Obligations

Chapter 1
Other instances that illustrate quasi-contracts:
1156. Obligations, a juridical necessity to give, to do or not During a calamity, property is saved from destruction by
to do. another person. Owner must pay for the savior’s efforts for
just compensation.
Elements of an Obligation:
1. Active Subject (CR;obligee) 1161. Crimes - are governed by Penal Laws.
2. Passive Subject (DR;obligor) - Article further explains the civil liabilities for
3. Object/Prestation obligations that arise from crimes.
4. Efficient Cause (vinculum/juridical tie - why)
[General Rule:]
Kinds of Obligations: Person who is criminally liable is also civilly liable.
1. Civil (perfect) - Commission of crime causes moral evil & material

❗
2. Natural damages.
3. Moral (Imperfect) If without material damages, civil liability can’t
4. Real - to give be enforced.
5. Personal - to do/not to do
6. Unilateral How criminal action can be brought forth:
7. Bilateral (Reciprocal or Non-reciprocal) 1. Criminal + Civil = combo
(general rule, implied together)
1157. Obligations arise from: Law, Contracts, 2. Criminal & Civil = separate actions
Quasi-Contracts, Crimes (Felonies), Quasi
Delicts(Negligence). ★ Accused may be sued civilly (guilty/acquitted),
victim can only recover damages from ONE case
1158. Law - aren’t presumed. only.
Those expressed in the Code/Special Laws are ★ Instance exempted from criminal liability. Guardian
demandable. may be sued civilly if negligent in their care. If w/o
guardian, property of the insane can be made
[NOTE:] liable.
If there is conflict between the Code & Special Laws:
Code < Special Law (prevails) Civil Liability from a crime:
● Restitution - return
1159. Contracts - have the force of law. ● Reparation - repair
- Law > Contract ● Indemnification - compensation
- Contract must not be against the law first and
foremost to be valid. ★ Death of offender pending trial:
- Parties may stipulate conditions as long as not Action may be taken to the admin of the estate,
against the law. esp if civil action is independent (material
- Parties are bound to the terms of the contract damages can be determined separately from
even before involving the court. (must be valid criminal intent, e.g. physical injuries).
first, ofc)
[NOTE]: If civil liability exists despite death, prior to final
★ Repudiation of an agreement validly entered into judgment (will NOT extinguish the civil liability).
can’t be made without justifiable reason.
Evidence Needed:

✅)
★ Contracts - Obligations
(Meeting of the minds expressed/implied
★ Obligation - Contract - Obligation
- Not all obligations come from contracts alone.
Innominate Contracts (Unclassified)
1. Do ut des - I give that you may give
2. Do ut facias - I give that you may do
3. Facio ut des - I do that you may give
4. Facio ut facias - I do that you may do
1160. Quasi-contracts
- Juridical relation that results from lawful, voluntary
and unilateral acts.
★ Civil Action = preponderance of evidence (higher
quantity & quality)
★ Criminal Action = proof beyond reasonable doubt
1162. Quasi-delicts, tort, culpa aquiliana = Negligence
- Fault/negligent act (omission of care) which
causes damage to another.
- No pre-existing contractual relations. Criminal in
character but was committed negligently.
Requirements to be held liable of Tort:
1. Fault/negligence is attributable to the person
charged.
2. There must be damage/injury.
3. Proximate Cause (cause and effect) connects

❌
- No meeting of the minds (expressed/implied) fault and damage.
NOT AN IMPLIED CONTRACT
★ No one shall be unjustly enriched at the expense ★ Damage w/o injury (Special Cases)
of another. A carefully driven car causes damage to a pedestrian
because the driver was suddenly struck by lightning.

❌
a. Negotiorum Gestio (Unauthorized Mgmt.) - Fortuitous Event

✅
b. Solutio Indebiti (Undue Payment) - unduly ● Fault =

❌
delivered by mistake. ● Damage = Pedestrian
● Proximate Cause =
Refers to legal wrong (e.g. negligent driver - driver sample
was diligently careful though which is why there is no fault
attributed)
Chapter 2
Nature and Effect of Obligations
1163. Person obliged to give is also obliged to take care of
it with diligence of a good father of a family. Unless
law/stipulations require another standard of care
(prevails).
[NOTE:] Unless diligence is exercised, there is danger that
property will be lost/destroyed. It would render obligation
related as illusory (not real).
1164. CR has (personal) right to the fruits of the thing from
the time the obligation to deliver it arises. However, “real”
rights shall be acquired when actually/constructively
delivered to them.
Not delivered = personal right (demandable)
Delivered = real right
★ Personal Right
- jus in personam/jus in ad rem
- power to demand to give, do or not to do.
★ Real Right
- jus in re
- power over specific thing (e.g. ownership) and is
binding on the whole world.
Kinds of Delivery:
1. Actual (Tradition) - physical, exchange of hands.
2. Constructive - physical transfer is implied.
a. Traditio Simbolica (symbolical tradition):
Keys to the bodega are given.
b. Tradition Longa Manu
(by consent/pointing of object):
Pointing at a car which is the object of
sale.
c. Traditio Brevi Manu (shorthand;
possessor becomes owner)
Tenant buys the house they’re renting.
d. Traditio Constitutum Possessorium
(opposite of brevi manu; owner retains
possession at a different capacity).
Owner sells their building and becomes a
tenant thereof.
e. Traditio by execution of legal forms and
solemnities
Execution of a public instrument to sell
land.
[NOTE:] A sale simulated/genuine one, when there is “no
delivery”, it doesn’t transfer ownership
When does the obligation to deliver arise?
1. W/O terms/condition = from perfection of the
contract (meeting of the minds)
2. W/ terms/condition = term arrives/condition
happens
1165.
Determinate - CR has personal right to compel/demand
DR to deliver.
Indeterminate - may compel at the expense of DR.
If DR committed delay/fraud prior, they aren’t exempted in
cases of fortuitous events.
★ Specific/Determinate - particular designation
- This car - Car owned by A on 12/14/2006
- Particular
★ Indeterminate/Generic - refers to a class, genus
and can’t be pointed out w/ particularity.
- A car - A sum of 5k - A kg. of sugar
- A 1971 Impala automobile model
Remedies for CR if DR fails to comply w/ their
obli:
- Demand compliance + damages
- Demand rescission + damages
- Damages (only)
★ Specific - extinguished by fortuitous event
★ Generic - can’t be extinguished by a fortuitous
event because by its nature, they’re replaceable.
Delay VS Default
★ Delay - non-performance at stipulated time.
★ Default (Legal Delay) - non-fulfillment of obligation
➔ Placed into default when demand is
made (judicial/extrajudicial) but is still
not complied with.
1166. The obligation to give a specific thing includes
delivery of all its accessions and accessories although
unmentioned. Unless stipulated otherwise.
★ Accessories - joined; principal + accessories for
better use/perfection/enjoyment by the latter. (e.g.
keys to a house).
★ Accessions - additional improvements upon a
thing (e.g. building/crops on a land, windows to a
building)
1167. Contravention of tenor &/or failure to do what is
obliged will be executed at their cost and what is poorly
done be undone.
- Defines rules for positive personal (to do)
obligations
Remedies for CR if DR fails to do:
1. Have obligation performed by themself/another @
expense of DR.
2. Plus damages (dmg can’t substitute performance
if CR can do it themself. If purely personal: special
painting done by a reputed artist - only damages
can be recovered unless substitute is permitted)
[NOTE:] Specific performance for personal obligations
may amount to involuntary servitude!
When a thing ordered be undone:
- If poorly made = performance at another + dmg
- If obli is negative, provided undoing is possible.
1168. When obli consists of “not” doing and DR does
what’s forbidden, it shall also be undone at their expense.
- Defines for negative personal (to not do)
obligations.
- Undoing of prohibited + dmg
1169. Provisions on when default may incur, other from
demand of CR:
★ Law expresses
★ Terms of the obligation expresses so
 ★ Nature/circumstances when delivery was motive
✅
to establish contract (time’s of the essence)
✅
expressed
implied
★ When demand is useless, DR rendered it beyond
their power to perform
★ In reciprocal obligations - when the first person
fulfills their end, it automatically queues the other
person to fulfill theirs too!
★ When DR acknowledges default
❖ Default = Mora
[General Rule:]
No demand, no delay!
Kinds of Mora:
1. Mora Solvendi (default on part of DR)
- Ex re (real obligations)
- Ex persona (personal obligations)
Requisites:
a. Obligation must be due, enforceable, already
liquidated (determinate in amount)
b. There is non-performance
c. There must be demand, unless demand is no
longer required (Art. 1169.). - Proof of demand
must be shown by the CR.
d. Demand must be for the obligation that is due.
Effects of Mora Solvendi:
a. DR in default may be liable for dmgs.
➢ In purchase installments, Acceleration Clause
may be provided. Default in one payment makes
the whole amount due immediately. Default here
is only attributable to “current” delayed payment
and not to the whole amount of the installment.
2. Mora Accipiendi (default on part of CR)
- CR unjustifiably refuses to accept
payment/performance.
Effects of Mora Accipiendi
- May make the CR liable to loss when obli arises
from a crime or even when there is a fortuitous
event.
- Exempts DR from shouldering dmgs due to
unjustifiable refusal of CR.
What should a Criminal (DR) do if CR is in Mora
Accipiendi?
a. Consign to court - expense to CR
b. Keep to himself - still obligated tho to pay/perform.
Only not liable for loss/dmgs.
➢ Reciprocal Obligations - if performance is not
set on diff dates, either by law, contract or custom,
it is understood that performance must be
simultaneous.
- One party can’t demand from the other till
they themselves perform their part.
3. Compensatio Morae
- Default on part of both
- “It is as if no one is in default.”
➢ When dmg/int may be lost: (p.114)
★ Prescription
★ Condonation
[NOTE:] DR liable due to delay/default is liable to
damages + interest.
1170. Guilty of fraud, negligence, delay and/or
contravention of tenor are also liable to damages.
★ Fraud (dolo) - intentional evasion of fulfillment
★ Negligence (quasi-delict/culpa)
★ Default (mora)
★ Violation (violatio) - of terms of obli
FF doesn’t excuse fulfillment:
a. Inflation (increase @ cost of performance)
b. Poverty
c. War (Position of country is neutral to war)
[NOTE to c:] Substantial compliance can still be done.
Kinds of Damages:
1. Moral - mental & physical anguish.
- If not “maliciously” done unto, e.g.
anxiety of a defendant - doesn’t count!
★ Damages must be proved in order to recover.
2. Exemplary - corrective, to set an example
3. Nominal - to vindicate a right
4. Temperate - exact amount of damages can’t be
determined.
5. Actual - actual losses/unrealized profit
6. Liquidated - predetermined by agreement
“beforehand”.
★ Damages in Monetary Obligation:
In monetary obligations, indemnity for damages
consist of the following
a. Agreed upon
b. Without agreement (legal rate of int, 6%
per annum).
1171. Responsibility from fraud is demandable in all
obligations. Any waiver for “future fraud” is VOID.
✨ ✨
Commission of Fraud may be for:
Past Fraud Future Fraud
- May be waived - Void for waiver
L__waiver in terms of related liability_____l
⬇️
Kinds of Fraud: More grievous
1. Casual Fraud - Fraud in obtaining consent.
- Coercion to agree
2. Incidental Fraud - Fraud in performing contract.
- Evasion
1172. Responsibility from negligence is also demandable.
Liability may be regulated by the courts according to
circumstances.
- Waiver of action for future torts (negligence) in a
certain sense may be allowed.
❌
✅may be excused/mitigated
Gross negligence:
Simple negligence:
Kinds of Culpa:
1. Culpa Contractual
- Negligence related to contracts.
- Damages are presumed.
- Main focus is the evidence of a contract (e.g.
passenger injured while in carrier - commute)
★ Has contractual relation prior negligence
committed.
2. Culpa Aquiliana
- Negligence here is direct, substantive &
independent.
- Victim is burdened to prove
★ No pre-existing relations/contract before culpa.
★ Broader in term.
 ★ Mainly identifies private matters, involving civil
liability that has negligence.
3. Culpa Criminal
- Negligence that arises from criminal acts.
- Involves the Penal Code and aims to correct
crimes
- Involves public interest/safety
- Negligence here is direct, substantive &
independent.
- Victim (prosecuted) is burdened to prove
negligence of accused,
★ No pre-existing relations/contract before culpa.
(e.g.) Reckless Imprudence
Effects of victim’s own negligence &/ contributory
negligence:
- If the victim's own negligence is immediate & is
the proximate cause of their injury - they can’t
recover damages.
1173. Negligence of DR is the omission of diligence
required in whatever circumstances they’re in.
Good father of the family (type of diligence) is required if
without stipulations from law/contracts.
a. Culpa lata - grave negligence
b. Culpa levis - ordinary negligence
c. Culpa levissima - slight negligence
Required diligence = Negligence that will give to liability:
1. Slight diligence = Grave negligence
2. Ordinary diligence = Ordinary negligence
3. Grave diligence = Slight negligence
Kinds of Diligence in Civil Code:
1. Agreed upon by the parties
2. Law
3. W/o stipulations from prev. 2 = Good father of a
family.
1174. No liability for fortuitous event except:
a. Bad faith
b. Expressly declared/stipulated in contract
c. Nature of obligation requires the assumption of
risk (e.g. delivery of dynamites)
Characteristics of a Fortuitous Event:
1. Cause must be independent from the will of the
DR.
2. Impossibility of foreseeing/avoiding even if
foreseen.
3. Occurrence renders impossibility of fulfillment
Fortuitous Event vs. Negligence
1. Fortuitous Event: Proximate Cause = Extinguish
2. Negligence: Proximate Cause = Liability holds
1175. Usurious Transactions are governed by special
laws.
★ Usury - exaction of excessive interests.
Kinds of Interest:
1. Compensation for use of money (e.g. int on loan)
2. Way of dmgs (e.g. additional fees caused by
default)
1176. Receipt of principal by CR, presumes that int has
been paid.
Receipt of latter installment presumes finished payment of
previous installments.
★ Interest precedes in payment, before principal
(according to the Civil Code)
★
1177. CR may bring/exercise their rights against DR
except those inherent to DR.
CR may also rescind contracts that were used by DR in
attempt or truly done to defraud the prior (CR).
Rights of CR:
a. Exact payment
b. Exhaust DR’s properties
c. Accion Subrogatoria (Subrogatory Action) -
exercise all rights except those inherent to DR’s
person.
d. Accion Pauliana - rescission of defrauding
contracts.
Rights inherent to persons:
1. Rights to existence (receiving support)
2. Relations of a public character (positions in the
gov)
3. Honorary character (degrees in education)
4. Affairs of home
5. Granted by law (Revocation of donation)
6. Appear in court proceedings (settlement of estate)
Properties exempted in execution:
1. Family home: home/land used
2. Tools and implements necessary, used for
trade/employment
3. Beasts of burden (e.g. cow, horse)
4. Necessary clothing for him & their family
5. Household furniture/utensils
6. Provisions for individual or family - sufficient for 3
mos.
7. Professional libraries
8. Fishing boat/net - anything that is related to their
livelihood is a NO)
9. Lettered gravestones
10. All monetary benefits arising from insurance
11. Copyrights/other properties exempted by law.
[NOTE:] Some, DR may select with certain values as
expressed by the Civil Code in order to keep.
When family home is not exempted:
Judicial Extrajudicial
- Unpaid taxes - Unpaid taxes
- Judgment of debt - Debts incurred b4 declaration in
secured by mortgage Registry of Property
- Debts secured by mortgage
- Debts to laborers/professionals
who rendered service/furnished
material to home’s construction
Extent of DR’s Liability
- All their property, present & future to fulfill their
obligation is subject to the exemptions by law.
★ The Court's judgment applies to properties
indisputably owned by DR.
1178. All rights acquired in virtue of an obligation are
transmissible unless stipulated.
[General Rule:] Rights are transmissible
Exemptions:
- Law provides otherwise
- Contract provides otherwise
- Obligations is purely personal
Chapter 3
Different Kinds of Obligations
Section 1: Pure & Conditional
1179. Pure obli without conditions are demandable asap.
Resolutory conditions are the only conditions demandable
asap too.
★ Pure - provided w/o absurdity
- Pure obligations that don’t depend on a
condition/past event unknown to parties is
demandable at once.
Other examples:
a. I’ll pay you 1,000 on demand
- No need for “instant” action (absurd)
b. OG terms were cancelled by both parties (CR &
DR).
★ Conditional - with condition
a. Suspensive - awaited results
(I’ll give you a car if you pass the Bar exams)
b. Resolutory - ends in failure
(I’ll give you my land now, should you fail the
exams, your ownership will cease)
➢ Condition - an uncertain event which wields
influence on a legal relationship.
➢ Term/Period - must come despite unknowingly
‘when’ (e.g. death)
➢ Past Event Unknown - future knowledge of a past
event (essentially a condition: if parties learn of
history of property - a condition itself)
1. Divisible - capable of partial performance
2. Indivisible - not capable of partial performance
➢ Conjunctive - all conditions must be performed
➢ Alternative - only few of the conditions have to be
performed.
Classifications of Conditions:
1. Potestative - depends on the will of the DR.
(I’ll sell you my car if I like - VOID)
2. Casual - depends on hazard/chance or will of a
3rd party
(I’ll pay if I win sweepstakes)
3. Mixed - depends on will of one of the parties &
partly on chance/3rd parties’ will.
(“If I pass the Bar exams)
1180. DR binds themselves when their means permit them
is deemed one with a period.
★ CR should ask the court to fix the terms.
1181. Rights acquired, extinguished or lost in conditional
obligations will depend on the happening of the event.
1182. Provisions for casual/mixed conditions:
★ Potestative (Facultative) - VOID
★ Casual - VALID
★ Mixed - VALID
Potestative/Facultative Conditions:
❌
● Potestative on DR
If also suspensive - VOID
✅
(I’ll give you 10,000 next month if I live)
If also resolutory - VALID
(I’ll employ you now but for any reason the
machine I ordered wouldn’t arrive - including my
✅
own will to cancel it if I wish, our contract will end)
● Potestative on CR - VALID
✅
(I’ll give you my pen, if you wish)
● Mixed/Casual - VALID
1183. Impossible/illegal conditions shall annul related
obligations dependent on them.
✅
If divisible, lawful potion that is not affected by the
impossible/illegal condition remains VALID .
Condition to not do an impossible thing, shall be
considered as not being agreed upon.
★ Impossible - physically/illogical
★ Illegal
● Impossible/Illegal = VOID condition
= VOID obligation
● Not to do impossible = VOID condition
= VALID obligation
(e.g. I’ll sell you my land if you can’t make a circle
and a square at the same time.)
● Not to do the illegal = VALID condition
= VALID obligation
1184. On positive conditions - with determinate time when
said period expires, it will extinguish the obligation. The
same will happen if it becomes indubitable that that
condition will not take place.
★ If period is not fixed: court should consider parties’
intentions to determine “period” intended.
[CASE:] A sold B land. Price to be paid as soon after B
pays off other debts of the estate. After some time, B is
not yet finished. A would like to rescind.
HELD: Sale won’t be cancelled. No time was
stipulated + good faith of DR
1185. On negative conditions - with a set period.
Obligation will be effective after the period has
lapsed/when it becomes evident it would not occur.
Without fixed time, condition is deemed fulfilled as
contemplated on the nature of the obligation.
1186. Condition is deemed fulfilled when DR voluntarily
prevents its fulfillment.
- One must not profit by their own fault!
1187. Effects of conditional obli to give - once fulfilled,
shall retroact to the constitution of the obli.
➢ Prescription - expiration of period
★ Retroactivity - constitution date of obligation.
★ NO Retroactivity
- to fruits/interest
- period of prescription. Effect/s of prescription can
only be enforced on its date. (Kung sano ma
 sugod count expiration period of delivery of
condition).
(e.g. Entitlement to land effects to retroactivity.
Consensual Contracts (SALE) only)
No retroactivity to Fruits/Interest:
● Unilateral: DR’s fruits/int unless expressed
intentions in contract
● Reciprocal: Deemed to mutually compensate
(even when truly unequal).
(e.g. In 1971, A agreed to sell B their land. B
agreed to pay if C passed their exams of 1972. C
passed. A must now give the land and B must
pay.
The fruits of the land for the one year period will
remain with A and B will keep the legal interest on
his money.)
★ Usufruct - right to the enjoyment of the use and
the fruits of a thing.
★ Refer to Art 579. (Usufructs)
- NO RIGHT TO BE INDEMNIFIED
- May remove improvements made by DR
for as long as it doesn’t damage the
property.
Effects of Partial Loss:
- If loss is important enough, it may be considered
as complete loss.
- If the loss is not as important, it may be
considered as partial loss.
1190. CR’s power to rescind reciprocal obligations, if not
“complied” with - CR may choose between the following:
➔ Rescission + damages
➔ Fulfillment + damages

