Article 1234.

If the obligation has been substantially performed in good faith, the obligor may
recover as though there had been a strict and complete fulfillment, less damages suffered by
the obligee.

1233- talks about integrity-

1234- is called doctrine of substantial performance
1235- partial performance

Example: the seller obliged himself to deliver 500 sacks of cement, however due to cement
shortage he can only deliver 400 sacks. It is noticeable that the seller wants to comply to his
obligation to deliver 500 sacks but for the reason beyond his control, he could not deliver the
full 500 sacks. This shows good faith because he attempted to go find 500 sacks

Under article 1234, the seller may recover as though there had been complete delivery less the
price of 100 bags of cement, the seller must show however that he attempted to delivery in
good faith to comply of his obligation.

If the seller proved that he complied with diligence required and in good faith, the law would
consider him as to have complied substantially to what is required to fulfill.
There is valid payment event if there is substantial compliancee
Substantial compliance means that there is no omission of any essential part from compliance,
that any omission consists only of an unimportant defect or omission, and that there has been a
firm effort to comply fully with the standards.
Doctrine of substantial performance- whereby one party under a contract can still recover for
damages if he substantially performed his duties under the contract even though that individual
failed to comply with the contract in some way.

Doctrine of substantial performance is a legal principle which says that if a good faith attempt is
made to perform the requirements of the agreement even if it does not precisely meet the
terms of the agreement or statutory requirements, the performance will still be considered
complete if the essential purpose is accomplished. However, this is subject to claim of damages
for shortfall. A defendant when sued for non-performance cannot avoid paying damages by
showing he substantially performed or came near to performing the requirements of the
contract.
Substantial performance in good faith rule
Requisites of 1234
Substantial
Good faith

Substantial Compliance

Substantial compliance means that the debtor, when in good faith, has attempted to perform
the contract or prestation, but through oversight, or any excusable neglect, he failed to make a
full and complete performance, for which the other party may be indemnified, there is already
a substantial compliance, and the debtor shall recover as though there had been a strict and
complete fulfillment of the obligation.

The omission or defect must be slight, unimportant, or not so material in the obligation as to
frustrate the accomplishment of the intended work. The omission or defect must also be in
good faith, that is, it was not intended by the debtor.

Right to Rescind

The right to rescind if there is substantial compliance cannot be invoked. This is because the
obligee has already benefited from the obligation.

The Article is grounded on evident fairness. The substantial performance in good faith by the
obligor, both he and the obligee must be benefited. Since, however, there was still breach in
the performance of the obligation by the obligor, the amount of damage suffered by the
obligee must deducted from the benefit that the obligor seeks to recover.

It must be noted that there must first be "substantial performance in good faith." Substantial
performance alone is not enough. It must have been under good faith. Good faith, on the other
hand, is not enough, just the same. It must be alongside with substantial performance.

Is the deduction from the benefit to be recovered by the obligor based on the damages
suffered by the obligee because of the breach considered "penalty" or may the obligee still
demand damages aside from the deduction?
It is submitted that the obligee can demand damages no more because of the following
reasons:

(1) This Article presupposes the acceptance of the obligee of the thing or the service despite its
lack of completeness. Hence, the obligation is deemed to be complied with, as set forth by
Article 1235.

(2) The compliance here is substantial and attended by good faith. One must not be penalized if
he acted in good faith. Good faith is always a defense, as a general rule.

How do we define "substantial performance"?

The law did not define the meaning of the term and so, it is up to the Supreme Court to decide
whether or not there is substantial compliance on a case-to-case basis. Nevertheless, the Court
in one case held for the record that "substantial compliance" is a performance according to the
fair intent of the contract.

Thus, if I have the obligation to deliver 100 apples and without my fault, I am only able to
deliver 99 apples, there is substantial compliance.

ARTICLE 1264

ART.1264. The courts shall determine whether, under the circumstances, the
partial loss of the object of the obligation is so important as to extinguish the
obligation. (n)
There is partial loss when only a portion of the thing is lost or destroyed or when it
suffers depreciation or deterioration. Partial loss is the equivalent of difficulty of
performance in obligations to do. (1267)

ffect of partial loss of a specific thing.

There is partial loss when only a portion of the thing is lost or destroyed or when it
suffers depreciation or deterioration. Partial loss is the equivalent of difficulty of
performance in obligations to do. (Art. 1267.)
In case of partial loss, the court is given the discretion, in case of disagreement
between the parties, to determine whether under the circumstances it is so important in
relation to the whole as to extinguish the obligation. In other words, the court will
decide whether the partial loss is such as to be equivalent to a complete or total loss.

EXAMPLE:

Gloria obliged himself to deliver to Joseph a specific race horse. The horse met an
accident as a result of which it suffered a broken leg. The injury is permanent. Here,
the partial loss is so important as to extinguish the obligation.

If the loss is due to the fault of Gloria, she shall be obliged to pay the value of the
horse with indemnity for damages.

If the horse to be delivered is to be slaughtered by Joseph, the injury is clearly not

important. Even if there was fault on the part of Gloria, she can still deliver the horse
with liability for damages, if any, suffered by Joseph.