C are liable to pay D the amount of P9,000. It is silent as to how much
each owes. Can D demand from C the entire P9,000? No. The obligation is silent so it is
presumed to be joint. Therefore, D cannot demand from the C the entire P9,000.

When obligation solidary

1. When the law expressly so states it is solidary
2. The law requires solidarity
3. Nature of obligation requires solidarity
4. If imposed by way of final judgment
NOTE: Solidarity not presumed. If the obligation is silent, presumed to be joint.

Words used to indicate jointly

● Moncomunada
● Moncomunadamente
● Pro rata
● Proportionately
● We promise to pay – signed by two or more persons

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Words used to indicate solidarity
● Solidary
● Jointly and/or severally
● Solidaria
● In solidum
● Together and/or separately
● Individually and/or collectively
● Juntos o separadamente
● I promise to pay – signed by two or more persons

Meaning of divisible and indivisible obligations

● Divisible – delivery or performance of object is capable of partial performance
● Indivisible – delivery or performance of object is not capable of partial performance

Test for distinction

● It should depend on the purpose of the obligation or the intention of the parties.
● Even though the object or service may be physically divisible, an obligation is
indivisible if so provided by law or intended by the parties.
● Obligation is presumed indivisible where there is only one creditor and only one
debtor

Example
● D agreed to pay C on a certain date the full amount of P10,000. Is this a divisible
obligation? Obligation is indivisible even though money is by its nature divisible.
● D agrees to pay C P10,000 in 4 equal monthly installments. Is this a divisible
obligation? Yes

Obligation deemed indivisible

● Obligations to give definite things – (fan, house, etc.)
● Obligations which are not susceptible of partial performance – (sing, dance, etc)
● Obligations provided by law to be indivisible even if the thing or service is physically
divisible – (taxes)
● Obligations intended by the parties to be indivisible even if thing or service is
physically divisible (money, suit)

Obligations deemed divisible

● Obligations which have for their object the execution of a certain number of days of
work –(paint the house in 10 days)
● Obligations which have for their object the accomplishment of work by metric units –
(obligation of two debtors to deliver 20 cubic meters of sand)
● Obligations which by their nature are susceptible of partial performance – (sing 3
songs; installment payments)

Meaning of an obligation with a penal clause

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An obligation which contains an accessory undertaking to pay a previously stipulated
indemnity in case of breach of the principal prestation, intended primarily to induce its
fulfillment

Meaning of penal clause

A penal clause is an accessory undertaking attached to an obligation to assume greater
liability in case of breach

Purposes of penal clause

● To insure performance
● To substitute for damages and payment of interest;
● To punish (punitive)

Example
Mr. X agrees that upon the termination of his employment, he will not make negative
remarks about the Company and shall not divulge confidential information about the
Company. Mr. X and the Company agree that, in the event that Mr. X violated this
Agreement, Mr. X shall pay to the Company as penalty, P100,000 for each breach, without
prejudice to other remedies available to the Company.

Penalty substitutes for damages and interests

● The penalty takes the place of the indemnity for damages and the payment of
interest in case of non-compliance
● Proof of actual damage is not necessary to enforce the penalty
● Example
○ X promised to construct a house for Y.
○ Penalty: P100,000
○ X did not construct the house and, as a consequence, Y suffered damage in
the amount of P40,000
○ X should pay P100,000 regardless of the amount of actual damages

When creditor may recover damages and interests

● In addition to the penalty, creditor may still recover damages and interests
○ When so stipulated by the parties
○ When debtor refuses to pay the penalty
○ When debtor is guilty of fraud in the fulfillment of his obligation

When penalty may be enforced

The penalty is demandable if:
● There is a breach
● It is not contrary to law, morals, good custom, public order or public policy

Penalty not substitute for performance

● Generally, the debtor cannot just pay the penalty instead of performing the obligation.
● Exception: When the right was expressly reserved to the debtor

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 ● Example: S was to deliver certain products to B; otherwise S will pay a penalty of
P10,000. S cannot choose to just pay the penalty unless he was expressly given the
right to do so

Penalty demandable without proof of actual damages

● Creditor just has to prove that there was a violation of the obligation of the debtor
● Creditor can enforce penalty even if he did not suffer damages
● Creditor cannot recover more than the stipulated penalty even if he proves that the
amount of his damages exceeds the penalty (see discussion on “When creditor may
recover damages”)

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