LAW ON OBLIGATIONS – LECTURE AID

GENERAL PROVISIONS

1. Obligation defined.

An obligation is a juridical necessity to give, to do or not to do. (Art. 1156, NCC)

2. Requisites of an Obligation.

a. Juridical or legal tie – it binds the parties to the obligation

b. Active subject (creditor) – one who can demand the fulfillment of the obligation
c. Passive subject (debtor) – one against whom the obligation is juridically
demandable.
d. Prestation – it is the object of the obligation

Requisites of prestation:
i. It must be licit
ii. It must be possible, physically or juridically
iii. It must be determinate or at least determinable
iv. It must be of pecuniary value

3. Civil Obligation vs. Natural Obligation.

a. Civil obligation – one which has a binding force in law, and which gives the creditor
the right of enforcing it against the obligor in the courts.
b. Natural obligation – cannot be enforced by action but which is binding on the party
who makes it in conscience and according to natural law.

4. Primary Classifications of Obligations under the Civil Code.

a. Pure and Conditional
b. With a period
c. Alternative and facultative
d. Joint and solidary
e. Divisible and indivisible
f. With a penal clause

5. Sources of Obligations. (Art. 1157, NCC)

a. Law

NOTE: Obligations derived from law are not presumed. Only those expressly
determined in the Civil Code or in special laws are demandable. (Art. 1158, NCC)

b. Contracts - meeting of minds between two persons whereby one binds himself
with respect to the other, to give something or render some service.

NOTE: Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.

c. Quasi-contracts – a juridical relation arising from lawful, voluntary and unilateral

acts, by virtue of which the parties become bound to each other, based on the
principle that no one shall be unjustly enriched or benefited at the expense of
another.

Principal kinds of Quasi-Contracts:

1. Negotiorum gestio – a juridical relation which arises whenever a person

voluntarily takes charge of the agency or management of the business or
property of another without any power or authority from the latter.
 2. Solutio indebiti – a juridical relation which arises whenever a person
unduly delivers a thing through mistake to another who has no right to
demand it.

d. Delicts – acts or omissions punishable by law.

NOTE: Every person criminally liable is civilly liable.

NOTE: However, there are offenses and special crimes without civil liability
(treason, rebellion, illegal possession of firearm, gambling – they do not affect
private rights)

e. Quasi-delicts - obligations which do not arise from law, contracts, quasi-contracts

or criminal offenses. Fault or negligence which causes damage to another, there
being no pre-existing contractual relations between the parties.

NATURE AND EFFECT OF OBLIGATIONS

6. Obligations “To Give.”

a. Determinate – when the object is particularly designated or physically segregated

from all others of the same class

b. Generic – when the object is designated merely by its class or genus without any
particular designation.

NOTE: Every person obliged to give something is also obliged to take of it with the proper
diligence of a good father of a family, unless the law or the stipulation of the parties
requires another standard of care. (Art. 1163, NCC)

7. When does the obligation to deliver the thing arise?

It depends.
a. From the time designated by the provisions of the Civil Code or of special laws
creating them (If obligation arises from law, quasi-contracts, quasi-delicts and
delicts)
b. From the moment of the perfection of the contract (If obligation arises from a
contract)

Exception: when the obligation is subject to a suspensive condition (obligation to

deliver only arises from the moment the condition is fulfilled)

8. Kinds of Fruits.

a. Natural Fruits – spontaneous products of the soil and the young and other products
of animals.
b. Industrial Fruits – produced by land of any kind through cultivation or labor.
c. Civil Fruits – the result of a juridical relation such as the rent of the building, price
of lease of land and other property and the amount of perpetual or life annuities.

9. When does the creditor have a right to the fruits of a determinate thing?

The creditor has the right to the fruits of a thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over it until the thing has been delivered to
him. (Art. 1164, NCC)

10. Personal Right vs. Real Right.

PERSONAL RIGHT – this is a right that may be enforced by one person on another, such
as the right of the creditor to demand the delivery of the thing and its fruits from the debtor.
 REAL RIGHT – this refers to the right or power over a specific thing, such as possession
or ownership, which is a right enforceable against the whole world. This is the right
acquired by the creditor over the thing and its fruits when they have been delivered to him.

