THE LAW ON OBLIGATIONS AND CONTRACTS

Module Title: Different Kinds of Obligations

Course Title: Law on Obligations and Contracts
Course Number: BUS LAW 321/BA 222
Course discerption: This course covers the legal concepts and rules governing
the law of obligations and contracts and application of these
concepts to practical problems. It involves a discussion of
the nature, sources, kinds, and extinguishments of contracts
including defective contracts and other miscellaneous
topics relevant to the course.
Total Learning Time: 3 hours per week

Overview:
This module enumerates the different classifications of obligations. It includes
provisions of law pertaining to the kind of obligation. It also shows practical
applications of the different legal provisions for obligations and contracts. Examples are
provided for illustration.

Learning Outcomes
At the end of the module, the students must have:
1. list and compare the different kinds of obligations; and,
2. explain the distinctive feature of each kind of obligation.

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DIFFERENT KINDS OF OBLIGATIONS

CLASSIFICATIONS OF OBLIGATIONS
I. Primary Classification of obligations under the Civil Code:

a. Pure or Conditional (Arts. 1179- 1192);

b. With a Period (Arts. 1193-1198);
c. Facultative or Alternative (Arts. 1199-1206);
d. Joint or Solidary (Arts. 1207-1222);
e. Divisible and Indivisible (Arts. 1223-1225); and,
f. With a Penal Clause. (Arts. 1226-1230)
II. Secondary classification of obligations under the Civil Code:

a. Unilateral and bilateral obligations (Arts. 1169-1191);

b. Real and personal obligations (Arts. 1163-1168);
c. Determinate and generic obligations (Art. 1165);
d. Civil and natural obligations (Art. 1423); and,

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 e. Legal, conventional and penal obligations. (Arts. 1157, 1159,
1161.)
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SECTION 1. - Pure and Conditional Obligations

Art. 1179. Every obligation whose performance does not depend upon a future or
uncertain event, or upon a past event unknown to the parties, is demandable at
once.

Every obligation which contains a resolutory condition shall also be demandable,

without prejudice to the effects of the happening of the event. (1113)

PURE OBLIGATION

The first paragraph of Article 1179 of the Civil Code discusses the concept of
pure obligation by defining what it is not and by stating its essential feature. Simply, a
pure obligation is one which is not subject to any condition and no specific date is
mentioned for its fulfilment and is, therefore, immediately demandable.

Illustration:

A promises to pay D P12,000 upon receipt by A of his share from the estate of C
or “upon demand of D”. The obligation of A is immediately due and demandable, for D
may rely on the wording “upon demand.”

CONDITIONAL OBLIGATION

A conditional obligation is one who consequences are subject in one way or another
to the fulfillment of a condition. Its essence is uncertainty. However, a condition must
not be impossible. The following are the characteristics of a condition:

1. future and uncertain—it must be both in the future and uncertain;

2. past but unknown—this may indicate to a past event unknown to the parties.
Its occurrence must be uncertain for it to constitute as a condition.

TWO PRINCIPAL KINDS OF CONDITION

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 1. Suspensive condition (condition precedent or condition antecedent) refers
to the happening or fulfillment of which will give rise to an obligation or
right.

Illustration: J promises to give N a car if he pass the bar the exam.

The obligation cannot be demanded at once but becomes demandable only
upon N passing the Bar.

2. Resolutory condition (condition subsequent) where the happening or

fulfillment of which will extinguish an obligation or right already existing.

Illustration: X promises to pension Y in the amount ofP8, 000 per month until
such time that she gets married.
The obligation to give monthly pension starts immediately. But the moment Y
is married the obligation stops. Marriage is the resolutory condition as it
extinguishes the obligation.

DISTINCTIONS BETWEEN SUSPENSIVE AND RESOLUTORY CONDITIONS

Suspensive Condition Resolutory Condition

If fulfilled, the obligation arises the obligation is extinguished
If it does the legal tie does not make its rie of law is consolidated
not come appearance
about,
Until the existence of the obligation is a its effects flow, but over it, hovers
first takes mere hope possibility of termination
place
(fulfillment)

WHEN OBLIGATION DEMANDABLE AT ONCE.

An obligation is demandable at once—
1. when it is pure;
2. when it is subject to resolutory condition; and,
3. when it is subject to a resolutory period.

Art. 1180. When the debtor binds himself to pay when his means permit him to do
so, the obligation shall be deemed to be one with a period, subject to the
provisions of Article 1197. (n)

A period is a future and certain event upon the arrival of which the obligation subject to
it either arises or is extinguished.

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The following are instances where the duration of period depends upon the will of the
debtor:

1. when the debtor promises to pay when his means permit him to do so; and,
2. in other cases:
a. Little by little
b. From time to time
c. In partial payments
d. As soon as possible
e. As soon as I have the money
f. At any time I have the money
g. In partial payments
h. When I am in a position to pay.

Illustration: A promises to pay B from time to time that he receive his monthly salary.

Such however, should be understood to be one with a period. In case the parties cannot
agree as to the specific time of payment, the court shall fix the same on the application
of either party.

Art. 1181. In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition. (1114)

EFFECT OF HAPPENING OF CONDITION:

1. There is Acquisition of rights in obligations subject to a suspensive condition.

Such acquisition depends on the happening of a future and uncertain event;
however, if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.

Illustration: Where the loans of A from B supposed to become due only at the
time B receives his monthly allotment from D, and D refused to give, the
condition for the loan did not happen and A is not, therefore liable to B.

2. There is loss of rights already acquired in obligations subject to a resolutory

condition. The happening of the event or fulfillment the condition thereof
produces the extinguishment or loss of rights already acquired.
Illustration: A promise to support M P10, 000 per month until such time that
M marry. Hence, M can enjoy the monthly support but the moment M
marries, such obligation stops.

