COLLEGE OF ACCOUNTANCY AND BUSINESS ADMINISTRATION

LAW ON OBLIGATIONS

II. KINDS OF CIVIL OBLIGATIONS time but is

definite to arrive.
Characteristic Futurity and Futurity and
A. Pure and Conditional Obligations certainty. uncertainty.
The effect of its No effect upon May give rise to
Pure obligation - An obligation whose performance does not happening to the the existence of an obligation
depend upon a future or uncertain event, or upon a past obligation the obligation but (suspensive) or
event or upon a past event unknown to the parties, only in its the cessation of
demandable at once (NCC, Art. 1179). demandability. one already
existing
NOTE: Other obligations which are demandable at once (resolutory).
are: 1. Obligations with a resolutory condition; and 2. If fulfillment is Valid. But the Annulled
Obligations with a resolutory term or period [NCC, Arts. dependent upon court is
1179 (2) and 1193 (2)]. the sole will of empowered to fix
the debtor the duration of
The most distinctive characteristic of a pure obligation is its the period.
immediate demandability. This quality, however, must not Retroactivity No retroactivity. The moment the
be understood in such a way as to lead to absurd condition is
interpretations which would literally require the obligor or fulfilled, the
debtor to comply immediately with his obligation. effects will
retroact on the
Conditional obligation - An obligation subject to a condition day of the
and the effectivity of which is subordinated to the fulfillment constitution of
or non-fulfillment of a future and uncertain event, or upon a the obligation.
past event unknown to the parties (Pineda, 2000).
Suspensive condition - A condition the fulfillment of which
Condition - A condition is an event which is future and will give rise to the acquisition of a right. While the condition
uncertain, upon which the efficacy or extinguishment of an has not arrived yet, in the meantime, the rights and
obligation depends. It has two requisites: first, futurity; and obligations of the parties are suspended.
second, uncertainty.
NOTE: In suspensive condition or condition precedent, the
Uncertain but past event as a condition: An uncertain but efficacy or the obligatory force is subordinated to the
past event itself can never constitute a condition because in happening of a “future and uncertain event”; if the
order to be classified as a condition, the requisites of futurity suspensive condition does not take place, the parties would
and uncertainty are required. Neither can it constitute a term stand as if the conditional obligation never existed (Gaite v.
or period because in order to be classified as a term or Fonacier, GR L-11827, July 31, 1961; Cheng v. Genato,
period, the requisites of futurity and certainty are required. 300 SCRA 722, GR 129760, December 29, 1998; Pineda,
But the proof or ascertainment of the fact or event, as 2000).
distinguished from the fact or event itself may either
constitute a condition or a term depending upon the Positive suspensive condition - A condition which requires
circumstances of each case (Jurado, 2009). a positive act on the part of the obligor that gives rise to the
acquisition of rights. A contract to sell, the obligation to
Constructive fulfillment of a condition: The condition shall be deliver the subject properties becomes demandable only
deemed fulfilled when the obligor voluntarily prevents its upon the happening of the positive suspensive condition
fulfillment (NCC, Art. 1186). (payment of full purchase price). Without full payment, there
can be no breach of contract to speak of because the seller
Period vs Condition has no obligation yet to turn over the title (Reyes v. Tuparan,
G.R. No. 188064, June 1, 2011).
Basis Period Condition
As to time Refers to the May refer to past Resolutory condition - A condition where the rights already
future. event unknown acquired are lost upon fulfillment of the condition. It is also
to the parties. known as condition subsequent.
As to fulfillment It will happen at May or may not
an exact date or happen.
at an indefinite