11. Obligation of the Debtor as regards accession and accessories.

The obligation to give a determinate thing includes that of delivering all its accessions and
accessories, even though they may not have been mentioned. (Art. 1166, NCC)

12. Accessions vs. Accessories.

ACCESSIONS – include everything that is produced by a thing or is incorporated or

attached thereto, either naturally or artificially, such as alluvium, the soil gradually
deposited by the current of a river on a river bank, or whatever is built, planted or sown on
a parcel of land.

ACCESSORIES – those joined to or included with the principal thing for the latter’s better
use, perfection or enjoyment (such as the keys to a car or a house, or the bracelet of a
wristwatch).

13. Remedies of the Creditor. (Art. 1165, in relation to Art. 1170, NCC)

In determinate obligations
a. To compel specific performance
b. To recover damages for breach of obligations

In generic obligations
a. To ask that the obligation be complied with at the expense of the debtor
b. To recover damages for breach of the obligation

14. Obligations “To Do.”

If a person obliged to do something fails to do it, the same shall be executed at his cost.
The same rule shall be observed if he does it in contravention of the tenor of the obligations.
Furthermore, what has been poorly done be undone. (Art. 1167)

NOTE: The creditor cannot compel the obligor for specific performance because the law
recognizes the individual’s freedom to choose between doing that which he promised and
not doing it, otherwise it would result to involuntary servitude.

15. Remedies Available for the Creditor in Obligations To Do. (Art. 1167, in relation to
Art. 1170, NCC)

If the debtor fails to perform his obligation in obligations to do:

a. Have the obligation executed at the expense of the debtor.
b. Ask for damages.

NOTE: When the prestation consists of an act where the personal and special
qualification of the obligor is the principal motive for the establishment of the
obligation. Only the remedy of damages can be availed of.

If the debtor performs the obligation but does it poorly:

a. Have the same be undone at the debtor’s expense.
b. Ask for damages.

16. Obligations “Not To Do.” (Art. 1168, NCC)

When the obligation consists in not doing, and the obligor does what has been forbidden
him, it shall be undone at his expense. The object of the obligation is fulfilled so long as
that which is forbidden is not done by the obligor.
17. Remedies of the Available for the Creditor in Obligations Not To Do. (Art. 1168, in
relation to Art. 1170, NCC)

If the obligor does what has been forbidden him, two remedies are available to the obligee:
a. To have it undone at the expense of the obligor (Art 1168)
b. Ask for damages (Art 1170)

Instances where 1st remedy is not available:

a. Where the effects of the act which is forbidden is definite in character
b. Where it would be physically or legally impossible to undo what has been done
because of the nature of the act itself, because of a provision of the law or because
of conflicting rights of third persons.

18. Breach of Obligations.

Two kinds of breach of obligation:

1. Voluntary (default, fraud, negligence, contravention)
2. Involuntary (fortuitous event)

19. Concept of Default.

Default signifies the idea of delay in the performance of an obligation with respect to time.

Three kinds of default:

a. Mora solvendi – delay of the debtor to perform his obligation. (Mora solvendi ex
re – obligation to give; Mora solvendi ex persona – obligation to do)
b. Mora accipiendi – delay of the creditor to accept the delivery of the thing which is
the object of the obligation
c. Compensation morae – delay of the parties in reciprocal obligations.

Requisites of default:
a. The obligation is demandable and already liquidated
b. The obligor delays performance
c. The creditor requires the performance judicially or extra- judicially

20. Default in positive obligations. (Art. 1169, NCC)

In obligations to give or to do, the debtor incurs in delay from the time the creditor demands
from him the fulfillment of the obligation. Demand may either be:
a. Judicial – creditor files a complaint against the debtor in court for the fulfillment of
the obligation
b. Extrajudicial – creditor demands from the debtor either orally or in writing.