Art. 1182. When the fulfillment of the condition depends upon the sole will of the
debtor, the conditional obligation shall be void. If it depends upon chance or upon

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the will of a third person, the obligation shall take effect in conformity with the
provisions of this Code. (1115)

CLASSIFICATIONS OF CONDITIONS

1. As to effect
a. Suspensive—happening of which gives rise to the obligation
b. Resolutory—happening of which extinguished the obligation
2. As to form
a. Express—clearly stated
b. Implied—merely inferred
3. As to possibility
a. Possible—capable of fulfillment
b. Impossible—not capable of fulfillment
4. As to cause or origin
a. Potestative—depends upon the will of one of the contracting parties
b. Casual—depends upon chance or upon a will of a third person
c. Mixed—depends partly upon chance and partly upon the will of a
third person
5. As to mode
a. Positive—performance of an act
b. Negative—omission of an act
6. As to number
a. Conjunctive—several conditions and all must be fulfilled
b. Disjunctive—several conditions and only one or some of them must be
fulfilled
7. As to divisibility
a. Divisible—susceptible of partial performance
b. Indivisible—not susceptible of partial performance

POTESTATIVE CONDITION

A potestative condition is a condition suspensive in nature and which depends upon the
sole will of one of the contracting parties. Where the potestative condition is imposed
not on the birth of the obligation but on its fulfillment, only the condition is avoided,
leaving unaffected the obligation itself.

If the suspensive condition depends upon the will of the debtor, the obligation is void.
For the reason that the validity and compliance is left to the will of the debtor and it
cannot, therefore, be legally demanded. An example of such is when the debtor
promises to pay the creditor if he receives a loan from a bank. On the other hand, only
the condition is void when the obligations is pre-existing and therefore, does not
depend for its existence upon the fulfillment by the debtor of the potestative condition.

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For example, A borrowed 1,000,000 from B payable within 10 months. Subsequently, A
promised to pay B “after C sells his house” to which B agreed. In this case, only the
condition is void but not the pre-existing obligation of A to pay B. However, where the
suspensive condition depends partly upon the will of debtor and partly upon the will of
a third person or upon chance is a valid obligation.

If the condition depends upon the will of the creditor, the obligation is valid. For
example, A will pay B of his debt upon B’s demand.

CASUAL CONDITION

If the suspensive condition depends upon chance or upon the will of a third person, the
obligation is valid.

Illustration: Where A binds himself to sell his land to B if he wins the lotto for the month
of September, 2020.

MIXED CONDITION

The obligation is valid if the suspensive condition depends partly upon chance and
partly upon the will of third person.

Art. 1183. Impossible conditions, those contrary to good customs or public policy
and those prohibited by law shall annul the obligation which depends upon them.
If the obligation is divisible, that part thereof which is not affected by the
impossible or unlawful condition shall be valid.

The condition not to do an impossible thing shall be considered as not having

been agreed upon. (1116a)

Impossible Conditions contemplates both physical and juridical impossibility of

conditions.

TWO KINDS OF IMPOSSIBLE CONDITIONS:

1. Physically impossible conditions—it cannot exist by its nature; and,

2. Legally impossible conditions – contrary to law, morals, good customs, public
order

EFFECT OF IMPOSSIBLE CONDITIONS:

1. Conditional obligation void—when both the condition and obligation is

impossible.
2. Conditional obligation valid—if the condition is negative, that is not to do an
impossible thing, it is disregarded and the obligation is rendered pure and
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 valid. Such condition is always fulfilled when it is not to do an impossible
thing so that it is the same as if there were no condition.
3. Only the affected obligation void—if the obligation is divisible, the par thereof
not affected by the impossible condition shall be valid.

Illustration: I will give you a car if you sell my land, and a P2,000,000 , if you
can kill X.
The obligation to give a car is valid but the obligation to give P2,000,000 is
void because it is dependent upon an impossible condition.

4. Only the condition void—if the obligation is a pre-existing obligation and,

therefore does not depend upon the fulfillment of the condition which is
impossible, for its existence, only the condition is void.

Illustration: A had an obligation in the amount of P5, 000 in favor of B. If B

later agreed to kill X before A pays him, the condition to kill X is void but not
the pre-existing obligation of A to pay B.

Art. 1184. The condition that some event happen at a determinate time shall
extinguish the obligation as soon as the time expires or if it has become
indubitable that the event will not take place. (1117)

Article 1184 refers to positive (suspensive) condition—the happening of an event at a

determinate time. The obligation is extinguished:

a. as soon as the time expires without the event taking place; or.
b. as soon as it has become indubitable that the event will not take place although
the time specified has not expired.

Illustration: A obliges himself to give B P100, 000 if B will be a teacher before B

reaches the age of 25.

a. A is liable if B becomes a teacher before he reaches the age of 25.

b. A is not liable if B becomes a teacher at the age of 25 or after he reaches the
age of 25. In this case, the time specified, before reaching the age of 25, has
expired without the condition (becoming a teacher) being fulfilled. The
obligation is extinguished as soon as B becomes 25 years old.
c. If B dies at the age of 24 without having been a teacher, the obligation is
extinguished because it has become indubitable that the condition will not
take place. In this case, the obligation of A is deemed extinguished from the
death of B, although the time specified (before reaching the age of 25) has not
yet expired.

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If the condition is both positive and suspensive, the non-happening of the event which
constitutes as the condition shall prevent the obligation coming into existence.

If the condition is both positive and resolutory, the non-happening of the event which
constitutes as the condition shall result in the consolidation of rights that have already
been acquired by the creditor.

Art. 1185. The condition that some event will not happen at a determinate time
shall render the obligation effective from the moment the time indicated has
elapsed, or if it has become evident that the event cannot occur.

If no time has been fixed, the condition shall be deemed fulfilled at such time as
may have probably been contemplated, bearing in mind the nature of the
obligation. (1118)

NEGATIVE CONDITIONS.

Article 1185 of the New Civil Code speaks of a negative condition that an event will not
happen at a determinate time. The obligation shall become effective and binding:

1. from the moment the time indicated has elapsed without the event taking
place; or,
2. from the moment it has become evident that the event cannot occur, although
the time indicated has not yet elapsed.

Illustration:

Y binds himself to give X 1,000,000 if X is not married to B on January 1, 2022.

a. Y is not liable to X if X marries B on or prior to January 1, 2022.

b. Y is liable to X is on January 1, 2022 X is not married to B or if X married B after
January 1, 2022.
c. Suppose B dies on December 25, 2022 without having been married to X. The
obligation is rendered effective because it is certain that the condition not to
marry B will be fulfilled.

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment. (1119)

Doctrine of constructive fulfillment of suspensive condition—the debtor himself

intentionally prevents the fulfillment of the condition. The obligor should not be allowed
to profit from his own fault or bad faith to the prejudice of the obligee.

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Illustration: A agreed to paint the house of B for P20, 000 after completion. Before A
could complete the job, B hired C, another contractor, who finished the painting. The
condition of painting the house is deemed fulfilled under Article 1186 and B’s obligation
to pay A P20, 000 is converted to a pure obligation. Hence, the 20,000 is immediately
demandable.

