Obligations and

Contracts
Primary Classification of Obligations
◈ Pure obligation
◈ Conditional obligation
◈ Obligation with a period
◈ Alternative obligation
◈ Facultative obligation
◈ Joint obligation
◈ Solidary obligation
◈ Divisible obligation
◈ Indivisible obligation
◈ Obligation with a penal cause
Pure Obligation v Conditional Obligation
◈ PURE obligation- obligation without a term, in other words,
effectivity or extinguishment does not depend upon the
fulfillment or non-fulfillment of a condition or upon the
expiration of a term or period.
◈ CONDITIONAL obligation – obligation whose
demandability and extinguishment is uncertain and is based
on a condition.
⬩ CONDITION - Future and uncertain event or a past
event unknown to the parties
Classification of Condition
◈ Suspensive v Resolutory
◈ Potestative v Casual v Mixed
◈ Possible v Impossible
◈ Positive v Negative
◈ Divisible v Indivisble
Suspensive v Resolutory
◈ Suspensive – happening of condition gives rise to
obligation

◈ Resolutory – happening of condition extinguishes

obligation
Effects of Suspensive Condition
◈ Upon fulfillment:
⬩ a. Effectivity retroacts to the day of the constitution of
the obligation
⬩ b. No retroactivity with reference to fruits or interest and
prescription
◈ Rights before fulfillment
⬩ a. Creditor may preserve rights through appropriate
actions
⬩ b. Debtor – recovery of payment by mistake or even w/o
mistake
DEBTOR VOLUNTARILY PREVENTS FULFILLMENT
OF THE CONDITION

◈ Condition is deemed fulfilled, if debtor

voluntarily prevents its fulfilment, hence,
obligation becomes demandable.
◈ Requires both intent on part of debtor and
actually preventing fulfilment of obligation
 RULES ON LOSS, DETERIORATION, AND IMPROVEMENTS
DURING PENDENCY OF A SUSPENSIVE CONDITION
◈ Loss of thing – a thing is lost when it:
• Perishes;
• Goes out of commerce;
• Disappears in a way that its existence is unknown or cannot be
recovered
Effect of loss of thing.
Without debtor’s fault - Extinguished
With debtor’s fault - Debtor to pay for damages
 RULES ON LOSS, DETERIORATION, AND IMPROVEMENTS
DURING PENDENCY OF A SUSPENSIVE CONDITION

◈ Deterioration of the thing – impairment of thing

⬩ Without debtor’s fault
⬩ - Impairment is borne by creditor
⬩ With debtor’s fault
⬩ - May choose either, rescission or fulfilment with
payment for damages
RULES ON LOSS, DETERIORATION, AND IMPROVEMENTS
DURING PENDENCY OF A SUSPENSIVE CONDITION
◈ Improvement of the thing
⬩ By nature or time
• Improvement shall inure to the benefit of the
creditor
⬩ At expense of debtor
• Debtor will have rights granted to a usufruct
• Remove improvement, without damaging principal
RULES IN CASE OF FULFILLMENT OF RESOLUTORY
CONDITION
◈ Upon fulfilment of resolutory condition, obligation
is extinguished
◈ Parties shall return to each other what they have
received
◈ In case of loss, deterioration, or improvement of
the thing, the provisions in Art. 1189 (NCC),
which pertains to the debtor shall be applied to the
party who is bound to return
Potestative, Causal, and Mixed
◈ Potestative
⬩ Obligation that depends upon the will of a party to the
obligations
⬩ If condition depends on creditor – valid
⬩ If condition depends on debtor:
⬩ If resolutory - valid
⬩ If suspensive - void
◈ Causal
⬩ Obligation that depends upon chance/will of a 3rd person
◈ Mixed
⬩ Obligation that depends jointly with creditor and debtor
Possible v Impossible
◈ Possible
⬩ - Capable of fulfilment in its nature and by law

◈ Impossible
⬩ - Not capable of fulfilment in its nature or due
to law.
⬩ Kinds of Impossible condition:
• Physical Impossible conditions
• Legal Impossible conditions
Divisible v Indivisble
◈ Divisible – condition that is capable of partial
performance

◈ Indivisible – condition that is not capable of partial

performance, by its nature or by law or by
agreement.
Positive v Negative
◈ Positive
⬩ - Condition that some event happen at a
determinate time. The obligation is
extinguished.

◈ Negative
⬩ - Condition that some event will not happen at
a determinate time. The obligation becomes
effective.
Impossible and Illegal Condition
◈ GENERAL RULE: They shall annul the
obligation which depends upon them
◈ EXCEPTIONS:
⬩ a. pre-existing obligation
⬩ b. if obligation is divisible
⬩ c. in simple or remuneratory donations
⬩ d. testamentary dispositions
⬩ e. conditions not to do an impossible thing
Reciprocal Obligation
◈ A reciprocal obligation is one that arises from the
same cause and in which each party is a debtor and
a creditor of the other, such that the obligation of
one is dependent upon the obligation of the other.
◈ This type of obligation is expected to be
performed simultaneously so that the performance
of one is condition upon simultaneous fulfilment
of the other.
REMEDIES OF INJURED PARTY IN
RECIPROCAL OBLIGATION
◈ Rescission with damages
⬩ Requisites:
⬩ -One of the creditors failed to comply with what is
incumbent upon him
⬩ -Obligor who performed chose rescission over fulfilment
or performance is impossible
⬩ -The breach is substantial so as to defeat the object of
the parties in making the agreement.
⬩ Effects:
⬩ -Extinguishes obligatory relation as if it has never been
created
⬩ -Mutual restitution
◈ Fulfilment of obligation with damages
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