[NOTE:] Court declares rescission claimed/period fixed

Kinds of Fruits:
1. Natural - spontaneous products of the
soil/animals.
2. Industrial - produced by lands of any kind through
cultivation or labor.
3. Civil - rents of buildings, the price of leases of
lands and other property and the amount of
perpetual or life annuities or other similar income.
1188. Rights of CR to act in order to preserve their rights.
DR may also recover what they paid by mistake in case of
suspensive condition.
Appropriate Actions:
- Ask for security if DR is about to be insolvent.
- Ask the court to prevent alienation/concealment
[NOTE:] DR has claims on fruits/int if DR is in Bad Faith.
1189. Rules to observe in case of loss, deterioration or
➡️
(there should be just cause for the fixing of the period).
(e.g. Fulfillment becomes impossible it then becomes
rescissible)
★ The reciprocal obligation should arise from the
same contract.
[RMBR:] Reciprocal obligations - the performance of one
is conditioned on the simultaneous fulfillment of the other.
★ Rescind = Resolve
★ In reciprocal obligations without a period - there
is the RIGHT TO RESCIND!
★ One the parties must be capable of complying.
Demandable if one is ready, willing and able.
When rescission is NOT absolute:
a. Trivial causes
b. If just cause to fix the period is present
c. If property is in the hands of an innocent 3rd
person/party.

➡️
improvement during pendency of the condition: [NOTE:] if substantial cause, it can lead to an end of the
contract. (Art. 1191 applies)
Article applies if:
1. Suspensive condition is fulfilled. ➔ Ground of the case must be established!
2. Specific object ➔ Right to rescind is implied - needn’t expressly
stipulated.
Loss of Specific Object ➔ Right to rescind may be waived. (e.g. acceptance
of delayed installments)
DR’s Fault w/o DR’s fault
➔ Rescission/fulfillment aren’t conjunctive (can’t be
Pays damages Extinguished done together - ONLY ONE)
➔ In some cases however, partial fulfillment &
★ Loss Defined:
partial rescission is allowed.
➔ Perishes - goes out of commerce.
➔ Disappears & location becomes unknown.
[General Rule:] Resolution cancels all its parts.
➔ Can’t be recovered.
● Damages must be sought from corresponding
Deterioration of Specific Object
action, otherwise it’s considered as waived.
DR’s Fault w/o DR’s fault
★ Right of innocent 3rd persons > Right to rescind
CR may choose between CR bears deterioration
fulfillment + dmg or
rescission + dmg Judicial Approval
When needed When NOT needed
Improvement of Specific Object
When delivery was made W/o any deliveries made
By nature/time @ exp of DR

CR benefits Usufructuary [NOTE:] In absence of a provision in law/contract in

regards to rescission, judicial action is needed.
➔ Improvement here should not alter the substance
of the object.
1192. When both parties “breach” a contract:
➔ First violator shall be dealt by the courts.
➔ When both attempted/truly violated at the
same time - contract is extinguished and
each will bear their respective dmgs.
Section 2: Obligations with a Period
1193. Obligations w/ fixed periods are demandable when
the period arrives.
Obligations with fixed, resolutory periods take effect at
once but terminate on the arrival of the “a day certain”.
★ A day certain/period - must come although
undetermined “when”.
★ Condition - future, uncertain (e.g. If uncertainty is
based on whether/if the day will come - it is
conditional)
Kinds of Terms/Periods:
1. Definite
2. Indefinite
3. Legal - granted under lawful provisions
4. Conventional/Voluntary - agreed upon by parties
(to be stipulated).
5. Judicial - period is fixed by the courts
6. Ex die - period with suspensive effect.
(I’ll support you beginning the first day of next year
- demandable on the first day of next year, Jan 1)
7. In diem - period with resolutory effect.
(I’ll support you until Jan 1 of next year. Ends after
Jan 1)
★ A contract with a fixed period & deemed
❌ ✅
conditional without indication - the contract
is not regarded as conditional, only one
with the term.
1194. In case of loss, deterioration or improvement before
the period - Refer to art 1189.
1195. DR can recover principal with fruits/interest if they
pay before the arrival of the term (may be out of mistake).
If DR is aware and knows of the period, they can’t recover.
➔ DR must be unaware of the period.
➔ DR must have believed that obli became
due/demadable.
When recovery should be made:
● Before maturity
● 5 years after premature payment
[NOTE:] Basis of 1195 is on the awareness of the DR
whether the CR is in good/bad faith.
1196. Agreed upon term presumes it is to benefit both CR
& Dr. Unless tenor/other circumstances expressly/implies
favor one of the parties more.
[General Rule:] Term is for the benefit of both parties.
Right to the favor of DR/CR:
● DR’s favor
- Required to pay only @ the end but may pay
before.
- May resist premature demand.
● CR’s favor
- May demand premature payment.
- Can’t be compelled to accept premature
payment of DR.
Indicators for whom benefit is for:
● In favor for both (DR/CR)
- Interest is stipulated. (CR is interested in the
interests earned while DR is interested in the time
given for them to pay).
- CR wants safety from in/de-flation (making DR
akin to depositary).
● In favor of DR
- Loan is without int. (Not absolute though)
- When payment is to be made “within” a certain
period.
● In favor of CR
- No payment should be made until after term.
[NOTE:] Acceptance of partial payment is a waiver of the
right to “Refuse” payment BEFORE END OF SAID
PERIOD (if in favor of CR).
1197. When courts should fix a period for oblis:
a. w/o stipulated period but parties inferred intention
for a term.
b. When it depends on the will of DR.
c. Any other circumstance contemplated by parties.
★ Once fixed by the courts, it can’t be changed.
[NOTE:] w/o period, CR can’t enforce obligation because
not demandable.
When courts no longer need to fix a period:
- When parties did not intend for a period
(demandable asap).
- When obli is payable upon demand.
- [CASE:] A typewriter was returned by the
repairman w/o any work done. By doing so they
lose their right for the fixing of a term w/ the
courts. In addition, the owner had it repaired by
someone else instead. Court held that the
repairman needed to indemnify the owner of the
typewriter.
- When specific periods provided by law (e.g. in
employment contracts, if the were was no agreed
upon period, the time of employment depends on
the time for the payment of the salary)
1198. DR loses every right to make use of the period:
a. After contracting of obli, DR becomes insolvent -
unless they give a security/guaranty to their debt.
b. If DR can’t furnish CR their promised
securities/guaranties.
c. By DR’s own acts, they impair their
security/guaranty and when they lose it through a
fortuitous event. - unless they immediately give
new ones with equal value.
d. When DR violates any undertaking.
e. When DR intends/attempts to abscond (flee).
➔ The above effects to the extinguishment of the
term and the immediate demandability of the obli.
[NOTE:] If given time is indefinite, it shouldn’t exceed 10
yrs (redemption).
★ In computing a period, exclude the first day and
Ainclude the last day.
Section 3: Alternative Obligations
1199. DR bound alternatively shall completely perform [SPECIAL CASE:] DR with their choice can give objects 1,
one of them. CR can’t be compelled to receive in part of 2 or 3 to CR. DR lost objects 1 & 2 by their fault. Object 3
one and in part of another. was later lost in a fortuitous event. Is DR liable?

★ Alternative/Facultative Obligations - two or more
prestations, only one is due.
➔ Alternative - options to render (generally
DR has the right to choose).
➔ Facultative - agreed upon and DR has the
option to render another in substitution.
1200. DR has the right of choice (what they will give) in
absence of a stipulation. Unless expressly granted to CR.
DR can’t choose prestations that are impossible, unlawful
or unrelated to the object of the prestation.
1201. Choice shall produce “no effect” except from the
time it is communicated.
★ Communication - oral, written, expressed or
implied.
★ When choice is made, alt. obli then becomes a
simple one - just do/deliver after.
★ DR who made the choice is then bound and isn’t
permitted to renounce/change their choice.
Requisites of making a choice:
1. Made properly so that the CR/agent knows.
2. Made w/ full knowledge that a selection is being
made (lack thereof impairs consent & choice can
later be annulled).
3. Made voluntarily/freely
4. Made in due time (before or upon maturity)
- CR can otherwise sue for alternative relief
- a judicial relief which is to give “this or
that” depending on your choice.
5. Made to all proper persons.
6. Made w/o conditions unless agreed upon by CR.
7. May be waived (expressed/implied).
Held: No, DR had the choice to not choose objects 1 & 2
which allows him to voluntarily destroy or lose them.
Object 3 was lost in a fortuitous event which generally
extinguishes any liability.
1205. When choice in an alt obli is given to CR expressly:
As soon as the choice is communicated to DR, the alt obli
becomes a simple one.
- In case of a fortuitous event and choice is w/ CR,
DR must allow CR to choose from the remaining
objects or must deliver the only remaining
prestation left.
- If loss is through DR’s fault, CR can select from
what remains or at the price of any that was lost
+ dmgs.
★ Damage = deprived of their (CR) right to select.
★ If CR delays in choosing:
- Can’t hold DR in default.
- Remedy for DR here is a petition in court
to compel the CR to accept.
1206. Loss/deterioration of substitute doesn’t make DR
liable. If substitution is already made/established, DR
is liable for its loss on acct of their delay, culpa or fraud.
➔ Makes the facultative obligation a simple one
already when the substitution is established.
- This is on facultative obligations.
- Facultative obligations - an obligation wherein one
prestation has been agreed upon but the DR can
render another in substitution.
(e.g. D promised to give C his diamond ring but it
was stipulated that D could give his Buick car as a
substitute.)
Alternative Facultative

[NOTE:] All rights in general may be waived. Principal 1, 2 or 3. Principal, substitute

1202. DR loses right of choice when among prestations in Various things are due but Only principal is due but
an alternative obli, one is only practicable. one is enough substitute may be given

If one of them is illegal, If principal is VOID,

1203. If through CR’s acts, DR can’t make a choice
the others may still remain substitute is not necessary
according to the terms of the obligation - DR may rescind valid
+ damages (upon the choice of the DR). If principal is impossible,
If all are impossible except substitute is not
A promised D to teach him math or build him a house. D for one, the latter must be necessary. If vice-versa:
goes abroad and it impairs A’s right to choose. A may: given substitute is impossible,
principal must be given!
- Build a house or rescind + dmgs (if suffered any)
Right to choice may be of
➔ A can choose from the two above mentioned. the DR’s/CR’s DR has only the right to
select.
1204. CR has right to indemnify:
a. Dmgs if prestations to alt. obli are lost by DR’s
Section 4: Joint & Solidary Obligations
acts (bcuz it renders impossibility in compliance).
b. Indemnity is fixed on the basis of the value of the
1207. Joint obligation is the usual presumption unless
last thing that disappeared/last service that
expressly stated by the obligation or when law or nature of
became impossible.
the obli requires solidarity.
c. Other dmgs other than lost thing/impossible
service may also be awarded.
Joint Soliday
➔ Art. applies when:
● Right of choice was DR’s To each of their own One for all, all for one
● Loss/impossibility happened before a
“Mancomunada” “Joint & Several”
selection was made. “Mancomunada Simple” “Separadamente/In Solidum”
“Proportionate” “Individually & collectively”
“Pro-rata” “Mancomunada Solidaria”
“We promise” (2+ sgd.) “Juntos”
“Each will pay the whole value”
“I promise” (2+ sgd.)
When law imposes solidary liability:
- Oblis arising from tort (negligence)
- Oblis arising from quasi-contracts
- Liability of principals, accomplices & accessories
of felonies/crime.
- Legal provisions on oblis of devisees & legatees.
- Bailees in commodatum
✅
May the obli be joint on side of CR & solidary for the DR,
vice-versa? YES
A & B are joint DRs to C, D & E who are solidary CRs. If
the due amt is 1k, how much can C collect from A? 500
only.
A & B are solidary DRs to C, D, E & F who are joint CRs. If
due amt is 1k, how much can C collect from A? 250 only.
Special Cases in Law:
A & B were both responsible in causing injury to C by a
tort (negligence). They are solidary DRs, each is liable as
principals to the same extent.
[NOTE:] Joint & solidarity are concerned w/ the plurality
of the subjects (DRs/CRs).
❌ DR & their assignee
- NEITHER JOINT NOR SOLIDARY
- Assignee is only an extension of the DR.
- Assignee doesn’t represent an interest completely
distinct & separate from their DR which makes
them but an extension of the latter’s personality.
1208. Presuming to be joint, credit/debit will also be
presumed to be divided into many equal shares as there
are CRs/DRs. Each credit/debit is considered distinct & is
subject to the Rules of Court of the municipality.
★ Distinct shares - better to sue all necessary
parties at the same time.
★ Contract prevail in determining whether
joint/solidary.
Mom & son loaned. They briefly and unwittingly
said they’re solidarily liable. Does this convert
supposed joint liability into a solidary one? NO -
determination of kind of liability is on contract.
A loans from B. C & D become sureties & assumed
solidary liability with A. On default, judgment from court
charged A, C & D. Is their liability on default & compliance
joint or solidary in nature?
Held: It is joint in nature - implicit in judgment. Because
joint is generally presumed unless stipulated otherwise
and the judgment did not express itself to be solidary as in
comparison to the liability of the first obligation.
Liabilities of Partners:
1. Arises out of a contract (pro-rata liability unless
stipulated otherwise)
[EXEMPTION:] Dependents claim compensation for the
death of an employee in line of duty = SOLIDARY
LIABILITY
LIABILITIES OF:
a. Agents: Joint unless otherwise agreed on.
b. Co-principals (Agency): Solidary
c. Husband & Wife (Conjugal): Joint
d. Violators of Human Relations of Civil Code:
Solidary
e. Employee & Employer for Latter’s Tort Act:
- Solidary if Employer is primarily liable
- Joint if Employer is subsidiarily liable
1209. Joint obli with indivisible prestation. CR must
demand from DRs altogether to enforce obli. If one of the
DR is insolvent - others are not liable for their (insolvent
DR) share.
★ CR should go against all DR for compliance to be
complete and therefore possible.
★ In compliance, it must be proportionately done to
all CRs. Unless that one is specifically
authorized by the others.
★ Join CR has the right to renounce their credit.
➢ Penalties are usually solidary.
➢ Damages are solidary to DRs who default.
1210. Indivisibility doesn’t automatically give rise to
solidarity, vice-versa.
★ Indivisibility = prestation
★ Solidarity = tie between parties
Kinds of Solidarity:
1. Active - CRs’ part
2. Passive - DRs’ part
3. Mixed - CR/DRs’ part
4. Conventional - agreed on by parties
5. Legal - imposed by law
1211. Solidarity may exist even if parties (CRs/DRs)
aren’t bound in the same manner - condition/period.
How DRs may be bound:
a. Uniform
b. Otherwise - DR are liable to the same prestation
yet aren't subject to the same secondary
stipulations/clauses.
Remedy for CR: CR may claim the portion of the obli
that’s “PURE” - term/condition has already
matured/happened.
1212. Solidary CRs may do what is beneficial to others but
nothing prejudicial.
Examples:
★ Beneficial: Demand to interrupt running
prescription.
★ Prejudicial: (Have damaging effects)
- Remission/condonation to solidary CR is allowed.
To remit + extinguishment of obli w/o prejudice to
the liabilities of the other CRs.
1213. Solidary CR can’t assign their rights without the
consent of the others.
- Article protects the rights of the co-CRs.
★ Reason of Law: Solidary oblis imply “mutual
agency and confidence”, Other CRs’ rights are
endangered if assignee absconds right after
receiving payment.
 ★ Solidary credit by contract, confidence between
co-CRs are established into existence.
★ Law - imposes solidarity to some obligations.
Effect if CR assigns their rights + misfeasance of
➔ Condones = Forget about the whole thing
a. Total Remission
A & B (solidary DRs) owe X & Y (solidary CRs). X
told A that he waives the whole obli. It

✅
assignee: CR is subsidiarily liable extinguishes it.