There are 3 requisites for the application of Article 1186:

1. the condition is suspensive;

2. the obligor actually prevents the fulfillment of the condition; and,
3. he acts voluntarily.

Illustration:

A agreed to give B a 20% commission if B could sell X’s car at a certain price. B
found a buyer who definitely decided to buy the car upon the terms prescribed
by A. To evade the payment of the commission agreed upon, A himself sold to the
buyer the property at a lower price without the aid of B.

In this case, it can be said that the due performance by B of his undertaking, the
condition for the payment of the commission was purposely prevented by X, and
is deemed fulfilled.

Art. 1187. The effects of a conditional obligation to give, once the condition has
been fulfilled, shall retroact to the day of the constitution of the obligation.
Nevertheless, when the obligation imposes reciprocal prestations upon the
parties, the fruits and interests during the pendency of the condition shall be
deemed to have been mutually compensated. If the obligation is unilateral, the
debtor shall appropriate the fruits and interests received, unless from the nature
and circumstances of the obligation it should be inferred that the intention of the
person constituting the same was different.

In obligations to do and not to do, the courts shall determine, in each case, the
retroactive effect of the condition that has been complied with. (1120)

Prior to fulfillment of the condition, the right is yet to be acquired and the debt is yet to
exist—the parties are not yet actual debtor-creditor of each other, as the legal tie does
not make an appearance yet. The would-be creditor does not acquire a right until the
happening of the event which constitutes the condition.

RETROACTIVE EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION:

1. In obligations to give—this obligation is subject to suspensive condition from

which, the obligation becomes demandable only when the condition.

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 However, once the condition is fulfilled, it will retroact to the day when it was
constituted, as if it were a pure obligation from the first day.
a. Illustration: If A entered into a conditional sale over his property in
favor of B but he retained ownership over the subject property until
full payment of the purchase price, transfer of title is subject to the
positive suspensive condition of the buyer’s full payment of the
purchase price. If A sells it to C in an absolute sale and C registered it,
the sale to C shall be respected if the suspensive condition is of B is not
fulfilled.
b. The rule of retroactivity of the effects of conditional obligation to give,
once the condition has been fulfilled, is without prejudice to the
existence of a preferred right of a third person who may have dealt
with the same property in good faith.
2. In reciprocal obligations —there is no retroactivity because the fruits and
interests received during the pendency of the condition are deemed to have
mutually been compensated. The value of the fruits and interests is to be
equal to do away with the need of actual accounting.
3. In Unilateral Obligations—there is usually no retroactive effect because they
are gratuitous. The debtor receives nothing from the creditor. Thus, fruits
and interests belong to the debtor unless from the nature and circumstances
it should be inferred that the intention of the person constituting the same
was different.
4. In obligations to do or not to do—no fixed rule is provided. Determination is
Retroactive
-it has entrusted to the sound discretion of the court.
effect from Illustration: A obliged himself to condone the debt of X, his lawyer, should the
a date before it X win A’s case in the Supreme Court.
was approved In this case, upon the fulfillment of the condition, shall not be entitled, unless
(Cambridge
Dictionary) the contrary has been stipulated, to the earned interests of the capital during
the pendency of the condition as the intention of C is to extinguish the debt.
Here, the fulfillment of the condition has retroactive effect.

Art. 1188. The creditor may, before the fulfillment of the condition, bring the
appropriate actions for the preservation of his right.

The debtor may recover what during the same time he has paid by mistake in case
of a suspensive condition. (1121a)

Art. 1189. When the conditions have been imposed with the intention of
suspending the efficacy of an obligation to give, the following rules shall be
observed in case of the improvement, loss or deterioration of the thing during the
pendency of the condition:

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 (1) If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;

(2) If the thing is lost through the fault of the debtor, he shall be obliged to
pay damages; it is understood that the thing is lost when it perishes, or
goes out of commerce, or disappears in such a way that its existence is
unknown or it cannot be recovered;

(3) When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor;

Deteriorates (4) If it deteriorates through the fault of the debtor, the creditor may
-to make choose between the rescission of the obligation and its fulfillment, with
inferior in
indemnity for damages in either case;
quality or
value
(Merriam- (5) If the thing is improved by its nature, or by time, the improvement shall
Webster) inure to the benefit of the creditor;

(6) If it is improved at the expense of the debtor, he shall have no other

right than that granted to the usufructuary. (1122)

Article 1189 applies only if:

1. the obligation is a real obligation;
2. the object is a specific or determinate thing;
3. the obligation is subject to a suspensive condition;
4. the condition is fulfilled; and
5. there is loss, deterioration or improvement of the thing during the pendency
of the happening on one condition.

KINDS OF LOSS
Loss in civil law may be:
1. Physical loss—when a thing perishes. Example: the agila dress(subject
of the obligation) is burned; or,
2. Legal loss—when a thing goes out of commerce or when a thing
heretofore legal becomes illegal.
3. Civil loss—when a thing disappears in such a way that its existence is
unknown (a Chihuahua dog has been missing) or even if known, it
cannot be recovered whether as a matter of fact (diamond ring
dropped in Manila Bay) or of law.

RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT OF THING DURING

PENDENCY OF SUSPENSIVE CONDITION.

1. Loss of thing without debtor’s fault.

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 Illustration: A obliged himself to give B his bracelet worth P20,000 if B will
sell A’s property. The car was lost without the fault of A.
In the case, the obligation is extinguished and A is not liable to B even if B
sells the property. A person, as a general rule, is not liable for a fortuitous
event. (Article 1174.)

2. Loss of thing through debtor’s fault

Illustration: In the same example, if the loss occurred because of the

negligence of A, B will be entitled to demand damages (Article 1170.)

3. Deterioration of thing without debtor’s fault

Illustration: If the ring fell down, as a result of which its quartz crystal was
scratched without the fault of A, thereby reducing its value to P10,000, B will
have to suffer the deterioration or impairment in the amount of P10,000.

4. Deterioration of thing through debtor’s fault

Illustration: In such case, B may choose between:

a. Rescission or cancellation of the obligation with damages, in this case, A
is liable to pay P20,000m the value of the ring before its deterioration
plus incidental damages; or
b. Fulfillment of the obligation also with damages, in this case, A is bound
to B to give the ring and pay P10,000 plus incidental damages, if any.

5. Improvement of thing by nature or time—A thing is improved when its value

is increased or enhanced by nature or time or at the expense of the debtor or
creditor.