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 Basis Suspensive Resolutory Kinds of terms or periods
Effect of Obligation arises Obligation is 1. Ex die – This is a term or period with suspensive effect.
fulfilment or becomes extinguished. The obligation begins only from a day certain, in other
effective words upon the arrival of the period.
Effect of non- If not fulfilled, no If not fulfilled, 2. In diem – A period or term with a resolutory effect. Up
fulfillmen juridical relation juridical relation to a certain extent, the obligation remains valid, but upon
is created. is consolidated. the arrival of said period, the obligation terminates.
When rights are Rights are not Rights are 3. Legal – A period granted under the provisions of the
acquired yet acquired, but already vested, law.
there is hope or but subject to the 4. Conventional or voluntary – The period agreed upon or
expectancy that threat or danger stipulated by the parties.
they will soon be of extinction. 5. Judicial – The period or term fixed by the courts for the
acquired. performance of an obligation or for its termination.
6. Definite – The exact date or time is known and given.
Potestative Condition - A condition which depends upon the 7. Indefinite – It is something that will surely happen but
will of one of the contracting parties (NCC, Art. 1182). the date of happening is unknown. e.g. “I will pay when
my means permit me to do so.”
Effects of potestative conditions upon the obligation: If the
condition is potestative in the sense that its fulfillment When the debtor binds himself to pay when his means
depends exclusively upon the will of the debtor, and the permit him to do so, the obligation is deemed with a period
same is suspensive, both the condition and obligation are (NCC, Art. 1180). This is valid because it is not the payment
VOID. However, if the condition is a pre-existing one or the itself that is dependent upon the will of the debtor, but the
condition is resolutory, only the condition is void, leaving the moment of payment.
obligation itself valid because what is left to the sole will of
the debtor is not the existence or the fulfillment of the Benefit of the period
obligation but merely its extinguishment.
GR: Whenever in an obligation a period is designated, it is
Causal condition - It is the performance or the fulfillment of presumed to have been established for the benefit of both
the condition which depends upon chance and/or the will of the creditor and the debtor
a third person.
XPN: When it appears from the tenor of the period or other
Mixed condition - It is the performance or fulfillment of the circumstances that it was established for the benefit of one
condition which depends partly upon the will of a party to of the parties (NCC, Art.1196).
the obligation and partly upon chance and/or the will of a
third person. Effect of the term or period - 1. When it is for the benefit of
the creditor – Creditor may demand the performance of the
NOTE: Casual and mixed conditions are valid, unlike purely obligation at any time but the debtor cannot compel him to
potestative conditions. accept payment before the expiration of the period. e.g. “on
demand” and 2. When it is for the benefit of the debtor –
Impossible conditions Debtor may oppose any premature demand on the part of
the creditor for performance of the obligation, or if he so
GR: Impossible conditions annul the obligation which desires, he may renounce the benefit of the period by
depends upon the parties but not of a third person. performing his obligation in advance.

XPNs: 1. Pre-existing obligation; 2. Obligation is divisible; 3.
In simple or remuneratory donations; 4. In case of
conditions not to do an impossible thing; and 5. In
testamentary dispositions.
NOTE: In the foregoing, the obligations remain valid, only
the condition is void and deemed to have not been imposed.
It is applicable only to obligations not to do and gratuitous
obligations.
Instances where the court may fix the period
1. If the obligation does not fix a period, but from its nature
and circumstances it can be inferred that a period was
intended by the parties;
2. If the duration of the period depends upon the will of
the debtor;
3. In case of reciprocal obligations, when there is a just
cause for fixing the period; or 4. If the debtor binds himself
when his means permit him to do so.

NOTE: Once fixed by the courts, the period cannot be

B. Obligations with a period changed by the parties (NCC, Art. 1197).

Obligation with a period or a term: Obligations for whose
fulfillment a day certain has been fixed, shall be
demandable only when that day comes (NCC, Art. 1193).
Term or period: A certain length of time which determines
the effectivity or the extinguishment of the obligations.
Requisites of a valid period or term
1. Future;
2. Certain; and
3. Possible, legally, and physically
“Day certain” - It is understood to be that which must
necessarily come, although it may not be known when.
Instances where the debtor loses his right to make use of
the period
1. When after the obligation has been contracted he
becomes insolvent, unless he gives a guaranty or security
for the debt;
2. When he does not furnish to the creditor the guaranties
or securities which he has promised;
3. When by his own acts he has impaired said guaranties
or securities after their establishment;
4. When through a fortuitous event they disappear, unless
he immediately gives new ones or equally satisfactory;
5. When the debtor violates any undertaking, in
consideration of which the creditor agreed to the period;
and
6. When the debtor attempts to abscond (NCC, Art. 1198).