NOTE: Whether demand is judicial or extrajudicial, if the debtor fails to performs his
obligation, he is in mora solvendi and therefore liable for damages.

21. When demand is not necessary. (Art. 1169, NCC)

Demand by the creditor is not necessary in order that delay may exist in the following
cases:
a. When the obligation or the law expressly so declares
b. When it appears that the designation of time was the controlling motive for the
establishment of the contract
c. When demand would be useless as when the debtor has rendered it beyond his
power to perform.

22. Default in negative obligations.

The debtor cannot incur delay in negative obligations. Fulfillment and violation are
possible, but never delay.
23. Default in reciprocal obligations.

Reciprocal obligations – those which are created or established at the same time, out of the
same cause and which result in mutual relationships of creditor and debtor between the
parties.

General rule: Fulfillment by both parties should be simultaneous.

Exception: When different dates for performance for each party are fixed by the
parties.

One party incurs in delay from the moment the other party fulfils his obligation while he
himself does not comply or is not ready to comply. (Art. 1169, NCC)

NOTE: If neither party complies, the default of one compensates the default of the other.
In which case, there can be no legal delay.

24. Effect of Default.

Once the debtor incurred in delay, he can be held liable by the creditor for damages. This
liability subsists even if the thing may have been lost through a fortuitous event.

25. Fraud, Concept.

Fraud consists in the conscious and intentional proposition to evade the normal fulfillment
of an obligation.

Two kinds of fraud:

a. Criminal fraud
b. Civil fraud
i. Fraud in the performance of an obligation (Dolo incidente)
ii. Fraud in the constitution of an obligation (Dolo causante)
iii.
Basis Dolo Causante Dolo Incidente

Present only at the time of the Present only during the

As to when Present birth of the obligation performance of a pre-existing
obligation

Purpose is to secure the Purpose is to evade the normal

As to Purpose consent of the other party to fulfillment of an obligation
enter into a contract

Results in the vitiation of Results in the nonfulfillment or

As to Result
consent breach of the obligation

26. Effect of Fraud.

If there is breach or non-fulfillment of the obligation by reason of fraud on the part of the
debtor, he can be held liable for damages. (Art. 1170, NCC)

27. Rule on Waiver of Fraud.

Liability cannot be waived or renounced. What is prohibited is the waiver made in advance
or in anticipation of fraud. Thus, waiver for past fraud is allowed.
• Waiver for future fraud – contrary to law and public policy. Hence, such waiver is
void.
• Waiver for past fraud – valid since such waiver can be deemed as an act of
generosity. Further, what is renounced is the effect of fraud or the right of the party
to indemnity.
28. Negligence, Concept.

Negligence is the omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the time and the place;
absence of due care required by the nature of the obligation. (Art. 1173, NCC)

NOTE: If the law or contract does not state the degree of diligence, that which is expected
of a good father of the family shall be required. (Art. 1173, NCC)

Kinds of negligence:
a. Criminal negligence
b. Civil negligence
i. Culpa contractual – fault or negligence of the debtor by virtue of which he
is unable to perform his obligation arising from a pre-existing contract
because of the omission of the diligence which is required of the obligation.

ii. Culpa aquiliana (quasi-delict) – fault or negligence of a person who,

because of the omission of the diligence which is required by the nature of
the obligation, causes damage to another.

Basis Culpa Contractual Culpa Aquiliana

As to Relationship of There is always a pre- There may or may not be a pre-

the Parties existing contractual relation existing contractual relation

As to Source of Breach or nonfulfillment of Purpose is to evade the normal

Obligation the contract fulfillment of an obligation

Existence of the contract and Negligence of the defendant must

As to Proof Required its breach is sufficient prima be proved
for Recovery facie evidence to warrant
recovery.

Proof of diligence in the It is available as a defense.

As to Availability of
selection and supervision of
Due Diligence as a
employees is not available as
Defense
a defense.