Illustration: If the market value of the ring increased, B will get the benefit.
Inasmuch as B would suffer in case of deterioration of the car through a
fortuitous event, it is but fair that he should be compensated in case of
improvement of the car instead.
Usufruct
-the right to 6. Improvement of thing at expense of debtor.
enjoy the use
and fruits of Illustration: During the pendency of the condition, A had the scratched ring
a thing repaired at his expense. In this case, A will have the right granted to a
belonging to usufructuary with respect to improvements made on the thing held in
another usufruct.
(Art.562)

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Art. 1190. When the conditions have for their purpose the extinguishment of an
obligation to give, the parties, upon the fulfillment of said conditions, shall return
to each other what they have received.

In case of the loss, deterioration or improvement of the thing, the provisions

which, with respect to the debtor, are laid down in the preceding article shall be
applied to the party who is bound to return.

As for the obligations to do and not to do, the provisions of the second paragraph
of Article 1187 shall be observed as regards the effect of the extinguishment of
the obligation. (1123)

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.

The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage
Law. (1124)

Breach of an obligation occurs when there is a failure or refusal, by a party without legal
reason or excuse to perform, in whole or in part the obligation or undertaking which is
incumbent upon him.

KINDS OF OBLIGATION ACCORDING TO THE PERSON OBLIGED:

1. Unilateral—only one party is obliged to comply with a prestation(ex.

Donation)
2. Bilateral—both parties are mutually bound to each other
a. Reciprocal—the performance of one is designed to be equivalent and
the condition for the performance of the other (ex. Contac of sale, the
delivery of the thing sold by the seller is conditioned upon the
simultaneous payment of purchase price by the buyer)
b. Non-reciprocal obligations—do not impose simultaneous and
correlative performance on both parties. (ex. If A borrowed from B
P10,000, B on the other hand borrowed A’s car. The performance of A

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 of his obligation to B is not conditioned upon the performance by B of
his obligation and vice versa)

REMEDIES IN CASE OF BREACH OF RECIPROCAL OBLIGATIONS:

Rescission
Refers to 1. Action for specific performance—pertains to actual accomplishment of a
the cancellation of contract
an agreement or 2. Action for rescission
contract either
through mutual a. Resolution—unmaking of a contract for legally sufficient reason. It
agreement of the abrogates the contract. It requires a mutual restitution
parties or for i. Mutual restitution—return of the benefits that each party may
cause.
have received.
ii. Right to rescind must be invoked judicially. For declaration
purposes
iii. In absence of a stipulation a party cannot unilaterally and
extrajudicially rescind a contract
iv. Right to rescind is not absolute

LIMITATIONS ON RIGHT TO DEMAND RESCISSION:

1. Rescission must be invoked judicially.

2. The court has the power to fix period if the injured permits performance.
3. The aggrieved must comply with his obligation.
4. If it will affect third person who acted in good faith, rescission will not apply.
5. Rescission must be substantial and fundamental
a. Rescission will not be permitted for a slight or casual breach of the
contract but only for such breaches that are substantial and
fundamental as to defeat the object of the parties in making the
agreement. Furthermore, the right is predicated by breach of faith by
the other party and not injury to economic interests.
6. He may waive his right to rescind expressly or impliedly.
7. The failure with an obligation already extant not a failure of a condition to
render binding that obligation
8. It applies to reciprocal obligations and not judicial compromise.
9. When breach by a party arises it must be brought first and resolved by
arbitration and not through an extrajudicial rescission or judicial action.

RESCISSION OF CONTRACT WITHOUT PREVIOUS JUDICIAL DECREE:

1. Where automatic rescission expressly stipulated. The parties may validly enter
into an agreement that violation of the terms of the contract would cause
cancellation thereof even without judicial intervention or permission.
2. Where contract still executory—in absence of stipulation of the right to
rescind. It must be invoked judicially.
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Art. 1192. In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts. If it cannot
be determined which of the parties first violated the contract, the same shall be
deemed extinguished, and each shall bear his own damages. (n)

In pari delicto(in equal fault)—when both parties committed infractions, none of them
can seek judicial redress for cancellation or resolution of contract and they are bound to
their respective obligations.

In liability for damages: It depends on who violated the contract first.

i. If first infractor is known. He is liable for damages and his liability shall be
equitably tempered by the courtss
ii. If first infractor cannot be determined, the claims for damages are extinguished.
iii. The second infractor may not be liable for damages. As damages for 2nd breach
are compensated by the mitigation of the 1st infractor’s liability for damages
arising from his earlier breach. It is still punished because of the mitigated award
for damages.

SECTION 2. - Obligations with a Period

Art. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be
demandable only when that day comes.

Obligations with a resolutory period take effect at once, but terminate upon
arrival of the day certain.

A day certain is understood to be that which must necessarily come, although it

may not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is
conditional, and it shall be regulated by the rules of the preceding Section.
(1125a)

An obligation with a period is one whose consequences are subjected in one way or
another to the expiration of said period or term. A period is future and certain event
upon the arrival of which the obligation or right subject to it ether arises or is
terminated. It is a day certain which must necessarily come, although it may not be
known when, like the death of a person.

DIFFERENCE BETWEEN PERIOD AND CONDITION

Period Condition
As to fulfillment A certain event which must happen An uncertain event

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 sooner or later at a date known
beforehand or a time which cannot
be determined
As to time Refers to future May refer to future and
past event unknown to the
parties
As to influence Merely fixes the time for the Causes an obligation to
on the obligation efficaciousness of the obligation arise or cease
As to effect, Empowers the court to fix the Invalidates the obligation
when left to duration thereof
debtor’s will
As to Unless there is an agreement to the Has a retroactive effect
retroactivity of contrary, the arrival does not have
effects any retroactive effect

KINDS OF PERIOD OR TERM:

1. According to effect
a. Suspensive period (ex die)—The obligation begins only from a day
certain upon the arrival of the period; and,
Illustration: “I will pay you 20 days from today.”
b. Resolutory period (in diem)—The obligation is valid up to a day certain
and terminates upon the arrival of the period.
Illustration: “I will support you until you die.“
2. According to source
a. Legal period—when it is provided by law;
b. Conventional or voluntary period—when it is agreed by parties; and,
c. Judicial period—when it is fixed by court.
3. According to definiteness
a. Definite period —when it is fixed or known period when it will come;
and,
b. Indefinite period —when it is not fixed or unknown when it will come.