(Misfeasance - Engaging in action/duty but failing to
perform/fulfill it correctly. It is unintentional)
1214. DR may pay any of the CRs. But if any demand
(judicial/extra), DR must specifically pay to them.
✅
Y collects their share of credit from X
B doesn’t have to pay A because it was a
gratuitous act - did not to give anything to CRs.
b. Partial Remission
A, B & C (solidary DRs) owe X 3k. X demanded

A & B (solidary DRs) owe C, D & E (solidary CRs). C
demands from A but B pays the whole amt to E. Is B
allowed to do that and does it extinguish the obligation?
Held: yes. A was the only one bound to C’s demand. B’s
payment is valid because no one demanded from B
allowing them to pay to any of the CRs.
1215. Novation, compensation, confusion or remission of
the debt made by a solidary DR & solidary CR
extinguishes the obli, w/o prejudice to 1219.
CR who executes/collects from any of the above
mentioned acts are liable for the other CRs’ shares of their
corresponding obligation.
★ Novation - modification of obli (change of
principal, prestation, stipulations)
✅
from A 2k and remitted A’s share of 1k.
A can only recover 1k from B & C each.
[NOTE:] Partial remission benefits all because it
diminished the “whole” solidary debt. If X
demanded from C with A’s share being remitted -
2k is still all they would have to pay. Although it
doesn't lessen the actual, individual share of the
DRs.
1216. CR may proceed against any of the solidary DRs
(some/all simultaneously).
Demand against one won’t be a hindrance to the others.
Effects: It doesn’t waive against the others who were not
proceeded against - as long as debt is not fully collected.
They may be sought after later on.

A & B (solidary DRs) are bound to pay 8k to C & D [Illustrated Case:] A, B and C were solidary DRs to a
(solidary CRs). A & C agreed that instead of promissory note. B wasn’t sued because he died before
paying 8k, A will paint C’s house. the suit began. The DR asked the estate of B to be
- If B didn’t consent to novation, they aren’t included in the suit. Is the request for the inclusion of the

bound to C & D in any way. They aren’t
also obliged to give anything to A except
insofar B was benefitted.
- C will have to reimburse D’s share.
★ Compensation - A (DR) owes B (CR). B in return
owes A.
- This may be total/partial.
❌
estate valid?
The estate doesn’t have to be sued because 1216
allows the CR to su ANY of the solidary DRs (A & C).
- This article applies to passive (DR)/mixed
solidarity.
★ Due process is still required, solidarity doesn’t
make one DR an indispensable party in a suit
filed by the CR.

a. Total Compensation - extinguishes entire obli ● Whole amt isn’t fully collected - no need to sue
if the CR receives completely what is owed to
A & B (solidary DRs) owe C & D (solidary them.
CRs) 4k. On a different transaction, C owes A 4k. ______________________________________________

✅
This extinguishes the obligation completely.
B should reimburse A his 2k share of the
Passive (DR) Solidarity Suretyship

✅
liability.
D should receive his 2k share from the credit of - Indebted by own share - Indebted to their
C. - Indebted for others (too) principal’s (a DR) share.
- Can demand for - Can demand
b. Partial Compensation reimbursement from other reimbursement for the
DRs (minus their own whole amt.
share of the whole debit) - If extension is given to
A & B (solidary DRs) owe C 2k. On a different
- There can be an principal DR & surety
transaction, C owes A 500. 1.5k subsists of the exemption for the one doesn’t accept/give
obli. given an extension to. consent - surety is
Others are still liable for released.
★ Confusion/Merger - characters of DR & CR are their portion that is valid
merged into one person. and due.

A & B are solidary DRs. A made a promissory ★ Guarantor - binds themselves to principal DR
note to C & D (solidary CRs). C & D endorsed the subsidiarily only.

✅
note to E, E to F and F to A. ★ Surety - a guarantor who solidarily binds
B is indebted to A for their (B’s) share of the themselves to principal DR.
debt. - CR can proceed to surety ASAP, without
first exhausting properties of principal DR.
★ Remission (Waiver) - a liberal act wherein the CR
condones (excuses) obli of DR to them.
A & B are soliday DRs to X & Y. X sued A for 4k but only
✅
recovered 3.5k. May X sue B for the 500?
Yes, because debt has not been fully satisfied yet.
A & B are solidary DRs to X & Y. X sues, A wins suit
❌
because subject was illegal - can Y sue B?
No, aside from the subject being illegal, A & X
correspondingly represented them due to their characters
(solidary).
1217. Payment by one of the solidary DRs extinguishes
the obli. If two or more offer to pay, CR may decide from
who to accept.
★ Solidary DR who pays may ask for reimbursement
from co-DRs the share that corresponds to each +
interest.
★ Intervening Period - may be demanded.
If one of the DRs is insolvent, such share shall be borne
by ALL their co-DRs in proportion to the debt of each
(towards DR who mainly paid).
- Basically to properly reimburse DR who paid.
[CASE:]
1. A, B & C are subsidiarily liable to D. A & B offered
to pay. D demanded from C though.
Held: Technically, D can proceed to any of the
solidary DRs, supposedly. But it will be foolish of
CR to accept payment from one who offers it.
➡️
● Nature of Liability for Reimbursement
Debt DR = CR to Co-DRS
Paid becomes CR for reimbursement
(liability becomes joint for reimbursement of co-DRs)
In nature, insolvency of one must be shouldered by other
co-DRs. Nature of liability of reimbursements.
[CASE:] A, B, C, D, E & F are solidary DRs to G. G
partially remitted debt to B, C, D, E & F only. G demanded
from A & they paid the whole amt of the first price of the
debt. How much can A reimburse from co-DRs?
Held: In respect to their remitted share of the lessened
debt. A may still recover for the intervening period.
1st: 253,445.42 x ⅙ = 42,240.9033
Partial remission: 225,000 x ⅙ = 37.5k (B, C, D, E & F)
★ A paid for to CR (G)
★ What A may reimburse from each co-DR +
interest (intervening period).
Substitution of Parties:
A, B & C are solidary DRs to X. X sues them. Pendency of
case A pays X, A can be changed to the position of X in
the suit. To enable A to collect reimbursement of
contribution shares of B & C to the debt.
[CASE:] A, B & C are DRs to D. D granted extension to C .
D demanded from A/B.
★ A/B should pay the obli minus C’s share (partial
defense)
★ If they paid ALL they should wait for the end of
term (extension for C) to compel/receive
reimbursement.
Complete Defenses - derived from nature.
- Personal to DR sued.
● Non-fulfillment, term, condition - partial defense
Partial Defense - personal to others (p. 290)
1218. Payment by solidary Dr shall not entitle him to
reimbursement from co-DR if such was paid after the obli
has prescribed/become illegal.
[CASE:] A & B are solidary DRs of C to the amount of 1k.
The debt prescribed but A voluntarily paid nevertheless
because A felt morally obliged. Can A recover from C what
they voluntarily paid?
Held: No, bcuz it was ‘voluntarily’ given that ‘A knew the
prescription’.
[NOTE:] Law: when a right to sue upon a civil obli has
lapsed by prescription, Dr can’t recover what they
rendered.
- If A didn’t know about the prescription of the debt.
A can recover from C due to solutio indebiti.
- A can’t get reimbursement. Backread, same
reasons + expressed by Art. 1218.
1219. Remission by CR of share which affects one of the
solidary DRs doesn’t release the latter from their
responsibility to their co-DRs. In case debt has been
totally paid by anyone “before remission’s” effectivity.
- Article is designed to prevent fraud
- Payment extinguishes obli, nothing more to remit.
1220. Remission of “whole” obli by one of the solidary
DRs doesn’t entitle them to reimbursement.
- Gratuitous
[CASE:] A & B are solidary DRs to C. A offered to pay
(remitted ‘whole’ obli. A didn’t pay anything to C, A isn’t
entitled to reimbursement from B).
1221. Object of prestation becomes lost/impossible w/o
fault of solidary DRs - extinguishes the obligation.
Fault on any one of them makes them all liable to CR w/o
prejudice against guilty/negligent DR.
★ A & B solidary DRs to C. A lost the car for
payment. C may ask for compliance + damages
from B. B may recover ‘whole’ reimbursement. A
was at fault.
Default incurred by one of solidary DRs before a
fortuitous event shall apply Art. 1147.
CR has the right to the exact price of the car from
‘any’ of them. DRs have the right to recover from
co-DR who incurred default.
1222. Solidary DRs defenses are derived from the nature
of obli & those that are ‘personal’ to him. Those that
belong to others, he may avail themself regarded to “that,
part” of the debt for which the others’ are responsible for
(1148).
Defenses in Actions Field:
- Applicable to filing of CR.
Kinds of Defenses:
1. Lack of consideration/Cause
2. Absolute Simulation (fictitious)
3. Illegal Consideration
4. Extinguishment of obli (payment, remittance,
prescription).
 5. Non-fulfillment suspensive condition - if made on
‘whole’ object/DRs. 4. When intended by 4. Obligation can be
6. Fraud parties involved. accomplished partially.
7. All DRs were incapacitated to give consent
(minors, insance, hypnotic spells)
[NOTE:] Character of prestation will determine
8. Vices of consent (vitiated) on “ALL” parts of the
in/divisibility of an obligation of “not to do” (negative
DRs.
obligations)
9. Vitiated Consent (forced)
10. Incapacity to give consent (personal to DR when
In the case of divisible obligation if illegal aspects can be
sure - a complete defense)
separated from legal ones, the latter can be enforced.
11. Non-fulfillment of condition - partial defense
12. Unarrived of term - partial defense
Reminder divisibility can apply to contract, obligation (e.g.
delivery) and/or recovery of damage. (TAKE NOTE!)
Section 5: Divisible & Indivisible Obligations

Section 6: Obligations with Penal Clause

1223. Divisibility/Indivisibility when there’s only one CR/DR
don’t modify Chapter 2 provisions:
1126. Obligations with Penal Clause:
★ Divisible - can be performed partially
★ W/o stipulation: penalty substitutes indemnity for
★ Indivisible - can’t be performed partially
damage & interest (non-compliance).
Kinds of Divisibility/Indivisibility:
Damages still need to be paid if DR refuses to pay the
Divisibility Indivisibility penalty/guilty of fraud in fulfillment of obligations.

1. Conventional 1. Quantitative Penalty may be enforced when demandable according to

- agreed upon (e.g. 10 chairs to be divided
Code.
to 2 brothers)
2. Natural/Absolute
- nature of 2. Qualitative ★ Penal Clause:
object/undertaking (e.g. (e.g. one heir - land, 2nd - Coercive means to obtain compliance from DR.
trip to Manila, delivery of heir - cash) - Insuring accessory undertaking to assume greater
a ring) liability in case of beach. Helps insure compliance
3. Intellectual/Moral
of obligation.
3. Legal - exists in mind only. (e.g.
- provided by law My brother and I own a
car). Kinds of Penal Clause:
First Classification:
a. Legal - by law
1224. When DR fails to comply with their “joint indivisible”
b. Conventional - agreed upon by parties
obli they are charged for indemnities. Only DR who failed
Second Classification:
to comply!
a. Subsidiary - only penalty can be asked.
b. Joint - both principal contract + penal clause can
Effect of Non-compliance - obli is converted into
be demanded.
monetary.

(e.g.) M & L are bound to give 10k worth of car to J.

Because M gambles, they’ve become insolvent and can’t
acquire the car. L must pay their 5k share instead to J & L
Penalty vs Condition
isn’t liable to M’s non-compliance.
Penalty Condition
1225. To give “definite things” & can’t be partially done is
indivisible. Obligations that can be done in days, metrical Constitutes obligation No obligation
(although accessory)
units or different degrees (analogous) in nature that CAN Mere condition
BE partial are divisible. Demandable (alone/joint)
NOT demandable
If provided by law that an obligation is indivisible even
when capable of partial performance - law prevails. In to
[NOTE:] Breach of obligation without Fraud (Dolo) cannot
“not to do obligations” divisibility/indivisibility is determined
constitute exceptions (last:fraud = penalty &
by character of prestation in each case.
damage/interests)

Indivisible
1. Give definite things
(e.g. give a car)
2. Not susceptible to
partial performance
(e.g. conduct orchestra ina
single rendition)
3. Provided by law as
indivisible even when
physically divisible.
Divisible
1. Object of obligation can
be executed for a certain
number of days of work.
(e.g. hired for 10 days)
2. Obligation is done by
metrical units.
(e.g. construct 3m wide,
50m long street)
3. Pay in installments
1127. DR must perform obligation & pay a penalty. He can
only pay a penalty without compliance of obligation if right
was expressly reserved (accessory, not facultative).
CR in turn, can’t demand fulfillment of both obligation &
penalty at the same time unless right to do so was granted
to them (i.e. tenor). Penalty may be enforced if CR
requires obligation to be fulfilled but it becomes impossible
to do without CR’s fault.
1128. Penalty may be demanded even without proof of
b. Resolutory condition
actual damages suffered by CR. b. Substitution to - Merger/confusion
performance - In personal obli; death of
★ Actual Damage - compensation for pecuniary loss. - Compensation a party.
- Actual losses/unrealized profit. - Novation - Change of civil status
- Dacion en pago (datio in (family relations change)
✅Evidence of violations is enough to enforce penalty solutum)
c. Reason of the object
clause.
c. Agreement to release - Impossibility of
1. Subsequent to obli performance
1129. Judge equitably reduces penalty when principal - Unilateral waiver - Loss of thing
obligation has been partly/irregularly complied with by DR. - Natural waiver
Even without compliance/performance, if the penalty is - Remission
unreasonably, courts may reduce it. - Mutual dissent
- Compromise
[CASE:] 5/20 rifles were recovered, supposedly by the 2. Simultaneous w/ creation
defendant but were actually done by someone else. of obli
- Resolutory term/extinctive
Should the penalty clause attached to obligation be period
reduced even when defendants with responsibility of - Resolutory
recovering weapons didn’t do it? condition/condition
subsequent
Held: Yes, it should be proportionately reduced w/ what
was recovered regardless.
★ Subsequent - coming after.
Penalty clause can’t be enforced if:
- CR is @ fault of breach. Additional Notes: other causes
- Fortuitous event, unless DR expressly agreed on their 1. Death of a party
liability regardless of a fortuitous event. 2. Resolutory term
- DR is not yet in default. 3. Change of civil status
4. Compromises
[NOTE:] Art. 1229 reduction of penalty can’t be 5. Mutual dissent (both parties to a contract refuse to
enforced/doesn’t apply to a final/executory judgment. go ahead with the contract)