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C. Alternative, Facultative, Conjunctive Obligations D. Joint and Solidary Obligations

Alternative obligation - It is an obligation where the debtor Joint obligations

is alternatively bound by different prestations but the
complete performance of one is sufficient to extinguish the One where the credit or debt shall be presumed to be
obligation. divided into as many equal shares as there are creditors or
debtors, the credits or debts being considered distinct from
Facultative obligation - It is an obligation where the debtor, one another (NCC, Art. 1208). Each debtor is liable only for
who has a reserved right to choose another prestation or a proportionate part of the debt and each creditor to his
thing, is bound to perform one of the several prestations due proportionate share to the credit. Other terms for joint
or to deliver a thing as a substitute for the principal. obligations are: (a) joint simply; (b) mancomunada; or (c)
pro rata.
Conjunctive obligation - An obligation where the debtor has
to perform several prestations; it is extinguished only by the Solidary obligations
performance of all of them.
It is where each of the debtors obliges to pay the entire
Basis Facultative Alternative obligation, while each one of the creditors has the right to
Obligations Obligations demand from any of the debtors, the payment or fulfillment
Number of Only one object is Several objects are of the entire obligation (NCC, Art. 1207; Pineda, 2000).
prestation due due
Manner of May be complied May be complied Joint obligation v. Solidary obligation
compliance with by substitution with by fulfilling any
of one that is due. of those alternately Joint obligation Solidary obligation
due. Presumption Presumed by law. Not presumed. Must
Right to Choice pertains GR: Choice pertain by law (NCC, Art. 1208). be expressly
choose only to debtor. to debtor. XPN: stipulated by the
Expressly granted parties, or when the
to creditor or third law or the nature of
person. the obligation
Liability of When substitution The creditor shall requires solidarity
the debtor has been made have the right of (NCC, Art. 1207).
and communicated indemnity for Liability of Proportionate Obliged to pay the
to the creditor, the damages when, each debtor part of the entire entire obligation.
obligor is liable for through the fault of debt.
the loss of the thing the debtor only, all Right of the Each creditor, if Each creditor has the
on account of things which are creditor to there are several, right to demand from
delay, negligence, alternatively the the is entitled only to any of the debtors,
or fraud. object of the fulfillment of a proportionate the payment or
obligation have the part of the credit. fulfillment of the
been lost, or the obligation entire obligation
compliance of the (Tolentino, 1999).
obligation has
become Character of an obligation
impossible.
Void If the principal If one prestation is GR: When two or more creditors or two or more debtors
prestation obligation is void, void, the others that concur in one and the same obligation, the presumption is
the creditor cannot are free from any that the obligation is joint.
compel delivery of vices of consent
the substitute. preserve the validity XPNs: The obligation shall only be solidary when: (LEN-CJ)
of the obligation. 1. Law requires solidarity;
Impossibility If there is If some prestations 2. Expressly stipulated that there is solidarity;
of prestation impossibility to are impossible to 3. Nature of the obligation requires solidarity; e.g. Civil
perform or to perform or to deliver liability arising from crime.
deliver the principal except for one - this 4. Charge or condition is imposed upon heirs or legatees
thing or prestation, one must be and the will expressly makes the charge or condition in
the obligation is delivered. solidum (Manresa); or
extinguished, even 5. Solidary responsibility is imputed by a final Judgment
if the substitute If all prestations are upon several defendants (Gutierrez v. Gutierrez, 56 Phil
obligation is valid. impossible to 177, GR 34840, September 23, 1931).
perform, the
obligation is
extinguished.
Loss of Loss of the When the choice is
substitute substitute before given to the
the substitution is creditor, the loss of
made through the the alternative
fault of the debtor through the fault of
doesn’t make him the debtor renders
liable. him liable for
damages.