29. Negligence vs. Fraud.

Negligence Fraud

Act or omission is voluntary in Conscious or intentional proposition to evade

character the normal fulfillment of the obligation

There is merely abandonment, There is intent to cause damage or injury

carelessness or lack of diligence

NOTE: Where negligence shows bad

faith, the rules on fraud shall govern

30. Breach of Obligation through Contravention of Tenor.

Debtor is bound to indemnify the creditor for the damages caused thereby. Contravention
of the tenor of the obligation includes every kind of defective performance.

31. Fortuitous Event, Concept.

Fortuitous event is one which could not be foreseen, or which, though foreseen, was
inevitable. It covers:
 • Acts of God - Those which are absolutely independent of human intervention, such
as rains, typhoons, floods, cyclones, earthquakes or any other similar calamity
brought about by natural forces.

• Force majeure – Events which arise from legitimate or illegitimate acts of persons
other than the obligor, such as commotions, riots, wars, robbery and similar acts.

32. Effect of Fortuitous Event Upon Obligation

If the obligor is unable to comply with his obligation by reason of fortuitous event:

General rule: Obligation is extinguished. Obligor is exempted from any liability.

Exceptions:
a. When the obligation is generic (the genus of a thing can never perish) (Art. 1263,
NCC)
b. Where such liability is expressly specified by law (Art. 1174, NCC)
c. Where it is declared by stipulation of the parties (Art. 1174, NCC)
d. Where the nature of the obligation requires the assumption of risk (no wrong is
done to one who consents) (Art. 1174, NCC)
e. When the object of the obligation is lost and the loss is due partly to the fault of the
debtor (Art. 1262, NCC)
f. When the object of the obligation is lost and the loss occurs after the debtor has
incurred in delay (Art. 1262, NCC)
g. When the debtor promised to deliver the same thing to two or more persons who
do not have the same interest
h. When the obligation to deliver arises from a criminal offense

NOTE: These conditions must concur before general rule can be applied:
a. The event must be independent of the will of the obligor
b. The event must be either unforeseeable or inevitable
c. The event must be of such character as to render it impossible for the obligor to
fulfill his obligation in a normal manner
d. The obligor must be free from any participation in the aggravation of the injury
resulting to the obligee.

33. Remedies of Creditor to Protect his Credit. (Successive Remedies) (Art. 1177, NCC)

a. Exact payment
b. To exhaust the property in possession of the debtor (By attachment)
c. To be subrogated to all of the rights and actions of the debtor, save those which are
inherent in his person (Accion Subrogatoria)
d. To impugn all of the acts which the debtor may have done to defraud him (Accion
Pauliana)

DIFFERENT KINDS OF OBLIGATIONS

34. Pure Obligation.

An obligation that is demandable at once; whose effectivity or extinguishment does not

depend upon the fulfillment of a condition or upon the expiration of a term or period.

35. Conditional Obligation.

An obligation whose effectivity is subordinate to the fulfillment or nonfulfillment of a

condition.

CONDITION - A future and uncertain fact or event upon which an obligation is

subordinate or made to depend.
 Requisites of a condition:
a. The fact or event must be future
b. The fact of event must be uncertain

TERM OR PERIOD - That which necessarily must come whether the parties know when
it will happen or not.

36. Classification of Conditions.

• Suspensive and Resolutory

• Potestative, Casual, and Mixed
• Divisible and Indivisible
• Possible and Impossible
• Positive and Negative
• Conjunctive and Alternative
• Express and Implied

37. Suspensive and Resolutory Conditions.

SUSPENSIVE CONDITION – Effectivity of obligation is suspended until the happening

or fulfillment of the condition.

• Effect: The acquisition of rights shall depend upon the happening of the condition.
What is acquired by the creditor upon the constitution of the obligation is only a
mere hope or expectancy.

RESOLUTORY CONDITION – Effectivity of obligation is extinguished upon the

happening or fulfillment of the obligation.