Art. 1194. In case of loss, deterioration or improvement of the thing before the
arrival of the day certain, the rules in Article 1189 shall be observed. (n)

Art. 1195. Anything paid or delivered before the arrival of the period, the obligor
being unaware of the period or believing that the obligation has become due and
demandable, may be recovered, with the fruits and interests. (1126a)

Art. 1195 applies only to obligations to give. Hence, the article does not apply in
personal obligations or obligations to do or not to do because it is physically impossible
to recover the service rendered.

16
Debtor is presumed aware of period. Otherwise, the debtor has the burden of proving
that he was unaware of the period.

Art. 1196. Whenever in an obligation a period is designated, it is presumed to

have been established for the benefit of both the creditor and the debtor, unless
from the tenor of the same or other circumstances it should appear that the
period has been established in favor of one or of the other. (1127)

General Rule: Period is presumed established for the benefit of both the creditor and
debtor.

Exceptions: This refers to the tenor of the obligation or the circumstances where the
parties intended the period for the benefit of either of the debtor or creditor. The benefit of
such may be subject of express stipulation of parties.

1. Term is for the benefit of the debtor alone. –He can pay prematurely, if he
desires
2. Term is for the benefit of the creditor—He may demand fulfillment even
before the arrival of the term but the debtor cannot require him to accept
payment before the expiration of the stipulated period.

If there is, Who may benefit?

no interest Debtor
use of Money Debtor
interest Creditor

The debtor cannot accelerate the time of payment without the consent of the creditor.
This is to protect the money against decline in the purchasing power of currency.

COMPUTATION OF TERM OR PERIOD.

1. The administrative Code of 1987 provides:

a. Legal periods—“Year” shall be understood to be twelve (12) calendar
months, “month” of thirty days, unless it refers to a specific calendar
month in which case it shall be computed accordingly to the number
of days the specific month contains; “day” to a day of twenty-four (24)
hours and “night” from sunset to sunrise.
2. A calendar month is a month designated in the calendar without regard to the
number of days it may contain.
Illustration: One (1) calendar month from December 31, 2019 will be
from January 1, 2020 to January 31, 2020.

17
Art. 1197. If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts may fix the
duration thereof.

The courts shall also fix the duration of the period when it depends upon the will
of the debtor.

In every case, the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once fixed by the
courts, the period cannot be changed by them. (1128a)

Judicial Period is a period fixed by the court. On the other hand, Contractual period
refers to the period fixed by the parties in their contract.

INSTANCES WHEN COURTS ARE AUTHORIZED TO FIX PERIOD:

1. When the obligation does not fix a period but from its nature and the
circumstances it can be inferred that a period was intended.
2. When the duration of the period depends upon the will of the debtor.
3. In case of breach of a reciprocal obligation the court may refuse to order
rescission if there is a just cause for the fixing of a period.
4. In lease of urban lands, the courts may fix a longer period in case daily,
weekly or monthly rent is paid and the lessee has occupied the premises for
more than one month, or more than six months or more than one year,
respectively.

INSTANCES WHERE COURTS ARE NOT AUTHORIZED TO FIX PERIOD:

1. When no period was intended by the parties.

2. When it is a pure obligation.
3. When obligation was with a reasonable period and the period has already
lapsed or expired.
4. When law provides for a period.
5. When the parties give their acceptance and consent to the period fixed by the
court.

Art. 1198. The debtor shall lose every right to make use of the period:

(1) When after the obligation has been contracted, he becomes insolvent, unless
he gives a guaranty or security for the debt;

(2) When he does not furnish to the creditor the guaranties or securities which he
has promised;

18
 (3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through a fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory;

(4) When the debtor violates any undertaking, in consideration of which the
creditor agreed to the period;

(5) When the debtor attempts to abscond. (1129a)

General rule: the obligation is not demandable before the lapse of the period.

Exception: The debtor shall lose every right to make use of the period, that is, the period
is disregarded and the obligations becomes pure, and therefore, immediately
demandable. This is on the following circumstances:
Insolvency is
a state of 1. When debtor becomes insolvent; Abscond to
financial go away
2. When debtor does not furnish guaranties or securities promised;
distress in hastily and
3. When guaranties of securities given have impaired or have disappeared; secretly; run
which a
person or 4. When debtor violates an undertaking; or, away and
business is 5. When debtor attempts to abscond. hide
unable to pay
their debts. SECTION 3. - Alternative Obligations
(Investopedia)

Art. 1199. A person alternatively bound by different prestations shall completely

perform one of them.

The creditor cannot be compelled to receive part of one and part of the other
undertaking. (1131)

KINDS OF OBLIGATION:

1. Simple obligation—there is only one prestation

Illustration: A obliged himself to deliver to B a car.

2. Compound obligation—there are two or more prestations

a. Conjunctive obligation—there are several obligations and all of them
are due
b. Distributive obligation—one where one of two or more of the
prestations is due. It may be alternative or facultative.
i. Alternative obligation—there is several prestations but the
fulfillment of one is sufficient. It is determined by the choice of
the debtor who generally has the right of election.

19
 ii. Facultative obligation—one where only one prestation is due
but the debtor may substitute another.

Art. 1200. The right of choice belongs to the debtor, unless it has been expressly
granted to the creditor.

The debtor shall have no right to choose those prestations which are impossible,
unlawful or which could not have been the object of the obligation. (1132)

General rule: The right to choose the prestation belongs to the debtor.

Exception: It may be exercised by the creditor but only when expressly granted to him
or by a third person when the right is given to him by common agreement.

LIMITATIONS ON THE RIGHT O CHOICE OF DEBTOR:

1. The debtor cannot choose those prestations which are impossible, unlawful,
or which could not have been the object of the obligation. These prestations
are void.
2. The debtor has no more right of choice, when among the prestations whereby
he is alternatively bound, only one is practicable.
3. The debtor cannot choose part of one prestation and part of another
prestation.

Art. 1201. The choice shall produce no effect except from the time it has been
communicated. (1133)

i. Effect of notice—until the choice is made and communicated, the

obligation remains alternative.
a. Once the notice of the obligation has been given to the creditor, the
obligation ceases to be alternative and becomes simple.
b. Such choice once properly made and communicated is irrevocable
and cannot be renounced.
ii. Proof and form of notice—may be made orally or in writing, expressly or
impliedly.