✅Agreement on penalty “apart” from interest is allowed

6. Impossibility of fulfillment
7. Fortuitous event
by the Civil Code
Section 1: Payment/Performance
- If there is such an agreement, the penalty &
interest is distinct from one another & may be 1232. Payment - delivery of money & performance in any
demanded separately. Stipulation about payment other manner of an obligation.
of additional rate is part of the very “nature of a ★ A person pays for a “pre-existing” obligation. If w/o
penalty clause”. pre-existing obligation. Strictly speaking there is
no payment.
1230. If the penal clause is null, it doesn;t carry the
principal obligation is null, it carries the penal clause as [CASE:] A was given the option to buy a car or not within 1
null too. week. A has no duty to buy.
- A decides to buy, an obli is created and therefore
they must pay.
- Payment made because of a reserved right/option
privilege is not governed by Arts 1232-1262
because such “payment” cannot be demanded by
Extinguishment of Obligations the CR.
Chapter 4
★ Payment needs to be accepted by CR
1231. Obligations are extinguished: (General provisions) expressly/implicity to properly exist. Payment for
1. Payment/performance proper reason may be properly rejected.
2. Loss of the thing due ★ Effect of payment under void judgment:
3. Condonation/remission of debt - Payment to null judgment makes the payment
4. 4. Confusion/merger of rights of DR & CR itself as null/void too.
5. Compensation
6. Novation 1223. For a ‘debt’ to be deemed as ‘paid’ thing/service
due to obligation should be ‘completely
Other causes of extinguishment 9e.g. Annulment, rendered/delivered.’
recession, fulfillment of resolutory condition & prescription)
are governed elsewhere in this code. [NOTE:]
★ Indebtedness - unconditional & legally enforceable
Classifications: obligation for the payment of money.
➔ If monetary obligation - full amount must be paid
Voluntary Involuntary
unless otherwise stipulated in contract.
a. Performance a. Failure to bring action.
- Payment/performance (e.g. prescription) Burden of Proof:
- Consignation - CR needs to prove that a debt exists.
 - When debt is proven to exist in turn, DR needs to
prove they already paid.
[NOTE:] If the promissory note is w/ CR, it is presumed it
has “not” yet been paid.
1234. If obligation is substantially complied with and in
good faith, DR may recover as if it had been a “strict and
complete” fulfillment, less damages suffered by CR.
➔ Affords just compensation for the relative breach
committed by DR.
1235. When CR accepts irregular/substantial (incomplete)
performance “w/o” expressing objection/protest -
obligation is deemed fully complied with!
★ Qualified Acceptance - of substantial/irregular
payment.
1236. CR is not bound to accept payment/performance by
3rd person who has NO interest in the fulfillment of the
obligation unless there is a stipulation to the contrary
whoever pays for another (DR) may demand
reimbursement. Except, if they paid w/o the knowledge/will
of the DR. They can only then recover only insofar as the
payment has been beneficial to the DR.
Right of CR to refuse payment from stranger UNLESS
- There’s a stipulation allowing it.
- If 3rd person has an interest in the fulfillment of the
obligation (co-DR, guarantor joint DR).
Beneficial Reimbursement (e.g.):
X pays for Y’s transportation fare without Y’s
knowledge/will. Later X discovers that Y was entitled to
HALF-FARE. X can only recover half-fare and not the
whole amount.
[CASE:] of beneficial reimbursement
● CR recover from not DR whom one pays for
- Debt prescribed
- Debt was remitted completely
- Debt was already paid
- When legal compensation had already
taken place.
1237. Who pays on behalf of DR w/o the
knowledge/against the will of DR is not “entitled to
subrogation” of CR’s rights - arising from mortgage,
guaranty or penalty.
★ Subrogation - act of putting someone in the shoes
of the CR. Enabling them to experience all rights
& actions CR can act on.
➔ Because payor on behalf of DR can recover from
CR.
Rights subrogated person as CR can exercise:
a. Mortgage
b. Guaranty
c. Penalty (penal clause)
(e.g. A loaned 10k from B. W/o the knowledge of A. C paid
their debt - 10k. The loan was secured by a mortgage of
A’s land.
✅
1. May C claim reimbursement from A? YES
2. If so, how much? 10,000
❌
3. If A can’t pay, may C foreclose the mortgage on
A’s land? No, C doesn’t have that right.
A owes B 10k w/ C as their guarantor. A paid 4k & against
✅
the will of A. D paid their debt for 10k.
1. Can D claim reimbursement from A? YES
2. How much can he claim back? 6,000
❌
3. If A can’t pay, can D proceed against the
guarantor? No, they don’t have the right of
A’s CR.
★ If DR gives consent for another to pay on their
behalf, payor is entitled to: (supported by Art.
1302)
- Subrogation
- Full reimbursement
[NOTE:] Suppose CR voluntarily agrees to subrogate
payor, is this alright?
- In the context of law, NO.
Subrogation can take place only if the payment
was made with the knowledge and will of the DR.
(Refer to Art. 1237)
1238. Payment by 3rd person, not intending to be
reimbursed by DR is considered a DONATION - requiring
DR’s consent. Its payment is Valid if CR accepts it.
[General Law:] No one should be compelled to accept the
generosity of another.
A owes B 1,000. C pays B 1,000 even when against A’s
consent. B still accepts C’s payment.
a. Is A’s obligation to B extinguished? YES
b. May C recover from A? Yes, because it wasn’t a
donation without A’s consent. If C chooses to
claim against A later on.
1239. In real obligations, payment of one who doesn’t
have the free disposal of the thing due and capacity to
alienate it - not valid
★ Payment of Incapacitated Person:
1. Payment - invalid - if accepted
2. CR can’t even be compelled to accept
3. Even remedy of consignation is not proper
Exemption:
Minor (18-21 yrs old) entered into contract w/o consent of
guardian voluntarily pays/delivers thing ‘due’ to fulfill
obligation - THERE’S NO RIGHT TO RECOVER the same
from CR who consumed it in good faith.
A (19 yrs old) entered into a contract w/o the consent of
their parents. In the contract, A was supposed to pay B
1,000. B didn’t know about A’s minority. A voluntarily paid
& B accepted it. B later spent 800. A’s parents found out
about the transaction & brought an action to recover the
1,000.
1. How much can A’s parents recover from B?
200 only since the 800 was used in good faith
by B.
[NOTE:] 1239 - refers to payment BY incapacitated
person.
1240. Payment shall be delivered to CR, their successor in
interest or any person authorized (by law/agreement) to
receive it.
[NOTE:] If money is paid to the wrong party in good faith,
debt is not extinguished. Obligation carries interest which
will continue to run.

1241. Payment to incapacitated person is valid if:
a. Incapacitated person keeps the thing
b. Payment is beneficial to them
Payment to 3rd person is valid if:
1. It contributes to the benefit of the CR.
When benefit is presumed its based on the following, no
longer needing to be proven if:
a. After payment, 3rd person acquires CR’s
(incapacitated person’s) rights.
b. CR consents (ratifies) payment to 3rd person.
c. By CR’s conduct, DR is led to believe that 3rd
person has authority to receive payment.
A owes B 1,000. A pays debt to B. B is already insane. A
swindler convinces B to exchange 1,000 with a P50 worth
of ring.
Is A’s payment to B valid? Only to the amt of 50
Who has the burden of proving that the payment benefits
incapacitated CR? One who made the payment (DR)
[NOTE:] 1241 is payment to incapacitated person.
If indeed, w/o benefit, what remedies are there?
- Payment is not VALID. Legal representative of
incapacitated person can “demand new
payment” on behalf of their ward (incapacitated
person).
- If the ward themself regains capacity, they’re
allowed to claim new payment too!
(Imposter agent was given by Meralco the usual
uniform for their collectors
1242. Payment in good faith to any person in possession
of the credit shall release the DR (Another instance
wherein payment is valid).
Requisites:
- Payor must be in good faith (Payee may either be
in good/bad faith).
- Payee must be “in possession” of credit itself and
not only the receipt/document evidencing the
credit.
1243. Payment to CR by DR - one that was judicially
ordered to retain - NOT VALID!
Judicial orders retaining payment may arise from:
1. Garnishment - DR’s DR is judicially ordered not to
pay their CR (1st DR) and unsteady pay their
CR’s CR.
2. Interpleader - person in possession of a thing has
‘conflicting claimants’ over their possession.
Possessor wants them to settle between
themselves first.
A has merch that is to be that is to be delivered to a
person who presents the proper receipt. B & C claim to be
“supposed receivers” with identical proper receipts. A
doesn’t know who to deliver to so he files an action in
court for them to settle their rights.
- The order was judicially declared to prevent A
from delivering to either. Regardless, A pays B
(brother of A’s lover) Invalid by law.
3. Injunction - order to refrain someone from doing
something.
● Preliminary Injunction - prohibiting order during
PENDENCY of certain proceedings.
1244. DR can’t compel CR to receive a different thing
(even when the substitute is more valuable than what’s
due). An act of forbearance can’t be substituted by
another act of forbearance against CR’s will.
★ Forbearance - to suspend enforcement of a legal
right (especially in payments of debts)
★ Exemptions of 1244:
a. Facultative obli
b. Dation of money
c. Novation (change in prestation, primary
✅
terms)
d. If CR waives (express/implied )
1245. Dation in payment shall be governed by law of
sales.
★ Dation in payment - mode of extinguishing an
obligation whereby DR alienates in favor of CR -
property for the satisfaction of a monetary debt.
★ Alienation - process wherein an owner voluntarily
gives/sells title of their property to another party.
[NOTE:] Less freedom in determining the price in dation in
payment compared to a usual sale.
Conditions when dation in payment is valid:
1. CR consents, presupposes sale (consent of both
parties)
2. Doesn’t prejudice other CRs.
3. DR isn’t judicially declared as insolvent. If so, their
property should be administered by the assignee.
[NOTE:] Dation in payment doesn’t always necessarily
mean that all of DR’s property will be given to satisfy the
credit.
1246. The delivery of a “generic” thing whose
quality/circumstances “have not been stated”, CR can’t
demand one w/ superior quality and DR can’t deliver one
w/ inferior quality.
★ Waiver:
a. CR may demand/accept one of inferior quality if
they desire.
b. DR may deliver one of superior quality if they
desire.
[NOTE:] When kind and quantity can’t be determined w/o
need of a new agreement, contract is void.
Object to every contract must be determinate to its kind.
Quantity on the other hand can be determined without the
need of a new contract.
1247. Extrajudicial expenses required by the payment
shall be shouldered by DR. Unless otherwise stipulated.
Judicial costs shall be governed by Rules of Court.
[General Rule:] To why DR shoulders extrajudicial costs
- Because they benefit from the extinguishment of
their obligation/debt.
How judicial costs are determined:
- Are usually given to the winning party.
➔ Still subject to the court though.
 - No costs against the government (Republic of the
Philippines) unless provided by law otherwise.
1248. CR can’t be compelled to receive partial prestations.
Dr can’t be required to make partial payments. Unless
there’s express stipulation. If debt is partially liquidated &
the other is not (unliquidated) CR may demand Dr
payment for the liquidated portion without waiting for the
other portion that isn’t.
★ Recap 1233 - an obligation shall be understood to
have been paid when fully delivered/rendered.
★ Exemptions:
- Express stipulation otherwise
- Different prestations are subject to different
conditions/terms.
- Debt partially liquidated
D owes C 300 damages. Even when the whole amount of
damages is not yet ascertained, the 300 is already known,
therefore demandable.
- Joint Dr pays their share.
- Solidary DR pays part that is demandable (subject
to different conditions, etc.)
- Compensation - when one debt is larger than the
other & leaves a remaining balance.
- When work is to be done in parts.
1249. Monetary debts shall be paid in currency stipulated.
If not possible to deliver stipulated currency, pay according
to legal tender in the Philippines.
Payable to order notes, checks, or other mercantile
documents shall effect payment when CASHED or if CR
has fault that said docs are impaired.
★ Conversion (exchange rates) - will be used at the
time the payment/satisfaction of the judgment was
made. (If time is DISPUTED, court will determine
when)
★ Checks, notes are not legal tender. CR can’t be
compelled to accept payment through their
means. Which is why payment by documents will
be considered as satisfied when cashed!
When negotiable documents should be accepted:
a. Estoppel (on CR) - going back on their word (e.g.
previously promised to accept a check then
wouldn’t)
b. Check lost value w/ CR’s fault.
c. Right of conventional redemption - subrogation on
terms of a contract.
(e.g. Clerk of court deposits check to the bank. Buyer
(maker of the check) petitioned the court that they’re
allowed to withdraw the amount in deposit.
1250. In case of extraordinary in/deflation after
contraction, the value of currency at the time of
establishing the obligation will be the basis of payment.
Unless agreed otherwise.
★ Currency stipulated (1250) - other than Ph legal
tender.
★ Doesn’t include Ph money itself in case of
in/deflation
[NOTE:] Extraordinary in/deflation - decrease/increase
couldn’t be reasonably foreseen/beyond contemplation of
the parties at the time of contraction of the obligation.
★ Basis of payment - value at time obli was incurred.
★ Article applies to CONTRACTS
(e.g. Expropriation of property by the government arises
from LAW. Due to the nature of properties, value may
inflate. Basis will be on value when the government
expropriated the property in determining the
compensation.
1251. Payment will be delivered at designated place of the
obligation without express stipulation and if what is due is
a determinate thing - it will be delivered where determinate
thing might be at the moment the obligation was
constituted. Any other case, at DR’s domicile (state). If DR
changes domicile in bad faith/after incurring delay -
additional expenses are borne by them.
Where to deliver payment?
● W/ stipulation - designated place
● W/o stipulation
- Determinate - where the thing was when
the obli was contracted. If to be shipped,
to the domicile of the DR
- Generic - domicile of the DR
★ Domicile - country that one treats as their
permanent residence.
Application of Payments:
1252. DR who has various debts (of the same kind) to the
same CR - may declare application of payment when
delivered. Unless stipulated otherwise, application of
payment is made by party (for whose benefit the term has
been constituted).
❌Invalid application - debts not yet due. DR accepts
receipt from CR and it states the application of the
payment - DR can’t complain.
Unless: there’s a clause invalidating the contract.
4 forms of payment:
a. Application (Imputation)
b. Dation
c. Assignment in favor of CR
d. Tender of payment and consignation
Requisites for application of payment
- 2/+ debts (same kind)
- Owed to the same CR
- All debts must be due, unless stipulated
otherwise.
- Payment is not enough to end ALL debts.
✅
Rule when debts aren’t yet due, may there be
application? Yes, if parties stipulated the application
made by party who benefits the term constituted.
Preferential right of DR
By law, Dr has right to choose which debt they’re paying
(not absolute)
(e.g.
1. Valid, prior contrary agreement
2. Can’t pay part of the principal ahead of the int.
Unless CR consents)
How application of payment is made:
a. DR designates
b. If not, CR designates by issuing a receipt. Unless
there’s a cause for invalidating the contract.
c. Operation by law - if CR/Dr doesn’t designate and
if application is not valid.
[NOTE:] DR makes application payments that should be
credited to the “first debt”. If on the “second debt” -
considered partial payment.
Dues of debts first contracted are likely to be due first too!

Application by CR: ❌No partial payment - not completely satisfied (RMBR!).

- If CR issues receipt w/o knowledge/consent of DR
- deemed as INVALID. [CASE:] A owes B two debts. One secured by a mortgage,
the other isn’t. Both are due & A pays to B making its

❌
Revocation of application: application on the second debt. B refuses - saying debt

❌
Not allowed! with mortgage is more burdensome. Is he correct?
Unless: both parties agree. If 3rd persons are No. Although true, second debt is more onerous.
prejudiced. Preference of DR (that is a right) should be followed.

❌
Application must be made at the time payment by DR Determination of Onerous Debt
is delivered. Not afterwards! If can’t be determined which debt is more onerous, equal
(pro-rata) application to all
w/o protest from DR - accepts receipt, DR
waives/renounces their right of choice. Payment of Cession

[Case:] Partner - DR ( C )
Dation en Pago Cession
A owes C personally and owes their (C & B’s) partnership (Dation in Payment)

✅
too. A pays, how will the application apply?

✅
Apply to both credit, pro-rata in amounts. - Doesn’t affect ALL - Affects ALL properties
If C chooses to apply & prioritize liability in partnership - properties. - 1+ CR’s consent is
payment of A should be applied to it solely. - Concerned w/ CR’s consent required
(required) - Full/partial insolvency of
- Ownership on delivery DR
Surety guarantees DR’s debt of 535,428.44 for 53,643 -
which they’re (DR) still liable for. If DR pays 10k for
principal, surety’s applies to the unsecured portion of the
Act of novation (new
agreement) ❌
- Assignment
Novation

debt.

1255. DR may give up (cede)/assign properties to CRs for

1253. If debt produces interest - payment of principal is
their debts. Cession will release DR from responsibility
not deemed to be paid until interests are covered FIRST.
stipulated. Agreement in effect of cession is governed by
special laws.
● Unless: CR agrees that the principal portion will
first be paid instead of interests.
● Cession/Assignment - CR is entitled to right to sell
● Interest - due and on future installments.
property assigned by DR but THEY’RE NOT THE
OWNER
Effect of payment credited to interest:
Decreases principal’s total and total interest collectible.
Kinds of Assignments:
1. Legal (majority of CRs must agree)
RMBR: Interest is paid for fair compensation - way of
2. Voluntary (all CRs must agree)
damages to default (law makes no distinction).

Requisites of voluntary agreement:

1254. If payment can’t be applied/concluded with previous
- 1+ debts
article &/or other circumstances on basis - Most onerous
- 1+ CRs
debt to DR that is due shall be considered as the one
- Complete/partial insolvency of DR
satisfied from the payment
- Abandonment of all DR’s property for execution -
unless this exemption is to be waived by DR.
● If debts due are the same in nature & burden -
payment will be pro-rata applied to all.
Effect of voluntary assignment:
1. CR are assignees (not owners)
● Most onerous - different nature of debts.
- w/ authority to sell
● Proportionately - same debts.
- Datio in Solutum - ownership transferred.
2. DR released up to the amount of net proceeds of
Samples of Onerous Debts:
sale - unless contrary stipulation.
1. Older debts in running accounts
> Balance remains (net proceeds - amount of debt
2. Interest bearing debts (> non interest bearing)
= remaining balance) is collectible.
3. Debt secured by mortgage/pledge
3. CR will collect credits in order of preference
4. Debts with penalty clause
agreed upon or if with agreement - order of
5. Advance for subsidence > cash advance
preference by law.
6. DR is in mora
7. Exclusive (solo-ish) debt > solidary debt
Some properties should not be assigned:
- Family home
● Subsistence - maintenance
- Amount needed by DR to support themselves &
(e.g.) Subsistence allowance - new employee to buy
others required by law to support.
necessities while awaiting first pay.