• Effect: Although rights are immediately vested in the creditor upon the constitution
of the obligation, such rights are always subject to the threat or danger of extinction.

38. Potestative, Casual, and Mixed Conditions.

POTESTATIVE CONDITION – One whose fulfillment depends exclusively upon the will
of either of the parties to the obligation.

Effects:
• SUSPENSIVE POTESTATIVE
 Depends exclusively upon the will of the creditor
 Condition and obligation is valid
• Rationale: Because the creditor is naturally interested in the
fulfillment of the suspensive condition, since it is only by
such fulfillment that the obligation can become effective.

 EXAMPLE: A is to give B P20,000 if B will marry C.

 Depends exclusively upon the will of the debtor

 Condition and obligation is void.
• Rationale: It would sanction obligations which are illusory,
in direct contravention of the principle that validity and
fulfillment of contracts cannot be left to the will of one of
the contracting parties.

 EXAMPLE: A is to give B 20,000 if A will marry C.

 Exception: pre-existing obligation (condition is void, but obligation

is valid)

• RESOLUTORY POTESTATIVE – Condition and obligation is valid even if

fulfillment exclusively depends upon the will of the debtor
  EXAMPLE: A will allow B to use his (A’s) car until A’s return from
Dumaguete.

 EXAMPLE: A will allow B to use his (A’s) car until B’s return from Cebu.

 Rationale: It is but natural that the debtor is interested in the fulfillment of

the resolutory condition since it is only by such fulfilment that he can
reacquire the rights.

CASUAL CONDITION – One whose fulfillment depends exclusively upon chance and/or
the will of a third person.

• EXAMPLE: A will give B P10,000 if A will win the 6/49 lotto draw tonight.

• EXAMPLE: A will give B P10,000 if C marries A.

• Effect: The obligation including such condition shall take effect.

MIXED CONDITION – One whose fulfillment depends jointly upon the will of either of
the parties and upon chance/will of a third person.

• EXAMPLE: A is to give B P50,000 if B will marry C.

• Effect: The obligation including such condition shall take effect.

39. Possible and Impossible Conditions.

POSSIBLE CONDITION – Capable of realization, not only according to its nature, but
also according to law, good customs and public policy.

IMPOSSIBLE CONDITION – Not capable of realization either according to its nature or

according to law, good customs or public policy.

• Effects
1. The obligation which depends upon the condition shall be annulled.
2. Divisible obligation - The part which is not affected by the impossible or
unlawful condition shall be valid.
3. Condition is not to do an impossible thing – Shall be considered as not
having been agreed upon. Hence, obligation becomes pure, and
immediately demandable.

40. Positive and Negative Conditions.

POSITIVE CONDITION - Involves the performance of an act or fulfillment of an event

• Effect: The condition that some event happen at a determinate time shall extinguish
the obligation as soon as the time expires or if it becomes indubitable that the event
will not take place.

NEGATIVE CONDITION - Involves the non-performance or an act or nonfulfillment of

an event.

• Effect: The condition that some event will not happen at a determinate time shall
render the obligation effective from the moment the time indicated has elapsed or
if it becomes evident that the event cannot occur.

41. Retroactive Application of Conditional Obligations. (Art. 1187, NCC)

a. OBLIGATIONS TO GIVE
 The effects of a conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation.
  If reciprocal obligation – The fruits and interests during the pendency of
the condition shall be deemed to have been mutually compensated

 If unilateral obligation – The debtor shall appropriate the fruits and

obligations received, unless from the nature and circumstances of the
obligation, it should be inferred that the intention of the person constituting
the same was different.

b. OBLIGATIONS TO DO AND NOT TO DO

 The courts shall determine in each case, the retroactive effect or the
condition that has been complied with.