Art. 1202. The debtor shall lose the right of choice when among the prestations
whereby he is alternatively bound, only one is practicable. (1134)

Art. 1203. If through the creditor's acts the debtor cannot make a choice
according to the terms of the obligation, the latter may rescind the contract with
damages. (n)

20
Rescission creates the obligation to return the things which were the object of the
contrac together with their fruits, and the price with its interest.

Art. 1204. The creditor shall have a right to indemnity for damages when, through
the fault of the debtor, all the things which are alternatively the object of the
obligation have been lost, or the compliance of the obligation has become
impossible.

The indemnity shall be fixed taking as a basis the value of the last thing which
disappeared, or that of the service which last became impossible.

Damages other than the value of the last thing or service may also be awarded.
(1135a)

Art. 1205. When the choice has been expressly given to the creditor, the
obligation shall cease to be alternative from the day when the selection has been
communicated to the debtor.

Until then the responsibility of the debtor shall be governed by the following
rules:

(1) If one of the things is lost through a fortuitous event, he shall perform
the obligation by delivering that which the creditor should choose from
among the remainder, or that which remains if only one subsists;

(2) If the loss of one of the things occurs through the fault of the debtor, the
creditor may claim any of those subsisting, or the price of that which,
through the fault of the former, has disappeared, with a right to damages;

(3) If all the things are lost through the fault of the debtor, the choice by the
creditor shall fall upon the price of any one of them, also with indemnity for
damages.

The same rules shall be applied to obligations to do or not to do in case one, some
or all of the prestations should become impossible. (1136a)

IF THE LOSS IS DUE TO CREDITOR’S FAULT, DEBTOR MAY:

a. Rescind with damages

b. Choose among remainder prestations
i. If all prestations is lost, obligation of debtor is extinguished

Loss after election

21
 Lost was the chosen prestation: It is due and demandable
Without fault of the debtor and there was Obligation is extinguished
no delay
With debtor’s fault Indemnification for damages
No chosen prestation Does not affect obligation because it was
not due

Art. 1206. When only one prestation has been agreed upon, but the obligor may
render another in substitution, the obligation is called facultative.

The loss or deterioration of the thing intended as a substitute, through the

negligence of the obligor, does not render him liable. But once the substitution
has been made, the obligor is liable for the loss of the substitute on account of his
delay, negligence or fraud. (n)

A facultative obligation is one where only one prestation has been agreed upon but the
obligor may render another in substitution.

Illustration: I will give you my laptop but I may give my iPad as a substitute.

EFFECT OF LOSS

1. Before substitution. If the principal thing is lost through a fortuitous event, the
obligation is extinguished; otherwise, the debtor is liable for damages. The loss
of the thing intended as a substitute without the fault of the debtor does not
render him liable.
2. After Substitution. If the principal thing is lost, the debtor is not liable whatever
may be the cause of the loss, because it is no longer due. If the substitute is loss,
the liability of the debtor depends upon whether or not the loss is due to his
fault. Once the substitution is made, the obligation is converted into a simple one
to deliver or perform the substituted thing or prestation. The substitution
becomes effective from the time it has been communicated.

ALTERNATIVE AND FACULTATIVE OBLATIONS DISTINGUISHED

Alternative Obligation Facultative Obligation

Several prestations are due
Right of choice generally belongs to the
debtor but may be granted to creditor or
third person
If one of the prestations are impossible or
unlawful, it doesn’t affect the validity
Only one prestation is due
Right of choice is always with debtor
If original prestation is impossible or
unlawful, obligation is invalid even is

22

Loss of one prestation prior to election,
debtor is liable for damages
Nullity of a prestation does not invalidate
the others
The debtor or creditor shall choose from
among the remainder
substitute is valid
Loss of substitute prior to election, debtor
is not liable
Nullity of the prestation agreed upon
invalidates the obligation
The debtor is not bound to choose the
substitute

SECTION 4. - Joint and Solidary Obligations

Art. 1207. The concurrence of two or more creditors or of two or more debtors in
one and the same obligation does not imply that each one of the former has a right
to demand, or that each one of the latter is bound to render, entire compliance
with the prestation. There is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires
solidarity. (1137a)

Art. 1208. If from the law, or the nature or the wording of the obligations to which
the preceding article refers the contrary does not appear, the credit or debt shall
be presumed to be divided into as many shares as there are creditors or debtors,
the credits or debts being considered distinct from one another, subject to the
Rules of Court governing the multiplicity of suits. (1138a)

Kinds of obligations according to the number of parties bound:

a. Individual obligation—one where there is only one obligor or one obligee;

and,
b. Collective obligation—one where there are two or more debtors or two or
more creditars, It may be joint or solidary.

A Joint obligation or one where the whole obligation is to be paid or fulfilled

proportionately by the different debtors and/or is to be demanded proportionately by
the different creditors.

A Solidary obligation or one where each one of the debtors is bound to render, and
or/each one of the creditors has a right to demand from any of the debtors, entire
compliance with the prestation.

DIFFERENCE OF JOINT OBLIGATION AND SOLIDARY OBLIGATION

Joint Obligation Solidary Obligation

23
An obligation where there is a concurrence
of several creditors
Each creditor can recover only his share
Each debtor can be made pay only his part
Each debtor is liable for the entire
obligation, and each creditor is entitled to
demand the whole obligation
Each creditor may enforce entire
obligation
Each debtor may be obliged to pay in full

WHEN OBLIGATION SOLIDARY:

1. The obligation expressly states so; or

2. The law requires solidarity; or
3. The nature of the obligation requires solidarity.

WORDS USED TO INDICATE SOLIDARY LIABILITY:

a. Severally d. together and/or separately

b. Jointly and/or severally e. individually and/or collectively
c. Solitarily f. I promise to pay signed by two or more
persons

Kinds of Solidarity:

2.According to the parties bound:

a. Passive Solidarity—any of the debtors can be made liable
Illustration:
b. Active Solidarity—any of the creditors can demand
c. Mixed Solidarity—solidarity on the part of the debtors and creditors, each
is liable
3.According to source:
c. Conventional Solidarity—agreed by the parties
d. Legal Solidarity—imposed by the law
e. Real Solidarity—imposed by the nature of the obligation

DIFFERENCE OF PASSIVE SOLIDARITY AND SOLIDARITY GUARANTY

Passive Solidarity Solidarity Guaranty

One may demand for reimbursement
Liability is not only for the debt of another Does not incur liability unless the principal
but also for one properly his own debtor is held liable
The debtor who made payment may claim The surety who paid the obligation is
for reimbursement from his co-debtors for entitled to be indemnified by the principal
the share which corresponds to each debtor with the right to be subrogated by
virtue of such payment to all rights which

24

An extension granted by the creditor to
one of the solidary debtors without the
consent of the other solidary debtors
would not release the latter from the
obligations.
the creditor had against the debtor
An extension granted to the principal
debtor without the consent of the surety
would have the effect of extinguishing the
suretyship

EFFECTS OF JOINT CHARACTER OF OBLIGATION:

1. Claim of a creditor through a demand to one of the debtors is not prejudicial

to other creditor or debtor.
2. Delay of one does not affect others.
3. Vices of each obligation, does not affect validity of other credits or debts.
4. Insolvency of one debtor or non-performance does not increase the liability
of others.
5. In divisible joint obligation, defense of res judicata is not extended from one
debtor to another.