(If not reserved:cession is reducible)
Tender of Payment of Consignation
Introduction:
1. Tender of Payment - offering to CR what is due to
them + demand for them (CR) to accept the same.
★ Object of Notice Prior Consignation - give CR the
chance to reconsider their refusal (to avoid
litigation and consignation)
[NOTE:] If refusal of tender is justifiable, consignment is
void/null.
Object of notice after consignation:
- Enable CR to withdraw money/goods deposited
with (in company of) judicial authorities.
Consignation - depositing the thing due with court/judicial
authorities when CR can’t refuse to accept payment.
Generally, require prior tender of payment.
➡️
Process:
➡️
Cause for consignment
➡️
Tender of Payment (extrajudicial, preparatory)
Consignment (judicial)
1256. CR who receives tender of payment, refuses without
just reason to accept - DR is released by consignation of
things due.
Consignation (alone) gives effect to:
1. CR absent/unknown/doesn’t appear at place of
payment.
2. CR incapacitated to receive at time due.
3. Without just cause, CR refuses to give a receipt
4. 2/+ persons claim the same right to collect.
5. Title of obligation has been lost.
● Consignation - goes after debts.
● Tender of Redemption - No need to consign if
refused (e.g. repurchased case)
When CR is justified in refusing tender of payment.
1. If tender of payment is INVALID
Requisites of a Valid Tender:
a. Legal tender (lawful currency, doesn’t include
checks)
- If check is accepted to reappeal via tender of
payment; defect in legal tender requisite is
CURED.
b. Includes interest due
c. Generally must be unconditional.
- If with conditions & CR doesn't protest in regards
to it (condition) can’t be estoppelled later on and
try to prescribe terms for validity for CR’s
acceptance which they already made.
d. Obligation must be due.
Consignation without Tender - possible with equitable
conditions/circumstances.
1257. For consignation to release DR, it must first be
announced to persons interested in obligations’ fulfillment.
Consignation doesn’t have effect if it doesn’t follow
provisions that regulate payment.
1st Requisite: Existence of a debt
Not a debt:
a. Option
b. Redemption (legal/conventional)
c. Prescribed debt
d. Illegal cause
e. If conditional & said conditions are unfulfilled.
2nd Requisite: Valid prior tender unless tender is excused.
3rd Requisite: Prior notice of consignation (before deposit)
- If notice had been made, it gives CR a chance to
withdraw money consigned.
- Exemption: Attempt to notify was useless (e.g. CR
couldn’t be located - was traveling)
- Without notice - consignment is VOID.
- Allows interested parties to reconsider and avoid
litigation.
● Notice of consignation - shows intention of DR to
take the case in court in event that tender is
refused.
- In itself a consignation!
★ What to state in the first notice:
1. Tender was made (unless excused) on a
specified date.
2. Tender was unjustifiably refused.
3. Depositing in court is contemplated.
[NOTE:] Notice is not essential if the sum deposited is the
very sum due from a final judgment.
● Consignation presupposes the existence of a suit.
Without a suit, no consignation too!
4th Requisite: Actual Deposit to Proper Judicial Authorities
1. File complaint first in court then consign after.
2. Consignation
- Deposit the thing/s due.
- With proper judicial authority in certain
cases (e.g. sheriff)
- With proof of tender unless excused &
first notice of consignation was sent.
[NOTE:] Judicial deposit due from a final judgment doesn’t
require a notice to CRs/interested person.
Effects of consignation:
- “In custodia legis” state of property
➔ Exempted in execution/attachment.
- If property is “perishable” by nature, the court may
order for its sale.
- Consigning DR makes themself the agent/receiver
of the court. If particularly for some reason said
property can’t actually be placed in the hands of
the court.
➔ True if involved is real property.
➔ Remedy: Ask the court for receivership.
● If real property and without
remedy, obligation is still in force
because ‘no’ payment.
[CASE:] Court decision - balance of a purchase price is
due within 60 days from the receipt thereof. DR needs to
pay the amount in reasonable time after the decision, not
from when the judgment becomes final.
- If CR refuses, consign the thing with court (also
within the 60 day period).
- DR’s attempt to reach an agreement with CR
doesn’t affect the finality of the judgment.
5th Requisite: Subsequent notice of consignation.
- Mandatory or else the consignation is void.
★ Final Judgment Due Thing - doesn’t require
notice.
❌
➔ Refers to contractual debt.
Not decreed by court.
Form: Issue formal notice or file complaint, service of
summons of CR & copy of complaint.
1258. Requisites of consignation should be done/given to
the proper authorities.
1259. Expenses of consignation when properly made will
be charged to the CR.
Why? CR’s fault for refusal. Judicial intervention may
have been avoided if they accepted.
If not proper consignation: DR shoulders expenses.
1260. DR may ask the judge to order cancellation of
obligation when consignation was duly made. DR may
also withdraw deposited sum/thing before the acceptance
of the CR or judicial declaration that consignation was
properly made.
Effects of Proper Consignation:
- DR may ask the judge to cancel the obligation.
- Running interest is suspended.
[NOTE:] Obligation remains in force before CR
accepts/judge declares proper consignation.
Effects of Improper Consignation
- Obligation remains.
- Invalid/improper consignation at time due, DR is in
default.
❌No effect.
★ Dismissed case (with consignation) -
[NOTE:] DR may ask for cancellation of obligation
DESPITE lack of important requisites of consignation. If
CR doesn’t object, they waive & allow DR to cancel so.
✅
If DR withdraws what they consigned it should be:
✅
Before CR accepts
Before judge declares proper consignation
- DR bears expenses if anything. Remember, the
✅
preferential right of DR, they still own it by then.
After proper consignation and with CR’s consent that
DR may withdraw the sum/thing.
1261. When properly consigned & CR authorizes DR to
withdraw the same, CR loses every preference they have
over the sum/thing to DRs, guarantors & sureties are
released.
Effects: Obligation remains
:CR loses every preference
:Co-DR (solidary), guarantors, sureties are
released.
➔ Co-DR, not their own, individual shares but what
they do with their other co-DRs. Released from
solidarity.
Section 2: Loss of Thing Due
Introduction:
● Loss - impossibility of performance.
- Object perishes (physically destroyed)
- Out of commerce
- Disappears - existence becomes unknown, can’t be
recovered.
Impossibility of Performance:
- Physical Impossibility
- Legal Impossibility
➔ Direct - prohibited by law.
➔ Indirect - DR enters military draft.
- Moral Impossibility (Impracticable)
1262. Obligation to deliver a specific thing for as long as
without fault of the DR & before they incur delay is
extinguished in a fortuitous event.
Obligation to deliver specific thing even with fortuitous
events remains if: law/stipulation provides so. Obligation
referred here is converted into monetary obligation
(damages). Same rules apply if the nature of obligation
requires the assumption of risk on part of the DR.
[NOTE:] Loss must be AFTER obligation was incurred.
- If mortgaged property is lost, the owner of the
mortgage bears loss. They still have to pay
because the mortgage is monetary in nature.
When claim of loss must be made:
[CASE:] Claim of loss/dmg (to goods carried by vessel)
must be made only AFTER the date of discharge of the
last package.
- Will a claim BEFORE such date of discharge be
✅
regarded as premature & speculative?
❌
If made without basis
Claim is proper if prior info/discovery of
shortage/dmg to the goods.
Instances when the law requires liability even with a
fortuitous event:
- DR is at default
- DR promised to deliver the SAME thing to
two/more persons with different interests.
- When obligation arises from a crime.
- Borrower (of a thing) has lent the thing to another
who’s not a member of their household.
1263. Obligation to deliver a GENERIC thing,
loss/destruction doesn’t extinguish the obligation.
Exemption: Fixed boundaries/limit
- If generic thing is DELIMITED (50kg of sugar from
my 1958 harvest)
- Generic thing is segregated/set aside - making it
in nature SPECIFIC rather.
In case of Monetary Obligations:
- Loss of specific, mortgaged property due to a
fortuitous event doesn’t extinguish the monetary
(generic) obligation.
1264. Courts shall determine under certain circumstances
the materiality (whole/partial) of loss. If enough, it
extinguishes the obligation.
(e.g. Loss of a cover of a specific fountain pain -
considered as a complete loss)
1265. When thing is lost while in the possession of a DR -
presumed to be lost due to DR’s fault. Unless proof of the
contrary. Presumption doesn’t apply in the case of a
natural calamity.
1266. DR is released from the obligation in case of
PERSONAL obligations wherein they become
legally/physically impossible without DR’s fault.
★ Impossibility - must incur AFTER constitution of
the obligation.
- If impossibility was the nature of the
obligation since the beginning - VOID.
[CASE:] A sold half-interest in his motorboat to B. Agreed
upon was that the price to be paid by B will be used in
installing a motor on the vessel. Later, the vessel was
destroyed due to a fortuitous event. Is B free?
✅No. To pay is a real obligation & involves a thing that is
generic (money). B’s obligation to pay isn’t extinguished.
Delivery of the supposed motorboat AFTER paying has
become impossible.
Effect of Subject’s Impossibility:
- Subject impossible (for DR) but object possible (for all
✅
others), is the obligation extinguished?
Depends, obligation usually subsists unless personal
considerations are involved (e.g. only a particular
company is prohibited by law to furnish work on a certain
day).
Effect of Loss on a Reciprocal Obligation:
[General Rule:] Obligation not extinguished by a
fortuitous event remains. (Building was sold yet was
destroyed by lightning, Buyer must still pay. Buyer bears
the loss even when the building has not yet been
delivered.)
Exemptions:
1. Lease - if object is destroyed = lease and
obligation to rent is extinguished.
2. Contracts for a piece of work (worker/contractor
can’t ask for price if the thing is lost by a fortuitous
event prior to delivery).
1267. DR may be released from obligation partially/wholly
when service is so difficult as to be manifestly beyond the
contemplation of the parties.
- Court decides whether whole/partial.
- Personal obligations ONLY!
★ Aleatory - dependent on an uncertain event.
Effect of difficulty beyond the parties’ contemplation:
- Refers to moral impossibility/impracticability due
✅
to change of certain conditions.
A treaty/agreement remains VALID if the same
conditions prevailing at time of contracting
continue to exist at the time of the performance.
(AKA = frustration of commercial object/frustration of an
enterprise)
Moral impossibility samples:
Duty to construct a railroad - construction was possible
but very dangerous to life & property is excused by the
law.
● Mere inconveniences, unexpected impediments,
inflation aren’t enough to release a DR from their
obligation.
Requisites to apply article 1267:
- Service must become so difficult it was beyond
contemplation of BOTH parties & the difficulty that they
couldn’t possibly have anticipated/foresee it.
- One of the parties must ask for relief.
- Object must be a future service with future unusual
change in conditions. (Aleatory contract/dependent on
CHANCE in view of the risks being foreseen don’t come
under the scope of 1267.)
1268. Debt which proceeds from crimes doesn’t exempt
the DR from the obligation even with a fortuitous event
(loss). Unless CR refuses DR’s offer without justification.
Effect of Loss in Criminal Cases:
Obligation is not extinguished even with a fortuitous event.
Exemption: CR is in Mora Accipiendi.
1269. Obligation is extinguished by the loss of the thing
due, CR shall have all the rights of action which the DR
may have against third persons related to the reason of
the loss.
Transfer of Rights from DR to CR (in case of loss):
S is obligated to deliver this car to B but X destroys the
car. B has the right to sue X. S might unduly profit from the
damages of the case.
★ Rights of Action - includes insurance indemnity
that may have been received.
[CASE:] Two vessels collided with the first vessel at fault.
First vessel later sank. Its owner collected insurance. Is
the insurance money liable for the damages sustained by
✅
the second vessel?
Yes, insurance money substitutes the first, sunken
vessel and must be used as far as necessary to the
judgment rendered in the case.
Section 3: Condonation/Remission of the Debt
★ Condonation - voluntary overlook/pardo of an
offense (express/implied).
★ Remission - CR discharges DR from their
obligation (express/implied).
1270. Condonation/Remission requires the acceptance of
the DR. May be expressed/implied.
Both are subject to the rules that govern inofficious an
effect of depriving descendants of the shares of a
succession to which they are entitled by law) donations.
★ Express condonation will comply with the form of
donations.
★ Remission/Condonation - gratuitous
abandonment by the CR of their right/s.
Requisites for Remission:
a. Must have an agreement (since acceptance of the
offer is required).
b. Parties must be capacitated and need to consent
(beyond the powers of court: e.g. condone interest
unless CR consents).
c. Must have a subject matter (otherwise nothing to
condone).
 d. Cause of consideration must be liberality
(otherwise act may be: dation in
payment/novation/compromise).
e. Obligation remitted must have been demandable
at the time of remission (otherwise remission is
useless).
f. Remission must not be INOFFICIOUS.
(Otherwise, reducible so that it won’t impair
compulsory heirs).
★ Other grounds of donation (i.e. revocation of
donation such as ingratitude):
g. Remission is essentially a donation despite the
exclusive mention of inofficious
h. Formalities of donation are required in the case of
express remission.
(e.g. Remission of an obligation to give land must
be through a public instrument to be valid)
[Query:] Can an express remission, defective in form, be
considered an implied remission?
✅NO, provision of law to requisites of express remission
render it useless.
- Express remission not due in form must be
withdrawn in due time to not affect the CR.
Confirmation of waiver ensues after. If they’re
unable to withdraw the remission the rest may be
implied.
- Waivers/remission aren’t presumed (generally).
Must be clearly/convincingly be shown: express
stipulations/acts admitting no other reasonable
explanation.
★ Classes of remission:
1. Effect/Extent
- Total
- Partial (by portion/refers to the accessory
obligation).
2. Date of effectivity
- Inter vivos (during life)
- Mortis causa (after death)
➔ Must have formalities of a will and
needs to be probated.
3. Form
- Implied/Tacit - requires NO formality,
conduct is sufficient.
- Express/Formal - requires formalities.
1271. Delivery of “private document” evidencing credit
(return of e.g. promissory note) by CR to DR implies
remission of the action which the former had against the
latter.
(remits right to collect from DR because obligation was
already finished before) = “presumption
★ Inofficious - not official
To nullify waiver, it should be claimed as inofficious. DR &
heirs may prove the delivery of the document (Remittance
of CR’s action to DR, because already completed prior)
was made in virtue of a paid debt.
[CASE 1:] Bella made a promissory note to Ruben at
1,000. Later, Ruben voluntarily delivered said promissory
❌
note to Bella without collection.
➔ Presumption here is DISPUTABLE. Not
conclusive.
➔ Return of instrument for examination/collection.
★ Implied Remission (e.g.)
CR voluntarily destroyed the private instrument.
● Omission of debt/name of DR may be an
ERROR. Not an implied remission.
DR & heirs may prove the document was for the payment
❌
of a debt = Only WHEN there was INDEED a payment.
Otherwise, immoral/falsehood - Not allowed, illegal.
Conflict of Presumption:
Presumption of Remission > Presumption of Payment
1272. When a private document )where debt appears) is
in the possession of the DR, the presumption is: CR
delivered it VOLUNTARILY unless proved otherwise.
Instrument of Credit is still with CR:
Evidence debt is not yet paid.
Rebuttal: receipt of payment must be presented.
Presumption in Joint/Solidary Obligation
(e.g.) A & B owed C 1,000 evidenced by a private
document.
a. If the document is in the possession of A, who is a
✅
joint DR? What is the presumption?
Only A’s debt is remitted (500).
✅
b. Same scenario but A is a solidary DR.
Whole obligation of 1,000 is remitted.
✅
c. In both scenarios (A & B), can they be remitted?
YES, with superior contrary evidence.
1273. Renunciation of the principal debt shall extinguish
the accessory obligation but waiver of the latter shall keep
the former (principal) in force regardless.
(e.g.) Penalty (accessory obligation) condoned will not
extinguish principal obligation. Yet if principal obligation is
condoned, penalty follows the same.
1274. Presumption: Accessory obligation (pledge) is
remitted after its delivery to CR is found in the possession
of the DR/3rd person who OWNS the thing.
Accessory Obligation of a Pledge
- Presumed to be remitted (1274).
- Principal obligation of debt is still in force though.
➔ Disputable if DR/3rd person is in
possession of pledge by theft, sent for
repairs/similar causes.
Reason for Presumption
Pledge must be delivered to CR/3rd person by common
agreement if pledge is to be used.
3rd Person must OWN it
Stranger may have it for safe-keeping purposes only if
they don’t own it.
Section 4: Confusion/Merger of Rights
1275. Merger of rights of CR & DR shall extinguish
obligation.

Requisites for a Valid Merger
a. Should take place between the principal DRs &
CRs (Confusion between CR & guarantor only
extinguishes the accessory obligation without
guarantee but not with principal obligation).
b. Merger must be clear and definitive.
c. Obligation involved must be the same - identical
from the point of view of the DR & CR.
Effect of Transfer of Rights:
Transfer of RIGHTS ONLY!
➔ Not credited against debt = NOT A MERGER
➔ Rights of both CR & DR to a 3rd person
➔ E.g. assignment, safeguard only. Not a merger.
Extinction of Real Rights
Real right (e.g. usufruct) may be extinguished if the naked
owner becomes the usufructuary.
Aka Consolidation of ownership (FULL OWNERSHIP)
● Naked Owner - real, true owner
(e.g.) Lucy gave usufructuary rights to daughter, Leonel.
Lucy dies and Leonel is her heir. Making him the naked
owner after Lucy’s death. Usufructuary rights are
extinguished yet the right to enjoy/use fruits (usufruct) of
property is still a right of an owner.
Revocability of Merger
Confusion ceases, revived obligation.
1277. Merger between person (DR/CR) with guarantors
extinguishes accessory (guaranty) obligation. Principal
obligation remains! Unless merger between principal
CR/DR themselves.
★ Confusion doesn’t extinguish joint obligation
except the share corresponding CR/DR, whom the
2 characters concur to.
[CASE:] A & B jointly owes C 1,000. C assigns entire
credit to A. Obligation is extinguished. B’s obligation to A
(500) still remains though!
1276. Merger benefits guarantors. Confusion with other
parties apart from the principal CRs/DRs - doesn’t
extinguish the obligation.
Section 5: Compensation
1278. Compensation is when two persons are CR & DR of
each other.
Compensation vs Payment
- Compensation may partially extinguish.
- Operated by law.
- Payment - complete, indivisible & involves
action/delivery.
Compensation vs Counterclaim
- Effective by operation of law.
- Must be pleaded to take effect.
- Extinguishes both (2) obligations when both exist
simultaneously to the amount of respective sums.
Kinds of Compensation
● Effect/Extent: Total, Partial
● Origin/Cause: Legal, Conventional (by agreement
of parties involved), Judicial, Facultative (choice to
claim/oppose).
➔ A owes B 1,000 due on Jan 31. B has the
choice of compensation to pay his own
debt due Jan 31 or B can oppose A from
compensation because they (B) can’t be
made (demanded) to pay until Jan 31.
Case, No Compensation:
James owns shares of a bank. Later, James loaned from
the same bank with interest per annum. His obligation to
the bank to have an acceleration clause and he defaulted
several installments. James pleaded compensation with
✅
his shares. Can he?
NO, because he is the DR of the bank (CR) but bank
has no obligation to him (wherein bank is DR of
James-CR)
➔ Both need to be reciprocal by CR and D - to one
another.
[CASE:] Jack owns shares in a corporation. Jack pays a
little over his credit to the corporation. He is CR of the
corporation to the amount of his excess pay prior. That
portion he may compensate if he is indebted to the
corporation in return.
1279. Requisites for proper compensation:
a. Each obligors (DRs) are principally bound while
being CRs of one another.
b. Prestation: sum of money, consumable things, be
of the same kind and quality.
c. Both debts are due.
d. Both must be liquidated and demandable.
e. Neither have retention/controversy by 3rd
persons, communicated to DR in due time
Last Requisite:
- E.g. court litigation, waiver, etc.
Legal Compensation
- Requisites of 1279
Voluntary Compensation
NO requisites for as long as voluntary and validly entered
into.
1280. Notwithstanding the previous article, guarantor may
use what CR has against principal DR.
(e.g.) A owes B 2,000 with C as guarantor. B owes A 500.
✅
If A can’t pay, how much is C liable for?
1,500. C can set up the 500 compensation that B owed
A.
[CASE:] A owes B 5,0000 with C as guarantor. B owes C
✅
5,000.
✅
A can’t compensate because they aren’t a CR to B.
If B goes after C because they’re the guarantor to A,
there can be compensation (up to the amount applicable
in what B owes C) - 5,000
1281. Compensation can be total/partial.
1282. Compensation for debts NOT YET DUE may be
agreed upon.
★ Refers to Voluntary Compensation
[NOTE:] 1279 doesn’t apply here because it was for legal ✅A can’t set up on the 150 because they already knew of
compensation. the assignment.