42. Effect when the debtor voluntarily prevents fulfillment of the condition. (Art. 1186,
NCC)

Doctrine of constructive fulfillment of suspensive conditions – The condition shall be

deemed fulfilled when the obligor voluntarily prevents its fulfillment. The debtor must
have actually voluntarily and willfully prevented the creditor from complying with the
condition

43. Loss, Deterioration or Improvement in Obligation to Give a Determinate Thing with

a Suspensive Condition. (Art. 1189, NCC)

a. LOSS – either:
i. Without the fault of the debtor

Effect: The obligation is extinguished

ii. Through the fault of the debtor

Effect: The obligation is converted into one of indemnity for damages

NOTE: The thing is lost when:

i. It perishes
ii. It goes out of commerce
iii. It disappears in such a way that its existence is unknown or cannot be
recovered

b. DETERIORATION – either:
i. Without the fault of the debtor

Effect: Impairment is to be borne by the creditor

ii. Through the fault of the debtor

Effect: Creditor may choose between rescission of the obligation with

damages and bringing an action for specific performance

c. IMPROVEMENTS
i. By its nature or by time

Effect: The improvement shall inure to the benefit of the creditor

ii. At the expense of the debtor

Effect: Debtor cannot have any other right than granted to a usufructuary.
He cannot ask for reimbursement for the expenses incurred for useful
improvements or for improvements for mere pleasure. (Except:
Reimbursement for necessary expenses)

However, he has the right to:

 a. Remove such improvements, provided there is no damage to the
thing or property.
b. Set off the improvements he may have made on the property against
any damage to the same
44. Rule in case of Fulfillment of Resolutory Condition (Art. 1190, NCC)

• Upon the fulfillment of the resolutory condition, the obligation is extinguished.

• The parties shall return to each other what they have received
• In case of loss, deterioration or improvement of the thing, the provisions in the
above rule (Art. 1189, NCC), which pertain to the debtor shall be applied to the
party who is bound to return.

45. Reciprocal Obligation, Concept.

Reciprocal obligations are those which are created or established at the same time, out of
the same cause and in which each party is a debtor and creditor of the other, such that the
obligation of one is dependent upon the obligation of the other.

46. Remedies of the Injured Party in Reciprocal Obligation.

a. Rescission with damages

NOTE: Rescission will not be permitted for a slight or causal breach of the contract, but
only for such breaches which are substantial and fundamental as to defeat the object of the
parties in making the agreement.

b. Fulfillment of the obligation with damages.

NOTE: The above remedies may be availed of by the injured party in the alternative. He
cannot ask for both. If he has chosen rescission of the obligation, he can no longer ask for
fulfillment. However, he may also seek rescission, even after he has chosen fulfillment, if
the latter becomes impossible.

47. Effect of Breach of Both Parties. (Art. 1192, NCC)

In case both parties have committed a breach of the obligation, the liability of the first
infractor shall be equitably tempered by the courts. If it cannot be determined which of the
parties first violated the contract, the same shall be deemed extinguished, and each shall
bear his own damages.

48. Obligations with a Period, Concept.

An obligation with a period is one whose demandability or extinguishment is subject to the

expiration of a term or period which must necessarily come. In other words, there is a day
certain when the obligation will arise or cease.

49. Period vs. Condition.

As to fulfillment: A condition is an event that may or may not happen; a period is an event
that must necessarily come, at a date known beforehand, or at a time that cannot be
determined.

As to time: A condition may refer to the future or to a past event unknown to the parties; a
period always refers to the future.

As to the will of the debtor: A period that depends upon the will of the debtor authorizes
the court to fix its duration (Art. 1197, par. 2, NCC), while a condition that depends upon
the will of the debtor which is suspensive shall annul the obligation. (Art. 1182, NCC)
50. Kinds of Period.

According to effect
a. Suspensive period (ex die) – when the obligation becomes demandable only upon
the arrival of a day certain.

Examples:
 I will pay you on January 1 next year
 I will support you from the time your father dies.
 I will pay you when my means permit me to do so

b. Resolutory period (in diem) – when the obligation is demandable at once; although
it is terminated upon the arrival of a day certain.