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E. Divisible and Indivisible Obligations
Divisible obligations - Those which have as their object a
prestation which is susceptible of partial performance with
the essence of the obligation being changed.
Indivisible obligations - Those which have as their object a
prestation which is not susceptible of partial performance,
because otherwise the essence of the obligation will be
changed. The obligation is clearly indivisible because the
performance of the contract cannot be done in parts,
otherwise, the value of what is transferred is diminished.
Test of divisibility
Whether or not the prestation is susceptible of partial
performance, not in the sense of performance in separate
or divided parts, but in the sense of the possibility of
realizing the purpose which the obligation seeks to obtain.
It is indivisible, if a thing which could be divided into parts
and as divided, its value is impaired disproportionately
(Pineda, 2000).
Obligations that are deemed indivisible
1. Obligations to give definite things;
2. Those which are not susceptible of partial performance;
3. Even the object or service may be physically divisible,
an obligation is indivisible if so provided (i) by law or (ii)
intended by the parties (NCC, Art. 1225).
NOTE: A pledge or mortgage is one and indivisible by
provision of law, and the rules apply even if the obligation is
joint and not solidary (NCC, Art. 2089)
Obligations that are deemed divisible - When the object of
the obligation involves:
1.Certain number of days of work;
2. Accomplishment of work by metrical unit;
3.Analogous things which are by their nature susceptible
of partial performance (NCC, Art. 1225).
Factors to determine whether an obligation is divisible of
indivisible
a) The will or intention of the parties (express or implied);
b) The objective or purpose of the stipulated prestation;
c) The nature of the thing; and
d) The provisions of law affecting the prestation
Effect of illegality of a part of a contract
1. Divisible contract – the illegal part is void and
unenforceable, meawhile, the legal part is valid and
enforceable (NCC, Art. 1420).
2. Indivisible contract – the entire contract is void and
unenforceable.
Partial performance in indivisible obligation
GR : In indivisible obligations, partial performance is
equivalent to non-performance.
XPNs : (NCC, Articles 1234 and 1235).
1. Where the obligation has been substantially performed
in good faith, the debtor may recover as if there had been
complete performance, minus the damages suffered by
the creditor; and
2. Where the creditor accepts performance knowing its
incompleteness and without protest, the obligation is
deemed fully performed.
F. Obligations with a Penal Clause
An obligation with a penal clause is one with an accessory
undertaking by virtue of which the obligor assumes a
greater liability in case of breach of the obligations (Jurado,
2009).
Penal clause - A penal clause is an accessory undertaking
to asume greater liability in case of breach. It is attached to
an obligation in order to insure performance. The penalty is
generally a sum of money. But it can also be any othe thing
stipulated by the parties, inlcuding an act or abstention.
Double functions: 1. To provide for liquidated damages; and
2. To strengthen the coercive force of the obligation by the
threat of greater responsibility in case of breach.
Kinds of penalties
1. As to origin –
a. Legal - it is legal when it is constituted by law.
b. Conventional - it is constituted by agreement of the
parties
2. As to purpose
a. Compensatory - it is compensatory when it is
established for the purpose of indemnifying the
damages suffered by the obligee or creditor in case of
breach of the obligation.
b. Punitive - it is punitive when it is established for the
purpose of punishing the obligor or debtor in case of
breach of the obligation.
3. As to effect
a. Subsidiary - it is subsidiary when only the penalty
may be demanded in case of breach of the obligation;
b. Joint - it is joint when the injured party may demand
the enforcement of both the penalty and the principal
obligation.
Q: Can the debtor just choose penalty over non-fulfillment?
A: GR: The debtor cannot exempt himself from the
performance of the obligation by paying the penalty (NCC,
Art. 1227). XPN: When the right has been expressly
reserved to the debtor (NCC, Art. 1227).
Creditor cannot demand both the fulfillment of the principal
obligation and the penalty
GR: The creditor cannot demand the fulfillment of the
obligation and the satisfaction of the penalty at the same
time (NCC, Art. 1227).
XPNs: 1. When the right has been clearly granted to him; 2.
If the creditor has decided to require the fulfillment of the
obligation, the performance thereof should become
impossible without his fault, the penalty may be enforced
(NCC, Art. 1227).
NOTE: The creditor need not present proof of actual
damages suffered by him in order that the penalty may be
demanded (NCC, Art. 1228). In this jurisdiction, there is no
difference between a penalty and liquidated damages, so
far as the results are concerned. Whatever differences exist
between them, as a matter of language, they are legally
treated the same (Rabuya, 2017).