- Parties must simply give consent to have legal Reason for the Article: To prevent fraud (deprivation of
capacity. total/partial compensation benefits).

1283. If there are damages, it may be proved by one who
has right to it before legal compensation can take place
further.
1284. If one/both debts are rescissible/voidable, they may
be compensated against each other before being judicially
rescinded/avoided.
1286. Compensation occurs by operation of law. Even
when debts are payable at different places. But there shall
be an indemnity for expenses of exchange/transportation
to the place of payment.
Indemnity for expenses of exchange - refers to
monetary exchange, (in case debts are monetary).

★ Rescissible/Voidable debts are VALID until [CASE:] A owes B 1,000 payable at Manila. B owes A

✅
rescinded/voided properly - thus compensation is 1,000, payable in England.
allowed. Whoever claims compensation must pay for the
exchange rate of currency.
Prevention of Unfairness:
To avoid later recission/annulment, than what court 1287. Compensation is not proper when one of the debts
decreed, NO compensation took place. Decree is arises from:
retroactive. a. Depositum
b. Obligation of a depositary
[CASE:] A owes B 1,000. A forced B to sign a note in A’s c. Bailee in commodatum

✅
favor indebting B to A according to the note. Neither compensation can be set up against a CR who

❌
First debt is VALID has a “claim for support due by a gratuitous title” without
Second debt, forcing of B by A is VOIDABLE. prejudice to provisions of paragraph 2, Article 301.

❌
If requisites for legal compensation are valid, both debts a. Depositum - loan deposit

✅
are extinguished but not the case. Unfair to annul first Depositary can’t claim compensation
debt. Compensation before that took place is canceled Depositor may claim though
when one debt is annulled.
b. Debt arising from obligation of a depositary
1285. DR who consents to assignment of right by CR in Same reason of previous one (prevent breach of

✅
favor of a 3rd person can’t set up compensation to trust/confidence)

❌
assignee (3rd person) unless assignor (CR) was notified Depositor allowed
by DR their reservation of their right to compensation. Depositary NOT allowed.
c. Debt arises from an obligation of a bailee in
If CR told DR about cession but without or against the will commodatum (borrower of property who pays
of the latter, may set up compensation to debts previous to nothing for the loan).

✅
cession (NOT subsequent ones!). Prevent breach of trust/confidence.

If assignment was done without the knowledge of the DR,
they may set up compensation to all debts maturing
BEFORE DR’s knowledge to the assignment.
3 Cases Covered by the Article:
- Assignment with consent of the DR
- Assignment without the consent of the DR
- Assignment with knowledge of DR
➔ With consent of DR
May not set up compensation to 3rd
person (assignee).
❌
Lender may claim compensation.
Borrower can’t claim for compensation
★ Depositary - someone /thing lodged in trust.
★ Lodged - leave money/valuable with
someone/thing for safekeeping.
In summary of 3 Instances Prior:
Depositor/lender have an option to claim or not claim
compensation
d. Debt arising because of claim for support due to

❌
Unless - reserved right to compensate. gratuitous title.
➔ Without consent/against the will of DR Future support - NO COMPENSATION
(but with knowledge of intention to
assign) ★ Facultative Compensation - one party may
Compensation can be set up to debt - claim/use compensation (depositor/lender) but not
PREVIOUS TO CESSION (mature!) the other.

[CASE:] A owes B 1,000. B owes A 200. Both debts are [CASES:] A has 10,000 savings in a bank. A borrowed
due. B assigns 1,000 to C without knowledge of A (July 1). 2,000 from the bank. Without asking A, the bank
On July 15, a 250 debt of B in favor of A matured. A subtracted this from A’s savings. Is the bank’s action

✅
learned of the assignment on August 1. proper?
YES, compensation is allowed.
On August 23, a 150 debt of B to A matured. Lantern C

✅
asks A to pay his debt. How much can C collect?
550, A can set up partial compensation to the 200 and
250 debts maturing before A learned of the assignment
(1k - 200 - 250 = 550).
A asked B to keep their 100 for him. A becomes indebted
to B for 40, A asks for their money to be returned, B only
gives 60. Is B proper?
❌NO, B holds the 100 as a depositary which is not
subject to compensation.
Obligation of Depositary (For further understanding)
Depositary must keep things safely and return it when
required to: depositor, their heirs/successors, designated
contact.
Unless with stipulation in contract, the depositary can’t
deposit with a 3rd person.
If deposit with a 3rd person is allowed, the depositary will
be liable for loss/damages if they deposit the thing to a 3rd
person who is manifestly careless/unfit.
Depositary is responsible for negligence of their
employees.
Depositary can’t make use of things deposited without
express permission from the depositor. They become
liable otherwise.
For preservation of things - it requires to be used,
depository may use it but only for the purpose of its
preservation.
1288. No compensation debts that consist of civil liability
arising from penal offenses.
✅Victim may claim compensation.
➔ Another instance of facultative compensation (Art
1288).
1289. If a person has several debts susceptible to
compensation - rules on application of payments will apply
to order of compensation.
1290. Present requisites in 1279, compensation is made
into effect by operation of law and extinguishes both debts
concurrent (simultaneous) amount even without
awareness of DR/CR of compensation.
Automatic Compensation
If all requisites are present: (Refer to 1279)
Section 6: Novation
1291. Obligations may be modified by:
a. Changing object/principal conditions.
b. Substituting person of the DR.
c. Substituting a third person in right of CR.
★ Novation - substitution/change of an obligation by
another which extinguishes/modifies the first.
- In order to extinguish an obligation by
creation, extinguishment must clearly
appear.
- Has a dual function - extinguish & create.
★ Imperfect Novation - partial modifactory. Modifies
old obligation.
★ Perfect/True Novation - extinguishes old
obligations and creates a new one completely.
Kinds of Novation
a. According to Object/Purpose:
1. Real/Objective - changing of object/principal
conditions of the obligation.
2. Personal/Subjective (change of persons)
a. Substituting the person of DR
b. Substituting third person with rights of CR
(may be conventional - by agreement or
legal - operation of law).
b. According to Form/Constitution
1. Express
2. Implied (2 obligations are incompatible with one
another)
c. According to its Extent/Effect
1. Extinctive/Total - old obligation is completely
extinguished.
2. Modifactory/Partial - old obligation is in force,
merely modified.
[NOTE:] Should there be any doubt as to whether
novation is tota/partial, it will be presumed to be
modifactory.
Requisites for Novation (General)
❌
a. Existence of a VALID old obligation.
VOID/Non existent - nothing to novate.
- If voidable, novation is possible for as
long as obligation is not yet annulled.
b. Intent to extinguish/modify old obligations with a
substantial difference.
c. Capacity and consent of ALL parties (except in
case of expromission - old DR doesn’t participate.
[NOTE:] No novation if without consent of CR!
❌
d. Validity of new obligation
Subject to suspensive condition.
(e.g.) Obtaining signature and doesn’t materialize
❌
- NO NOVATION.
If contemplated, new obligation is on mere
draft, unsigned - not consented to - NO
NOVATION.
❖ Delegacion - DR offers and CR accepts a third
person to take the place of the original DR.
❖ Subrogating - put in place of another - substitute.
❖ Substantial - considerable importance/worth/ size
- Concerning the essentials of something.
❖ Expromission - type of substitution
- Third person with initiative, takes a role in
the obligation even without
consent/against the will of the original DR
but with the consent of the CR.
1292. Obligation extinguished and substituted by another
must be declared in unequivocal terms (leave no doubt)
that the old and new obligations are incompatible in every
point.
Express/Implied Novation:
● Express - declared in unequivocal terms.
● Implied - complete/substantial incompatibility
How Implied Novation May Be - done by making
substantial changes.
a. Object/subject matter of the contract 9e.g.
Delivery of a car instead of a ring).
b. Cause/consideration of contract (e.g. upward
change in price).
[NOTE:] Reduction in price implies a remission.
c. Principal terms/conditions
(e.g.)
 1. Obligation with condition and removal of
condition.
2. Reducing the period originally stipulated.
3. Without consent of some subscribers, stock
capital is increased - unconsenting subscribers
are released.
[CASES:]
A owed C 500 and 3,000 evidenced by two notes
(promissory). Later a 300 loan was obtained. By express
agreement, the three debts were consolidated into one,
single note of 3,800 (3k + 500 + 300). The last note was to
take the place of the three separate ones. Was there a
✅
novation?
Yes, in view of changes made.
- If with no proof of the last note substituting all - no
inconsistencies with different notes with different
amounts.
- If without novation, ‘all ‘ (3) obligations will
continue to subsist.
Instances when the court held NO Extinctive
Novation: (only modifactory effect - not total)
a. Slight alterations only.
b. New contract merely contains supplementary
agreement
c. Additional interest agreed upon
d. Additional security is given
e. After final judgment, a new contract was entered
to, precisely provide a method of payment other
than that stated in the judgment.
[NOTE:] Object of new contract is to settle judgment:
reducing amount stipulating atty. 's fees (incase of non
payment) and by inserting penalty clause - judgment is
novated. (not the contract). Obligation related is also
novated.
f. Guarantor enters agreement with CR that
guarantor will also become a principal DR (along
with original DR).
g. CR in the meantime refrains suing DR or extends
term/period. (Because period affects performance
- not creating an obligation).
[NOTE:] Unconsenting guarantors to extension of term are
released from their guaranty obligation by express
provision of law.
h. Place of payment is changed/there is a variation.
i. Public instrument is executed to confirm a valid
contract, whether oral/private instrument.
j. Payment of purchase price for certain trucks is
made by the execution of a promissory note for
the said price. Here, no novation of contract of
sale.
[CASES:] In a final judgment, Z was declared as DR to O.
Later, Z and O agreed that the judgment was to be
extinguished by payment in monthly installments with
stipulation. In case Z defaults - O may sue Z.
Later, Z defaults and O obtained execution of the final
judgment to have Z’s properties to be levied. Z now,
instituted for damages on the ground that the execution
was improper. Judgment was extinguished by novation
according to Z.
Held: Contract did not expressly extinguish the obligation
in the judgment. Contract still acknowledges obligation in
the judgment but provides a different method to extinguish
it.
[NOTE:] Expressly state intention to extinguish former
obligation with a new one.
★ Nery needs to sell. If successful, she receives a
commission. Nery did not return both rings/cash
value to Federia, leading Federia to sue Nery
(estafa). Pending the case, Nery executed a
compromise, promising to pay the money in
installments. After making one payment, she did
not fulfill the ones after. Now, Nery contends to be
acquitted due to acceptance of CR of DR’s
payment. Novating original relationship between
parties.
Held: Renunciation of criminal responsibility can only be
done by the State.
● Novation - may apply if CR accepted the payment
before suing for estafa - changing the parties’
relationship into a mere DR - CR one.
● Acceptance of partial satisfaction doesn’t annul
criminal liability that is fully mature while in the
process of judgment.
● Read pp 455-457 for more case samples.
1293. Novation with substituting a DR with a new one can
be made even with a new one can be made even without
knowledge/against the will of the latter but with the
consent of the CR.
- No consent from CR - NOT ALLOWED!
1236 - with consent 1237 - without consent
★ Personal/Subject Novation
1. Change of DR (passive)
2. Change of CR (active)
★ A substitution of DR without consent of CR is not
binding to CR, only to DR and intended substitute.
(a) Substitute of DR
1293 - speaks of passive subject novation (DR
substitute) which may be in the form of
expromission or delegacion.
Expromission - initiative if from the third person.
- It is essential that the original DR is released from
the obligation, otherwise, no expromission and no
novation (agreed upon of release).
(e.g.) D owes C 1,000. F, a friend of D, approaches C and
tells them “I’ll pay you what D owes you. Consider me as
your new DR and not D”. D is excused - do you agree?
✅Yes, if F does not pay C, D is no longer liable.
Requisites for Expromission:
a. Initiative is from a third person.
b. New DR and CR must consent.
c. Old DR must be excused/released from their initial
obligation.
Delegacion - replacement of old DR by a new DR who
(old) DR proposed to CR to which CR and new DR agreed
to.
- Initiative is from the old DR themself.
 - Old DR must be released from the obligation -
otherwise, no delegacion.
[NOTE:] Insolvency of new DR was already existing/public
knowledge/known to old DR - makes old DR liable again
due to obvious BAD FAITH.
Parties to a Delegacion:
a. Delegante - original DR
b. Delegatorio - CR
c. Delegado - new CR
Requisites for Delegacion:
a. Initiative is from old DR.
b. ALL parties must consent/agree.
[NOTE:] Consent of CR
1. Given in any form (express/implied_ from their
acts. BUT NOT from mere acceptance of payment
by a third party (no true transfer of debt).
2. May be before/after new DR’s consent is given.
3. May be conditional (condition must be fulfilled
through for delegacion to take effect).
Rights of New DR:
Refer to 1236 and 1247: beneficial reimbursement if
payment was made without knowledge/against the will of
the old DR. Reimburse and subrogation - if made with old
DR’s consent.
1294. Substitution without knowledge/against the will of
DR, new DR’s insolvency or non fulfillment of obligation
shall not give rise to any liabilities to original DR.
➔ Expromission
Reason: Initiative is of third person and not of the original
DR’s.
1295. Can’t revive action (CR to original DR) in case of
non-fulfillment of DR (new) unless insolvency was already
known by original DR before they were delegated of their
debt - DELEGACION!
- Initiative is by the original DR.
- For insolvency only - exemption applies to.
Requisites to hold original DR liable:
a. Insolvency already existing and of public
knowledge at the time of delegacion.
b. Known by the original DR, new DR’s insolvency at
time of delegacion.
[NOTE:] If insolvency is after of delegacion - original DR is
not liable.
[CASE:] Delegacion but CR finds out of new DR’s
insolvency. Their insolvency was existing but not of public
✅
knowledge and neither was it known to the original DR.
Original DR is still not liable to insolvency of new DR.
❌
★ When Art. 1295 doesn’t apply if:
NO extinctive novation
- Third person (agent, messenger, employee of
original DR).
- Third person (guarantor, surety)
- Third person agreed to be solidarily liable for the
obligation only.
- New DR agreed to be jointly/partially liable of
obligation (delegacion here is only with reference
to joint/proportionate share).
1296. Accessory obligations may only subsist insofar as
they may benefit third persons who didn’t give their
consent.
- (Art. 1296 doesn’t apply to novation by
subrogating CR).
- Applies in particular to modifactory novations. Are
guarantors/sureties released if novation was made
without their consent?
➔ If more onerous, they’re only liable to
original obligation.
➔ If less onerous, they’re still responsible as
is.
★ May it be agreed that accessory obligation would
✅
still remain to new obligation?
Yes, DR of said accessory obligation give their
consent.
★ May it be agreed that accessory obligations would
✅
still remain to the new obligation?
Yes, DR of said accessory obligation give their
consent.
★ Rule of 1296:
- Accessory obligations made in favor of
third persons remain unless third person
consents to novation. (Their rights to the
accessory obligation are distinct and
shouldn’t be prejudiced without their
consent).
1297. If the new obligation is VOID, original obligation will
subsist unless parties intended that the former relation be
extinguished.
- If a new obligation is void - no novation.
- If a new obligation is conditional and doesn’t
materialize - old obligation subsists.
[CASE:] New obligation was intended but new contract
was “never” perfected for lack of consent (necessary), old
obligation continues.
Rule if new obligation is voidable:
a. Old obligation novated. Voidable obligation is valid
until annulled.
b. Once the new obligation is annulled, old obligation
subsists.
★ Void obligation - no novation into the new
obligation.
★ Exemption - if parties intended that the original
obligation be extinguished in any event.
1298. Old obligation was void, effects:
1. Old obligation is void = no novation
2. Old obligation is voidable + already annulled =
No more obligation = no novation (VOID)
★ Exemption: Old obligation was voidable.
1. Only the DR can claim annulment.
(e.g.) A was coerced to sign a note of 1,000 to B. Later,
both (A & B) voluntarily agreed to change the subject
matter into a precious stone.
➔ First obligation is voidable.
✅
➔ Second obligation is valid and okay.
First contract, only DR can claim an annulment.