Examples:
 I will give you P1,000/month until the end of the year
 I will support you until you die

According to source
a. Legal period – When it is granted by law (ex. Arts. 1606, 1623, 1682, 1687)
b. Conventional period – When it is stipulated by the parties (ex. Art. 1196)
c. Judicial period – When it is fixed by the courts. (ex. Art. 1197)

According to definiteness
a. Definite period – When the date or time is known beforehand and is known when
it will come
b. Indefinite period – When it can only be determined by an event which must
necessarily come to pass, although it may not be known when.

51. Loss, Deterioration, or Improvement Before Period (Art. 1194, NCC)

As to the effects of loss, deterioration or improvement before the arrival of the day certain,
the rules of Art. 1189 shall be observed

52. Effect of Advanced Payment or Delivery. (Art. 1195, NCC)

If the obligor, being unaware of the period or believing that the obligation has become due
and demandable, paid or delivered something before the arrival or expiration of the period

Remedy: He may recover what he has paid or delivered with fruits and interests.

Conditions:
a. Only applies to obligations to give
b. Payment or delivery must have been made by the debtor because he was unaware
of the period or believed that the obligation had become due and demandable.
Otherwise, if made voluntarily, there can be no right of recovery.

53. When the Court may Fix the Period (Art. 1197, NCC)

a. If the obligation does not fix a period, but from its nature and circumstances it can
be inferred that a period was intended.
b. When the duration of the period depends upon the will of the debtor

Example: “when my means permit me to do so” (Art. 1180, NCC)

54. Presumption as to Who Has the Benefit of the Period. (Art. 1196, NCC)

Whenever a period is designated for the performance or fulfillment of an obligation, it is

presumed to have been established for the benefit of both the creditor and the debtor, unless
from the tenor of the obligation or other circumstances, it should appear that it has been
established for the benefit of only one of the parties.
 Therefore, the debtor cannot be compelled to perform, and the creditor cannot be compelled
to accept performance, before the term expires.

55. Period is for the Benefit of One of the Parties.

 Term is for the benefit of the debtor alone. He cannot be compelled to pay
prematurely, but he can, if he desires, to do so.
 Term is for the benefit of the creditor. He may demand fulfillment even before the
arrival of the term but the debtor cannot compel him to accept payment before the
expiration of the stipulated period.

56. When Debtor Loses his Right to Make Use of the Period. (Art. 1198, NCC)

General Rule: Obligation is not demandable before the lapse of the period.

Exceptions: The debtor shall lose every right to make use of the period, that is, the period
is disregarded and the obligation becomes pure and demandable –
a. When debtor becomes insolvent after the obligation has been contracted

Except: If there is a guaranty or security for the debt

b. When the debtor does not furnish guaranties or securities promised

Example: D promised to mortgage his house to secure the debt. If he fails to furnish
said security as promised, he shall lose his right to the period.

c. When the guaranties or securities given have been impaired through debtor’s fault
or disappeared through a fortuitous event

Except: If he immediately gives a new guaranty or security which is equally

satisfactory

NOTE: There is a difference between the effect of impairment and disappearance.

 If the security is impaired through the fault of the debtor – he shall lose his right to
period
 If impaired without his fault – he shall retain his right
 If disappears through any cause even without fault of debtor – he shall lose his
right to period

d. When the debtor violates any undertaking in consideration of which the creditor
agreed to the period.

Example: C granted a loan of P50,000.00 to D giving D one year to pay provided

D did not engage in any gambling until he has paid the debt. If D enters a casino to
play in the slot machine, say after one month, C can already demand immediate
payment.

e. When debtor attempts to abscond.

57. Alternative Obligation, Concept.

One wherein various prestations are due but the performance of one of them is sufficiently
determined by the choice, which, as a general rule, belongs to the debtor.

58. Right to Choose Prestation. (Art. 1200, NCC)

The right of choice belongs to the debtor, unless it has been expressly granted to the
creditor.
59. Limitations on Debtor’s Right To Choose.

 The debtor must completely perform the prestation chosen. He cannot compel the
creditor to receive part of one and part of another undertaking.
 He cannot choose those prestations which are impossible, unlawful or which could
not have been the object of the obligation.