Payment or acknowledgement by one of debtors will not stop the running of the period
of prescription as to others.

FOR INTERRUPTION OF PRESCRIPTION, THERE MUST BE:

1. Partial Payment
2. Written Acknowledgement
3. Written promise to pay debt

Art. 1209. If the division is impossible, the right of the creditors may be
prejudiced only by their collective acts, and the debt can be enforced only by
proceeding against all the debtors. If one of the latter should be insolvent, the
others shall not be liable for his share. (1139)

Joint Indivisible Obligation where parties are merely proportionately liable for his share.
In case one of them becomes insolvent later on, the debtor does not become liable for
the share of the insolvent debtor.

Illustration: A, B, and C are jointly liable to give D a machine valued at P540, 000.00. On
the date of delivery, A and B are willing to deliver but C is not. In this case, D has no
cause of action against C for the delivery of the machine because, as a joint-debtor, C is
liable only for a proportionate part of the obligation which is P180,000.00. Since the
object (machine) is indivisible, the debt can only be enforced by proceeding against all
the debtors for compliance is not possible unless they act together.
Pursuant to Article 1224, the liability is converted into one for damages. So, A, B, and C
will be liable for P180,000.00 each or a total of P540,000.00 which is the value of the

25
machine without increase of responsibility for A and B. C, the unwilling debtor, shall be
liable for damages to D for having violated the obligation. If A and B suffered damages
by reason of the non-fulfillment by C, they may recover them from C. should anyone of
the debtors be insolvent, the others shall not be liable for their share. (Art. 1209.) D
must wait until the insolvent debtor can pay.

Art. 1210. The indivisibility of an obligation does not necessarily give rise to
solidarity. Nor does solidarity of itself imply indivisibility. (n)

INDIVISIBILITY AND SOLIDARITY DISTINGUISHED

Indivisibility
Refers to prestation
Only the debtor guilty of breach of
obligation is liable for damages, thereby
terminating the agency
Can exist although there is only one debtor There must be at least 2 debtors or 2
and one creditor
The others are not liable in case of
insolvency of one debtor
Solidarity
Refers to juridical or legal tie that binds
the parties
All the debtors are liable for the breach of
the obligation committed by a co-debtor,
for solidarity among them remains
creditors
The others are proportionately liable

Art. 1211. Solidarity may exist although the creditors and the debtors may not be
bound in the same manner and by the same periods and conditions. (1140)

KINDS OF SOLIDARY OBLIGATION ACCORDING TO THE LEGAL TIE:

1. Uniform—bound by the same stipulations or clauses

2. Non-uniform or varied—parties are not subject to same stipulations or
clauses

The essence of solidarity consists in the right of each creditor to enforce the rights of all
and the liability of each debtor to answer for the liabilities of all. Therefore, there may
be a solidary obligation although the parties may not be bound in the same manner and
by the same periods and conditions. The rule is that the creditor may bring his action in
toto against any of the solidary debtors less the shares of the other debtors with
unexpired terms or unfulfilled conditions who are entitled to defenses under Article
1222. Upon the expiration of the term or the fulfillment of the condition, the creditor
will have the right to demand the payment of the remainder. The parties may stipulate
that any solidary debtor already bound may be made liable for the entire obligation.

26
Art. 1212. Each one of the solidary creditors may do whatever may be useful to
the others, but not anything which may be prejudicial to the latter. (1141a)

Art. 1213. A solidary creditor cannot assign his rights without the consent of the
others. (n)

Mutual agency implies mutual confidence.

If one assigns his rights without the consent of the others, his acts does not bind the
creditors or debtors. Any payment made by the debtors to such assignee is a payment
made to a stranger and therefore, invalid.

Art. 1214. The debtor may pay any one of the solidary creditors; but if any
demand, judicial or extrajudicial, has been made by one of them, payment should
be made to him. (1142a)

Mutual agency is the essence of active solidarity. It extends only to acts which are
beneficial to the others, but not to anything which may be prejudicial to them.

Art. 1215. Novation, compensation, confusion or remission of the debt, made by

any of the solidary creditors or with any of the solidary debtors, shall extinguish
the obligation, without prejudice to the provisions of Article 1219.

The creditor who may have executed any of these acts, as well as he who collects
the debt, shall be liable to the others for the share in the obligation corresponding
to them. (1143)

DUAL FUNCTION OF NOVATION

Novation is a contract containing two stipulations: one to extinguish or modify an

existing obligation, and the other to substitute a new one in its place.

1. Extinctive—when an old obligation is terminated by the creation of a new

obligation that takes the place of the former
2. Modificatory—when the old obligation subsists to the extent it remains
compatible with the amendatory agreement

REQUISITES OF NOVATION:

a. A previous valid obligation;

b. An agreement of all parties concerned to a new obligation;
c. The extinguishment of the old obligation; and,
d. The birth of a valid new obligation.

27
Compensation is a mode of extinguishing to the concurrent amounts the debts of
persons who in their own right are creditors and debtors of each other. They must be
mutually indebted to each other.

Remission or condonation is an act of liberality on the part of the creditor, who receives
no price or equivalent thereof, renounces the enforcement of the obligation which is
extinguished in its entirety or in that part or aspect of the same to which the remission
refers. It requires acceptance by the debtor.