2. Ratification validates voidable acts.
➔ Ratification - giving of formal consent.
(e.g. An agent without authority from their principal buys
merchandise from a company. Later, the principal learns of
the agent's act and tells the seller to deliver another kind
of merchandise completely different from the first.
1. Total
2. Partial - should have two or more CRs.
1301. Conventional subrogation of third person requires
consent of the original parties and the third person
themself.
★ Legal/conventional subrogation - requires consent

✅
Ratification of the principal cured the defects. of ALL parties.
Second contract is valid = delivery of a different kind of 1. DR - because they’re liable under the new
merchandise. obligation and because the old obligation
ends.
If old obligation was entered by a loss: 2. CR (old) - their credit is affected.
May old obligation extinguished by a loss, be novated? 3. CRR (new) - becomes a party of a new
● Depends: obligation.
a. Loss (purely due to a fortuitous event, without
fault of DR) - no novation because no obligation [NOTE:] DR loses right to set defenses to new DR which
to novate. they could’ve used on old CR.
b. Loss with liability of DR, existing monetary
obligation to compensate may be subject to ● Advantageous: Assignment of credit vs
novation. conventional subrogation
● Less advantageous: Conventional subrogation

✅
May prescribed obligation be subject to novation? ● For cases: read pp n vs. assignment of credit.

❌
Yes
No - Unless defense of prescription is made by DR -
Assignment of credit Conventional subrogation
obligation continues. Failure to address by the CR can
amount to a waiver. Mere transfer of “same” Extinguishes old obligation
credit. and creates a new one.
[NOTE:] Prescribed debt may be cause of consideration of
new obligation to pay thereof. Doesn’t require DR’s Requires the DR’s consent.
consent - notification is
sufficient here. Defect of old obligation may
Effects of a voidable obligation of novation by
be cured if new obligation
expromission: Defect in credit is not becomes entirely VALID.
- DR is released, substitution was not done by their cured - DR can still set (No right to present against
(DR’s) initiative. defense against this. new CR which DR would;be
- If new DR sues old DR for reimbursement, old DR used against old CR).
can set up defenses against the CR.
1302. Presumed legal subrogation when:
1299. If original obligation was subject to a a. CR pays another CR (preferred) even without
suspensive/resolutory condition, condition subsists to new DR’s knowledge.
obligation unless stipulated otherwise. b. Third person, not interested in obligation pays with
express/tacit approval of DR.
Condition must be fulfilled from the original obligation. ● Tacit - understood/implied without being
Otherwise, obligation in case of suspensive condition did stated.
not materialize, it DID NOT GIVE RISE TO THE c. When even without knowledge of DR, a person
ORIGINAL OBLIGATION. In the first place, what is there interested in the fulfillment of the obligation pays
to novate? without prejudice to the effects of confusion to the
latter's share (refer 1210).
★ Novation applies to a valid and effective ➔ For cases, read pp. 473 - 476
obligation.
[CASE SUMMARY:]
[CASE:] A promises B a car if B passes the bar exams. 1. A has 2 CRs: B & C. B for 15k and C for 6k. B,
Later they changed the subject matter into a diamond ring. without A’s knowledge, paid C for 6k. B will be
Nothing was mentioned in the new contract in regards to subrogated with rights of C. They’re now both a

✅
the condition - is the new obligation subject to it?
Yes, unless stipulated otherwise in the new contract.
The delivery will only be due once B passes the exams.
1300. Subrogation of third person in all rights of CR is
either: legal/conventional. Former isn’t presumed - clearly
established (must) to take effect.
Except for cases mentioned in this Code.
Kinds of Subrogation:
1. Conventional/Voluntary
- Requires consent and agreement of
original partners (DRs and CRs).
2. Legal - takes place by operation of law.
To extent of subrogation:
CR for 15k and 6k altogether.
(A assumes C’s CR rights)
2. E owes L 10k with security of a mortgage. B a
classmate of E, without any connection to the
contract, paid L what E owed them (with E’s
✅
consent). Is B subrogated in L’s place?
Yes, automatically - legal subrogation.
3. Example of interested persons:
- Guarantor
- Owner of the mortgaged property as a
security for the DR’s debt.
(e.g.) D owes C 10k with mortgaged security owned by G.
G pays C 10k even without knowledge of D, G is
subrogated in place of C as CR. Guaranty by then is
extinguished.
 ➔ What the law means when there is legal
subrogation without prejudice to effects of
confusions to payor’s (DR) share in obligation.
❌
★ Is solidary DR in the scope of interested persons?
NO, when solidary DR pays for the whole debt,
what remains is the solidary obligation between
the initial DRs.
➔ They don’t step into the shoes of the CR,
in that sense.
➔ In a looser sense - yes but they can’t
collect the whole amount.
1303. Subrogation transfers to a person subrogated the
credit with all rights against the DR and third persons
(guarantors, possessors of mortgages) subject to
stipulations in conventional subrogation.
Credit with rights to it transferred - implies obligation
subsists and not yet extinguished.
(e.g.) D owes C 1k with G as a guarantor. S, a stranger
paid the 1k debt with the consent of D and C. S now is
subrogated in the place of a CR. If D can’t pay 1k back, S
may proceed against G - the guarantor.
In case of suspensive condition - no collection if without
materialization of condition.
1304. CR to whom partial payment is made to may
exercise their right for the remainder and will be preferred
to a person subrogated in their (CR initial/old) place in
virtue of the partial payment.
Partial Subrogation: 2 CRs
1. Old CR - remains as CR to remaining balance.
2. New CR - CR to the extent of what he paid the old
CR.
[CASE:] A owes B 5,000. With consent of both, C pays B
2,500. Now, both B and C are CRs to A of 2,500. If A had
✅
2,500 available, who is preferred?
Old CR - grated by law - the preference.
CONTRACTS
Chapter 1
Life of a Contract:
1. Preparation/Conception/Generation - beginning of
negotiation.
2. Perfection/Birth of the Contract - agreement of the
essentials.
3. Consummation/Death/Termination of the Contract
- Fulfillment of the obligations of the contract.
1305. Contract - meeting of minds. Binding one with
respect to another to give something/render service.
★ Contractus (Latin) - agreement for the purpose of
creating, modifying, extinguishing a judicial
relation between them.
Elements of a Contract:
1. Essential Elements - without them, contracts can’t
exist (e.g. consent, subject matter,
cause/consideration).
2. Natural Elements - found in “certain”” contracts,
presumed to exist unless stipulated otherwise
(e.g. warranty against eviction, hidden defects in
contract of sales).
3. Accidental Elements - are various particular
stipulations that may be agreed upon by
contracting parties.
“Accidental” - may be present/absent depending
on parties' agreement.
● Stipulation to pay credit/inteset,
designation of particular place for
delivery/payment.
Classification of Contracts:
1. Consensual - perfected by mere consent (e.g.
sale).
2. Real - perfected by delivery (e.g. depositum,
pledge, commodatum).
3. Formal - special formalities are solemn. Essential
before the perfection of the contract (e.g. real
property requires a public instrument to be valid).
—--------------------------------------------------------------
4. Onerous - interchange of equivalent valuable
considerations.
5. Gratuitous/Lucrative - FREE, one party receives
NO equivalence (prestation).
6. Remunerative - one prestation is given for a
benefit/service that was “previously” rendered
(utang na loob).
—--------------------------------------------------------------
7. Principal - contract may stand alone (e.g. sale,
lease).
8. Accessory - existence relies on another contract
(principal) (e.g. mortgage of loan).
9. Preparatory - parties consider a preparation which
future transaction contracts may be made. It is not
exactly an end by itself (e.g. agency, partnership).
10. Unilateral - only one party has an obligation (e.g.
commodatum, borrowing of a bike).
● Commodatum - “Gratuitous” loan, to be returned
by borrower.
11. Bilateral/Syntagmatic - reciprocal restations (e.g.
sale).
—--------------------------------------------------------------
12. Nominate - contract is given a particular name
(e.g. commodatum, partnership sale, agency,
deposit).
13. Innominate/Contractus Innominados - without
name.
—--------------------------------------------------------------
14. Commutative - parties contemplate a real
fulfillment (delivery). Equivalent values are given
(e.g. sale, lease).
15. Aleatory - fulfillment relies on chance. Values vary
due to risk/chance (e.g. insurance contract).
—--------------------------------------------------------------
16. Executed - completed (consummated) at time
contract was entered into (e.g. transaction of sale
in a department store - payment and delivery are
simultaneous).
17. Executory - prestations to be compiled in the
future.
● Sale that is perfected, property not yet
delivered and price was not yet given.
There’s only a “chose in action” - a thing
which a person has not the present
enjoyment , but merely a right to to sue to
recover it (if withheld) by commencing an
action, and protected by the law.
—----------------------------------------------------------------
18. Contracts involving things (e.g. sale).
19. Contract rights/credits (provided transmissible)
(e.g. usufruct, assignment of credits).
 20. Contract services (e.g. agency, lease of services,
contract of common carriage).
—----------------------------------------------------------------
21. Ordinary - (e.g. Sale - the law regards it as an
ordinary contract).
22. Institutional - invoidable social institution - law
(e.g. Marriage).
● Invoidable - never to be known.
—----------------------------------------------------------------
Requiring of Evidence:
23. Mere oral/parol evidence - any agreement made
“outside” of contract that is invalid in court unless
fraud, duress (threats, violence, constraints that
force one against their will of better judgment) or a
mutual mistake.
● Oral Contract - binding unless. Form is
essential for validity/enforceability.
● Employee’s offer to pay separation pay is
a PERFECTED CONTRACT.
24. Written proof
—----------------------------------------------------------------
Number of persons entering contracts:
25. Ordinary - 2 parties, represented separately (e.g.
Sale).
26. Auto-contracts - one person represents two
opposite parties, in different capacities.
● Agent representing the principal, sells a
car to himself, a buyer.
● Exemption: Agent is authorized to lend
money from their principal. They can’t
borrow it themself unless
empowered/authorized by their principal.
—----------------------------------------------------------------
Number of persons participating in contract’s
drafting:
27. Ordinary (e.g. Sale).
28. Contract of Adhesion - prepared by real estate.
Buyer will simply sign consent in order to enter the
contract.
● Note: read similar/more samples on pp.
485-489.
● Contract of adhesion must be construed
and interpreted “against” the party who
drafted it.
—----------------------------------------------------------------
Nature of Contract:
29. Personal (e.g. Insurance) - upon death for
insured, contract ends.
30. Impersonal - if at the time of “supposed”
perfection, one of the parties died - NO MEETING
OF THE MINDS = NO CONTRACT!
● Contract effects to contracting parties,
their heirs and assigns except when
rights and obligations arising from the
contract are not transmissible by their
nature, stipulation or provision of law.
● Parity must really show that they have a
real interest, affected thereby in order to
sue/be sued.
★ Plaintiff - legal right.
★ Defendant - legal obligation.
[General Rule:] Every action must be brought in the name
of the infringed.
● Injured person by common carriage. Parents of
the injured aren’t real parties in interest of breach
of contract.
Basic Characteristics/Principles of a Contract:
a. Freedom to stipulate
b. Obligatory force and compliance in good faith
c. Perfection by mere consent (consensuality)
d. Both parties are mutually bound
e. Relativity - binding to parties, their heirs and
assigns (unless stipulated otherwise, provided by
law or due to the nature of the contract).
1306. Contracting parties’ right to establish stipulations
they deem convenient for as long as not contrary to laws,
morals, good customs, public order/policy.
- Stresses the principle of freedom.
● Moral - right and wrong, with human conscience.
● Good customs - Received for a period of time,
practical and social confirmation.
● Public order - deals with public weal and involves
public safety.
❖ Public weal - public good.
- Every contract affecting public interest
contains an “implied reservation of the
police power”.
➔ Power provided may be used at any time
to change the terms/provisions of
contract/revoke it entirely for
promotion/protection of the general
welfare.
● Public policy - public, social and legal interest in
private law.
- A contract is contrary to public policy if it
has a tendency to injure the
public/contravenes established interest of
society. Inconsistent with policies/good
morals/undermines the security of
individual rights.
★ Pari Delicto - the law will not aid either party to an
illegal agreement.
★ Contract entered by a domestic corporation with a
foreign corporation to make and sell the latter’s
products is illegal if the latter is not licensed to do
business in the Philippines. If the domestic
corporation can’t ask the courts to stop the foreign
corporation from terminating the contract.
Negotiating with it and transferring its license to
produce and distribute its products to third
persons.
Samples of Stipulations Declared VALID:
1. Stipulating limit of liability of a guarantor/surety for
only one year or as longer time than the period
fixed for principal DR.
2. Fire insurance policy, when action comes along, it
should be brought at a reasonable time.
3. Interest on loans should be compounded.
4. Employee is to be dismissed at any time when
services are no longer needed/employee leaves
employer without previous notice.
5. Pay a debt incurred during the Japanese
occupation in Philippine currency.
6. In contract of lease - tenant may retain rents of
house for repairs and taxes.
Designation of the Name of a Contract:
a. May agree on any contract - the name they give
shouldn’t be controlling. Contract is what parties
intend it to be (not what they call it).
b. Contract must be judged by its character, nature
and legal qualifications. Court will base more in its
substance and not the transaction.
1307. Unclassified (innominate) contracts will be regulated
by stipulations of parties and provisions of Titles 1 and 2 of
the Civil Code, by rules of the most analogous nominate
contracts and costumes of the place.
1308. Contract must bind both contracting parties. Its
validity and compliance can’t be left to the will of one of
them.
● Mutual binding of both parties emphasizes the
principle of equality.
Consequences of Mutuality:
- Party can’t revoke a contract without the consent
of the other. Nor can it be set on the ground that
they made a bad bargain.
- When fulfillment of the condition depends on the
sole will of the DR, conditional obligation is VOID -
✅
if suspensive.
Resolutory is valid though, will of DR.
➔ It’s valid to expressly give one party to
cancel the same. It truly follows and fulfills
the stipulations of the contract.
- When cancelled, both parties are released.
- Rule that obligation of contracts should not be
impaired, is not absolute.
1309. Determination of the performance may be left to a
third person whose decision will not be binding until it has
been made KNOWN to both contracting parties.
1310. Determination is not obligatory if it's evidently
inequitable. Courts will decide what’s equitable under the
circumstances.
1311. Relativity of contracts (heir, assigns - unless
contract isn’t transmissible by law/nature of the contract).
Heir/s is/are liable only up to the value of the property
received from their ancestors.
If a contract has stipulations in favor of a third person, they
may demand its fulfillment provided they communicated
their acceptance to DR before revocation.
Incidental benefit/interest of a person is insufficient.
Contracting parties must clearly and deliberately confer a
favor on a third person.
★ Relativity - contracts are generally:
1. Effective to parties, their heirs and assigns.
Exemptions of Relativity:
a. Not transmissible - form/nature of contract, law or
stipulations.
b. There’s the stipulation of Pour Autrui - in favor of
a third person.
c. Third person induces another to violate their
contract.
d. Third persons may be adversely affected by a
contract they didn’t participate in.
● Adversely - in a way that prevents
success/development;
harmful/unfavorable.
e. Law authorizes CR to sue contracts entered into
by their DR.
(e.g.)
1. Revocation of deed of sale is not conclusive on
individuals who aren’t parties.
● If I promised Mr. B’s land and they in
return, promised to sell me the same, my
friend J can’t insist that the contract be
performed.
★ Strangers to contracts shouldn’t have favor.
★ Read p. 509
★ Interest of one in a contract, determines the right
of a party obligated principally/subsidiarily to
enable them to enforce action/nullify.
(e.g.)
1. Contract of partnership/agency. Death of partner,
principal or of agents ENDS the contract and heir
do not step into shoes of the deceased.
★ Money debts are not chargeable to heirs.
It should be claimed at the estate/intestate
proceedings.
Requisites:
1. Stipulation in favor of a third person.
2. Contracting parties must clearly and deliberately
confer a favor to a third person.
3. Incidental benefit/interest is insufficient.
4. Stipulation must be part of the contract.
5. Third person accepts and lets DR know before its
revocation - of contract/stipulation by original
partners.
★ Acceptance - may be in the form of a
demand.
6. No relation of agency between either parties and
third person.
★ Pour Autrui - stipulation is in favor of a
third person conferring a clear and
deliberate favor upon him and upon him
and which stipulation is merely part of a
contract entered into by the parties,
neither of whom acted as agent to third.
★ Requisites of Pour Autrui:
a. Stipulation is in favor of third person/party.
b. Stipulation must be part of a contract (not whole).
c. Contracting parties must clearly and deliberately
confer favor and not a mere incidental
benefit/interest.
d. Third accepts and communicates their acceptance
to DR before its revocation by both parties.
e. Neither party bears the legal
representation/authorization of a third
person/party.
(e.g.) D buys C land for 10,000. It was agreed that
8,000 would be given to C and 2,000 would be
paid to X - a CR of C. If X accepts and
communicates it to D, X can demand its
fulfillment.
★ Read pp. 517-521
f. Third persons are adversely affected by a contract
they did not participate in.
- Evident in collective contracts.
= Majority > Minority
● (e.g.) Bargaining collective contracts by labor
organizations.
● Negotiorum Gestio
● Read p. 521-522 for more samples.
g. Law authorizes CR to sue a contract entered by
their DR.
● Lessor (CR) doesn’t have to respect a sub-lease.
Sublessee (DR’s DR) is subsidiarily liable to
lessor for any rent due from lessee (DR). Without
prejudice to their obligation to sub-lessor (original
DR), sublessee is bound to lessor (original CR) for
all acts that refer to the use and preservation of
the thing leased in the manner stipulated between
the lessor (CR) and lessee (original DR).