60. When Obligation Ceases to be Alternative and Becomes a Simple Obligation.

a. When the debtor has communicated his choice to the creditor. (Art. 1201, NCC)
b. When among the prestations whereby the debtor is alternatively bound, only one is
practicable. (Art. 1202, NCC)
c. When the creditor has communicated his choice to the debtor, if the creditor has
been expressly given the right of choice. (Art. 1205, NCC)

61. Rules in case of loss of things or impossibility of services which are alternatively the
object of the obligation before the choice is communicated.

a. When right of choice is with the debtor (Art. 1204, NCC)

i. If only one or some are lost through a fortuitous event or through the
debtor’s fault, the debtor may deliver any of the remainder, or that which
remains if only one subsists.
ii. If all are lost through a fortuitous event, the obligation is extinguished
(based on the rule that no person shall be responsible for fortuitous event).
iii. If all are lost through the debtor’s fault, the debtor shall pay the value of the
last thing that was lost plus damages.
iv. If all except one are lost through the debtor’s fault, and the remaining item
is subsequently lost through a fortuitous event, then the debtor’s obligation
is extinguished.
v. If all except one are lost through a fortuitous event, and the remaining item
is subsequently lost through the debtor’s fault, the debtor shall pay damages.

b. When right of choice is expressly granted to the creditor (Art. 1205, NCC)
i. If only one or some are lost through a fortuitous event, the debtor shall
deliver that which the creditor should choose among the remainder, or that
which remains if only one subsists.
ii. If all are lost through a fortuitous event, the obligation shall be extinguished.
iii. If only one or some are lost through the debtor’s fault, the creditor ma claim
any of those subsisting, or the price of any of those which were lost through
the debtor’s fault plus damages.
iv. If all are lost through the debtor’s fault, the creditor may claim the price of
any of them plus damages.

62. Facultative Obligation, Concept.

When only one prestation has been agreed upon, but the obligor may render another in
substitution, the obligation is called facultative.

63. Rules in case of Loss of Principal Thing and Substitute.

BEFORE SUBSTITUTION
1. Principal thing - If the principal thing is lost through a fortuitous event, the
obligation is extinguished. Otherwise, the debtor is liable for damages.
2. Substitute - The loss of the thing intended as a substitute with or without the fault
of the debtor does not render him liable. The reason is that the thing intended as a
substitute is not due. The effect of the loss is merely to extinguish the facultative
character of the obligation.

NOTE: The loss or deterioration through the bad faith or fraud of the obligor does not
render him liable because to hold otherwise would destroy the facultative character of the
obligation.
 AFTER SUBSTITUTION
1. Principal thing – If the principal thing is lost, the debtor is not liable whatever may
be the cause of the loss because it is no longer due.
2. Substitute – If the substitute is lost, the liability of the debtor depends upon whether
or not the loss is due through his fault. The debtor shall be liable for the loss or
deterioration of the substitute on account of his delay, negligence or fraud once the
substitution has been made.

64. Alternative vs. Facultative Obligation.

BASIS FACULTATIVE ALTERNATIVE

As to objects due Only one object is due Several objects are due
As to compliance By delivering another object By delivering any of the
in substitution of that which objects which are
is due alternatively due
As to right of choice Right to make the Right of choice may be
substitution is given only to given to the creditor or a
the debtor third person
As to effect of fortuitous Loss of the thing due Loss of one or more of the
loss extinguishes the obligation. alternatives through a
fortuitous event does not
extinguish the obligation.
As to effect of culpable loss The culpable loss of the Culpable loss of any of the
object which the debtor may objects which are
deliver in substitution alternatively due before the
before the substitution is choice is made may give
effected does not give rise to rise to a liability on the part
any liability on the part of of the debtor.
the debtor
As to nullity of prestation Nullity of the prestation Nullity of a prestation does
agreed upon invalidates the not invalidate the others
obligation