1312. An exemption to the general rule contract binds only
the parties. Contracts with real rights also bind third
persons who acquire the object of the contract. Subject to
the provisions of the Mortgage Law and Land Registration
Laws.
★ Reason: A real right binds property over which it is
exercised.
- B purchased an apartment house from the owner
but there’s a lease on it. B should respect the
lease if the same is registered in the Registry of
Property. If B has actual knowledge of the
existence/duration of the lease. Similarly, a
purchaser of land must respect a mortgage on it.
1313. CR are protected in cases of contracts that intend
to defraud them.
● A gratuitously gives B land. A has no
property/cash left to satisfy his CR. A may ask to
rescind the contract to the extent they’re
prejudiced.
1314. Any third person who induces another to violate
their contract shall be liable for damages to the other
contracting party.
- Whoever is injured may sue for damages.
● S, is a movie actress and has a one year contract
with XYZ studios. F, a friend of S, without
✅
justifiable cause, induced S to break the contract.
XYZ can sue F. S will still have higher damages
than F still though. F’s liability at most would be
solidary with that of S’.
1315. Contracts are perfected by mere consent. From that
point, parties are bound to fulfill what’s expressly
stipulated and to the consequences which according to
their nature may be in keeping with good faith, usage and
law.
- Article, stresses “consensuality” of contracts.
● Deposit
● Pledge - security for the fulfillment of a
contract/payment of a debt and is liable to the
forfeiture in event of failure.
● Commodatum - gratuitous loan of movable
property to be used and returned by the borrower.
How Contracts are Perfected:
1. Consensual Contracts - mere consent
➔ General Rule (e.g. Sale)
2. Real Contracts 0 by delivery (e.g. Deposit and
Pledge).
3. Formal/Solemn Contracts - Special form is
required for perfection.
● Donation - needs a public instrument to
be valid and perfected.
★ To be a written contract - all its terms must be in
writing in order for a contract that’s partly in
writing/oral to have legal effect (an oral contract).
★ Perfection by consent - agreed on subject matter
and cause of consideration.
1316. Real contracts: deposit, pledge and commodatum
are perfected by delivery of the object of the obligation.
★ Real Contracts Require:
a. Consent
b. Subject Matter
c. Cause of Consideration
d. Delivery
★ Future Real Contracts as Consensual Contracts:
To make a deposit/pledge/commodatum - is a consensual
contract.
After delivery, it becomes a real contract.
1317. No one may contract in the name of another unless
authorized by the latter/by law - has the right to represent
them. A contract entered into without authority/legal
✅
representation/acted beyond their powers.
Is unforceable unless ratified expressly or implied by
person on behalf its executed before revoked by other
party.
★ Death of principal doesn’t render an act of agent
unenforceable if the latter had no knowledge of
such extinguishment (death) of the agency.
Effect of the Ratification: has a retroactive effect,
cleanses defects.
★ There can be no ratification if already revoked by
the other party.
★ When an unauthorized person doesn’t really need
authorization.
- Lawyer without authority of a client, signs a
“compromise” contract due to legal provisions
involved.
Chapter 2: Requisites of Contracts
1318. No contract unless following requisites concur:
(1) Consent of contracting parties
(2) Object certain (subject matter of contract).
(3) Cause of obligation (cause of consideration)
Real Contracts: a last requisite
(4) Delivery
Solemn/Formal Contracts: a last requisite
(4) Compliance with formalities required by law.
★ Consent presupposes legal capacity and
fulfillment of conditions (if there are any).
❌
★ Effect of No-Consent
⭕
No Contract/Voidable (e.g. fraud)
VOID (i.e. fraud, vitiated consent)
Section 1: Consent
1319. Consent is manifested by meeting of offer and
acceptance over the object of contract.
● Offer - must be certain.
● Acceptance - must be absolute
➔ By letter/telegram - will bind the offerer
from the time it came to their knowledge.
➔ Presumed to have entered into the place,
an offer was made.
★ Consent - meeting of minds on subject matter and
cause of consideration when neither has been
delivered yet.
- Meeting of offer and acceptance.
A offered to sell B a particular car for 7,000. By B could
consent, A withdraws the offer - was A allowed to do so?
✅Yes, no meeting of the minds yet. No perfection, no
contract.
Requisites of Consent:
a) 2+ parties - one person may represent.
2/+ parties unless contradictory to prejudicial
interest.
b) Parties must be capacitated and capable (i.e. one
party’s insane - voidable contract)
c) No vitiation of consent (i.e. fraud, intimidation –
voidable contract)
d) No conflict on what’s expressly declared and
what’s intended. Otherwise, it needs
“reformation” or else VOID contract.
➔ Considered as fictitious, absolutely
simulated.
e) Intent be declared properly (if legal formalities are
required - they must be met).
★ Conformity to an original contract generally
presupposes conformity to subsequent contract
executed to cure defects in the original contract
(e.g. failure to state cause of consideration).
Requisites for Meeting of the Minds:
a) Offer must be certain - not vague/misleading.
b) Acceptance must be unqualified and absolute.
- If acceptance is qualified by a condition
(e.g. merely a counter-offer).
1. Certain - Not vague, misleading nor made as a
joke.
❌ ✅
- “Their intention to enter a contract.”
Offer Certain
● If the offer is withdrawn before accepted, no
meeting of the minds, no contract.
● Two contracts are offered (separate contracts) –
acceptance of one doesn’t imply acceptance of
the other.
● Two contracts that depend on one another (e.g.
loan, security of a mortgage).
- Needs the acceptance of BOTH
transactions otherwise no meeting of
minds.
❌ ❌
2. Acceptance that’s unqualified and absolute
No acceptance Rejected expressly
● If one acts (surety/agent) for another’s
obligation, they don’t answer for the
latter’s obligation.
● A counter-offer extinguishes the offer.
● Read pp. 538-542 for more samples.
★ Unqualified Acceptance - complete acceptance of
an offer with terms made by offerer.
★ Qualified Acceptance - subject to condition,
counter-offer.
[NOTE:]
Wherein a party accepts payment in a contract of sale,
said party who accepts and has given their consent to the
contract.
Contract in the case above is VALID even if one of the
parties states that they entered into it against their better
judgment.
● Acceptance by Correspondence
- “By letter or telegram doesn’t bind offerer
from the time it came to their knowledge.”
- Contract is presumed to be entered where
the offer is made.
- Knowledge may be actual/constructive (as
when the letter of acceptance has been
received in the home of offerer by person
with reasonable discernment).
★ Actual Knowledge – requires proof (almost
impossible). Even with letter of answer was
opened and read. Offerer can claim their mind
wandered and didn’t know the contents of the
answer.
[CASE:]
2/5/1919, A wrote an offer to L. On 4/6/1919. L wrote a
complete acceptance that A received the same noon. The
morning of that same day, though. A withdrew his offer.
✅
Was there a contract?
No. Prior to receipt of the letter of acceptance, the offer
was already withdrawn. Doesn’t matter if the withdrawn
letter was accepted at a later time than the receipt of
✅
acceptance letter of offerer.
Important: Withdrawal made prior knowledge of
acceptance.
● S is indebted to government with 184,000 tax
liabilities. Unable to pay, offered a compromise
payment of 70,000 in cash, 10,000 payable in 30
days. Secretary approved and informed S’
attorney on September 9. Apparently, unaware of
the acceptance, the attorney withdrew the offer on
September 24. The secretary, in turn, made use of
an acceleration clause. Was there a meeting of
the minds?
➔ In compromise (contract as considered by
the Code, an acceleration clause is part of
✅
it).
No, contract was not perfected and therefore,
unbinding. The attorney revoked the offer before
knowledge of the acceptance.
★ Letter of Acceptance may be Withdrawn:
- May be withdrawn.
- Depends: Manresa - as long as there’s a
revocation before acceptance is received.
1320. Acceptance may be expressed/implied:
a. Express
b. Implied (e.g. conduct)
c. Presumed (law)
● Implied Rejection - e.g. failure to act on offer of
compromise before the final judgment.
1321. Person making offer may fix the time, place, and
manner of acceptance must be complied with.
- Any act contrary to the term constitute a
counter-offer.
1322. Offer made through an agent is accepted from the
time acceptance is communicated to him.
- Article applies to both offer/acceptance made
through an agent.
1323. Offer is ineffective upon death, civil interdiction,
insanity, insolvency of either parties before acceptance is
conveyed.
● Read p. 548.
● Other Instance Wherein Offer is Ineffective:
a. Express/Implied rejection
b. Counter-offer
c. Before acceptance is communicated,
subject matter becomes illegal/impossible.
 d. The period of time for offeree to signify
acceptance has lapsed.
e. Offer revoked in due time (before
acceptance).
1324. May prescribe period of time to signify acceptance -
may be withdrawn by communicating intention to withdraw
before acceptance. Except when option is founded on a
consideration as something paid/promised.
[CASE:] A offered to sell a lot for 10K to B, who’s
interested in buying the same. A gave B one month to
decide. One week before the due of period to decide, A
told B that they’re no longer willing to sell unless the price
✅
is increased to 15K. May B compel A to accept the 10K?
No, cause/consideration is distinct from the selling
price.
● Unilateral Promise - to be binding, it must be
supported by cause/consideration distinct from
price.
● Option - a distinct, separate contract. Must have
its own cause/consideration! May be an option to
✅
be bought or not.
✅
Within a period set and at an agreed price.
May also be of pure liberality – donation with
no strings attached completely.
★ Perfection of an Option - meeting of minds on
option because it’s a contract that’s distinct.
(Refer to previous case:)
If S offered B a week’s time and if B gave P20, may S still
✅
withdraw before B accepts?
Yes, option of giving P20 doesn’t exist yet.
➔ No meeting of the minds here, yet.
● Acceptance of offer of option = contract of option.
● Acceptance of lot (object to be sold).
➔ Are separate kinds of acceptance.
★ Option without cause - offer of sale only.
1325. Unless appearing otherwise, ads of things for sale
aren’t definite offers. These are only invitations to make an
offer.
★ Definite offer in ads - contains specific details.
★ Indefinite offers - important details are left out
(mere invite to make an offer).
1326. Ads for bidders are invites for proposals. Advertisers
are not bound to accept highest/lowest bidder unless it
appears contrary.
★ Acceptance of Bid - determination of which bid to
be accepted must be communicated to the bidder.
❌ Bidder submits conditions - anyone participating in a
public auction is understood to have submitted themselves
to all conditions set at such sale.
1327. The following can’t give consent to contract.
Unemancipated minors and insane/demented persons
and deaf-mutes who don’t know how to write.
➔ Voidable if so. These contracts with them are valid
contracts until annulled and when annulment is
ratified.
★ Incapacitated Persons to Consent:
1. Unemancipated minors - generally, contracts they
enter are voidable unless:
- They ratify consent when they reach of
age.
- Enter to contract is approved by their
guardian (guardian should be approved
by the court too).
- Involves insurance in favor of parents,
siblings and/or spouse.
[Note:] Both parties are minors, contract is
unenforceable.
2. Insane/Demented Persons
● Reason: People must know what they’re entering
into.
No proper declaration of insanity is required. As long as, at
the time of the contract, the person was truly insane.
➔ Applies even with proper declaration of insanity, it
doesn’t mean they were at the time of contracting.
★ Unless at a lucid interval.
● Presumption – contract was made before
declaration of insanity, they were still sane at that
time.
- Who alleges insanity of another at time of
contract is burdened to prove it,
otherwise, presumption applies.
✅
3. Deaf-mutes who don’t know how to read
Are capacitated for as long as they are able to read.
Even when they can’t write.
4. Married women on conjugal partnership without
husband’s consent.
5. People specifically disqualified - are void transactions
because the right itself is restricted.
- Spouses can’t sell to each other nor donate.
- Insolvents before discharged.
- Fiduciary relations (e.g., guardians aren’t allowed
to buy property of ward).
1328. Contracts entered during lucid interval are valid.
Contracts entered in a state of drunkenness/hypnotic
spells are voidable.
★ Lucid Interval - when insanity was already declare
before, lucid interval must be proved.
★ Insanity on some things, sanity in others may still
apply for validity/voidability.
1329. Art. 1327 is subject to modifications according to
law. Understood to be without bias o special
disqualification established in the laws (not the important
fr).
● Incompetents by law:
- Those under civil interdiction.
- Lepers (hospitalized)
- Prodigal (spendthrifts)
- Illiterate (Unable to read & write)
- Unsound mind/health – truly unable to
manage property.
1330. Contract wherein consent is given by mistake,
violence, intimidation, undue influence/fraud is voidable.
★ Voidable Contract – binding and valid unless
annulled by action in court. May be ratified before
annulment.
★ Proof for vitiated consent must be “clear and
convincing”.
1331. Mistake (kinds) that vitiates:
Consent: error must be substantial regarding to:
1. Object of the contract
 2. Conditions - principally caused parties to contract Reformation:
3. Identity/Qualifications – principal cause A & B agreed on a sale but the document shows a

✅
supposedly. mortgage.
● Error must be excusable (not by culpa). Meeting of minds.
● Error must be a mistake of fact, not law. ● Instrument doesn’t show intention
➔ Reformation
[Examples:]
Error in Object - person signs contract of sale, thinking it Application of 1334: (Refers to its legal effect)
was only a contract of loan. Both A & B agreed to the sale, document shows the same.
Parties erroneously thought it had the same effect as a

❌
Conditions (Principally induced contraction) - Mistake in mortgage.
knowledge about true boundaries of land offered for sale. No meeting of the minds.
➔ Annuls because it vitiates consent.
Error to personal motive, doesn’t vitiate consent - man
buys a ring in false belief that his partner loves him. 1335. Violence = physical coercion.
—-------------------------------------------------------------------------- Intimidation = moral coercion.
2. Conditions - principal cause, its 2 kinds:
a. Quality 1. Requisites, Violence Vitiates Consent
b. Quantity a. Employment of serious/irresistible force.
b. Must be the reason of entering the contract.
Error in Quality - Person buys a fountain pen, thinking it
was completely made out of solid gold but was only gold 2. Requisites, Intimidation Vitiates Consent
plated. a. Reasonable, well-grounded fear.
b. Imminent/grave evil.
Error in Quantity - Person wants to buy land without 100 c. Threatening of a person coerced, property,
hectares when it actually has only 60. network of people.
- Mistake in computation may be corrected easily. d. Must be of an unjust act. Which is why,
★ A bought 10 books for P5.20 each. The contract intimidation through competent authority will not
was mistakenly presented P5.50 instead of P5.20. vitiate consent.
➔ Mere error in computation (corrected). e. Must be the reason of entering the contract.
➔ If seller sold them for P5.5 and thought he
would receive it – a true substantial error 1336. Violence/intimidation annuls obligation, even when
in quantity. delivered by a third person.

Error in Account Error in Quantity
1332. If one of the parties can’t read or if the contract is in
a language not understood by him and mistake/fraud is
alleged – the person enforcing the contract must show the
terms thereof to have been fully explained to the former.
1337. When Undue Influences Vitiates Consent:
a. Improper advantage (e.g., roles)
b. Power offer will of another (e.g., a superior
bargaining power).
c. Deprivation of latter’s will (reasonable freedom of
choice).

★ General Presumption: One always acts with due Circumstances considered:

diligence and signs with full knowledge of all - Confidential, familial, spiritual /other relations
continents of a document. For as long as he knew between parties.
what they were doing. - Mental weaknesses
➔ Article 1332 states what breaks the - Ignorance
general presumption. - Financial distress

● Illiterate - includes the blind. ★ Influence must be UNDUE.

★ Contracts of adhesion must be interpreted against
1333. If the party alleging the contract knew and was the company. Signor is usually helpless to bargain
aware of doubt, contingency, or risk affecting the object – for better terms. (i.e., insurance companies,
THERE’S NO MISTAKE! ready-made contracts are adhesion contracts).

- A bought a pen that was advertised to be capable
of writing even underwater. A knew it was
questionable but pushed with purchasing it.
● Inexcusable Negligence - doesn’t annul
the contract.
1334. Mutual error to legal effect of an agreement,
different from the real purpose of the parties – MAY
VITIATE CONSENT.
- Mistake of parties in understanding the effect of
the law (is a mistake of fact on basis of their
doubt/misunderstanding. The law itself is not
wrong, but rather the understanding to it is
erroneous).
1338. Fraud – insidious words/schemes of one of the
contracting parties leads to the inducement of the other to
contract. Without prior, they would have never otherwise
entered into.
Kinds of fraud:
1. Casual - Voidable
Incidental - Valid, fraud was at the end, different terms
would have been agreed upon if without fraud.
/_________ Fraud in celebration of contract __________/
2. Fraud in Performance
Vinegar was ordered, diluted vinegar was delivered.
● Injured Party Contributed to Fault
➔ Filed action won’t prosper.
 ➔ Entry to ridiculous contracts

Man has well mental faculties but had wrong judgement.

❌
Will the court grant annulment?
No, man’s fault.

1339. Fraud - failure to disclose fact when there’s a duty to

reveal them and when parties are bound by confidential
relations (constitutes fraud).
● Concealment – No disclosure.
● There’s a duty to reveal facts if parties are bound
by confidential relations.

1340. Usual exaggerations in trade, when other party had

the opportunity to know the facts – aren’t fraudulent in
themselves.

1341. Mere expression of opinion ➡️

NOT a fraud. Unless

➡️
made by an expert and other party relied on the former’s
specialized knowledge FRAUDULENT and therefore is
VOIDABLE on the ground of fraud.

1342. Misinterpretation by a third person, doesn’t vitiate

consent. Unless:
➔ If made a substantial mistake.
➔ Mutual mistake

➡️ On the ground of mistake, not principally on the ground

of fraud.

❌
1343. Misinterpretation in good faith.

✅
Fraudulent
May constitute error

1334. For fraud to make a contract voidable, it should be:

● Serious
● Not employed by both contracting parties.

Incidental fraud only obliges the person who employed it

to pay damages.

1345. Simulation of contract

● Simulation - intentionally deceiving others by
producing the appearance of a contract that really
doesn't exist.

Requisites of a Simulation:
- Outward declaration, different from the intention of
the parties.
- False appearance intended by mutual agreement.
- Its purpose is to deceive third persons.

Absolute Simulation Relative Simulation

No intention to be bound Parties conceal their true

at all. agreement.

1346. Absolute simulation of a contract is VOID.

Relative simulation of a contract, without prejudice to third
persons and not against the law, binds the parties to
their real agreement.