Art. 1216. The creditor may proceed against any one of the solidary debtors or
some or all of them simultaneously. The demand made against one of them shall
not be an obstacle to those which may subsequently be directed against the
others, so long as the debt has not been fully collected. (1144a)

RIGHT OF CREDITOR TO PROCEED AGAINST ANY SOLIDARY DEBTOR:

1. Since the liability is solidary, the other solidary debtors are not indispensable
parties in a suit filed by the creditor.
2. The bringing of an action against a solidary debtor to enforce the payment of
the obligation is not inconsistent with and does not preclude the bringing of
another to compel the others to fulfill their obligations.
3. In case of death of one of the solidary debtors, the creditor may proceed
against the estate of the deceased solidary debtor alone or against any or all
of the surviving solidary debtors whose liability is independent of and
separate from the deceased debtor, instead of instituting a proceeding for the
settlement of the estate of the deceased debtor wherein his claim could be
filed.
4. The choice is left to the solidary creditor to determine against whom he will
enforce collection.

Art. 1217. Payment made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors offer to pay, the creditor may choose
which offer to accept.

He who made the payment may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made. If the
payment is made before the debt is due, no interest for the intervening period
may be demanded.

When one of the solidary debtors cannot, because of his insolvency, reimburse his
share to the debtor paying the obligation, such share shall be borne by all his co-
debtors, in proportion to the debt of each. (1145a)

EFFECTS OF PAYMENT BY A SOLIDARY DEBTOR:

28
 1. Between the solidary debtors and creditors—payment made by one of the
solidary debtors extinguishes the obligation.
2. Among the solidary debtors—payment by one of the solidary debtors does not
create a real case of subrogation. He is entitled to claim reimbursement
corresponding to their share only.
3. Among the solidary creditors—receiving creditor is jointly liable to the others
for their corresponding share.

Art. 1218. Payment by a solidary debtor shall not entitle him to reimbursement
from his co-debtors if such payment is made after the obligation has prescribed or
become illegal. (n)

When a solidary debtor pays the obligation, he is entitled to reimbursement from his co-
debtors. However, the solidary debtor may be barred from getting any reimbursement
when the obligation has already prescribed or become illegal, the obligation is then
extinguished.

By prescription, one acquires ownership and other rights through the lapse of time in
the manner and under the conditions laid down by law. In the same way, rights and
actions are lost by prescription

Prescription
Extraordinary Prescription for Immovables 30 years
Ordinary Prescription for Immovables 10 years
Extraordinary Prescription for Movables 8 years
Ordinary Prescription for Movables 4 years
Mortgage Actions 10 years
Actions upon a written contract, obligation 10 years
created by law or upon a judgement
Actions upon an oral contract or quasi- 6 years
contract
Actions upon an inquiry to the rights of the 4 years
plaintiff or upon a quasi-delict
Actions for forcible entry and detainer of 1 year
defamation
Claim for rescission 4 years
Action for annulment 4 years
All other actions not fixed by law 5 years

Art. 1219. The remission made by the creditor of the share which affects one of
the solidary debtors does not release the latter from his responsibility towards
the co-debtors, in case the debt had been totally paid by anyone of them before
the remission was effected. (1146a)

29
 Art. 1220. The remission of the whole obligation, obtained by one of the solidary
debtors, does not entitle him to reimbursement from his co-debtors. (n)

EFFECTS OF REMISSION IN PASSIVE SOLIDARITY:

1. Remission of whole obligation—a total remission has the effect of

extinguishing the obligation. The creditor who made the remission becomes
liable to his co-creditors for their shares.

2. Remission of solidary debtor’s share—Art. 1219 authorizes the remission only

of the share which affects one of the solidary debtors, whether such
remission is for his full share or partial only. The share of the insolvent
Solutio debtor shall be borne by all of the co-debtors, including the debtor whose full
indebiti share has been condoned by the creditor.
refers to
the
Illustration: A and B are liable in solidum to C in the amount of P1,000.00. C remitted A’s
juridical
share. Subsequent payment by B of P1,000.00 to C will not entitle him to
relation
which reimbursement from A since the remission extinguished the obligation with respect to
arises A’s share. However, B can demand the return of P500.00 from C under the principle of
whenever a solutio indebiti. If payment by B was made before the remission, A is still liable to B
person because the remission is without effect, the obligation having been extinguished already
unduly by the payment.
delivers a
thing Art. 1221. If the thing has been lost or if the prestation has become impossible
through without the fault of the solidary debtors, the obligation shall be extinguished.
mistake to
another
who has no If there was fault on the part of any one of them, all shall be responsible to the
right to creditor, for the price and the payment of damages and interest, without
prejudice to their action against the guilty or negligent debtor.

If through a fortuitous event, the thing is lost or the performance has become
impossible after one of the solidary debtors has incurred in delay through the
judicial or extrajudicial demand upon him by the creditor, the provisions of the
preceding paragraph shall apply. (1147a)

In case of breach of solidary obligation, all debtors are liable to the creditor for the price
and the payment of damages and interest. However, the damages paid by a solidary
debtor who was not responsible for the breach of obligation may recover from the
guilty or negligent debtor.

In case of breach of a joint indivisible obligation, those joint debtors who may have
ready to fulfill their obligation or undertaking shall not contribute to the indemnity
beyond the corresponding portion of the price of the thing or of the value of the service
in which the obligation consists.

30
Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of
all defenses which are derived from the nature of the obligation and of those
which are personal to him, or pertain to his own share. With respect to those
which personally belong to the others, he may avail himself thereof only as
regards that part of the debt for which the latter are responsible. (1148a)

DEFENSES AVAILABLE TO A SOLIDARY DEBTOR:

1. Defenses derived from the nature of the obligation

a. Examples:
i. Non-existence of the obligation because of lack of an essential
requisite or illicit cause or object
ii. Nullity due to incapacity to give valid consent on the part of all
debtors or due to vitiation of consent of all debtors by reason of
mistake, violence, intimidation, undue influence or fraud
iii. Unenforceability because of failure to comply with Statute of
frauds
iv. Extinguishment of the obligation by payment or remission
v. Non-performance of suspensive conditions affecting the entire
obligation
2. Defenses personal to, or which pertain to share of, debtor sued.
a. Those affecting capacity or consent of the debtor=
Complete/exemption
b. Particular portion of the obligation=Partial/exemption
3. Defenses personal to other solidary debtors.

SECTION 5. - Divisible and Indivisible Obligations

Art. 1223. The divisibility or indivisibility of the things that are the object of
obligations in which there is only one debtor and only one creditor does not alter
or modify the provisions of Chapter 2 of this Title. (1149)

Article 1223 applies to real obligations only.

Divisible obligation refers to one of the object of which, in its delivery or performance, is
capable of partial fulfillment.

Indivisible obligation is one the object of which, in its delivery or performance, is not
capable of partial fulfillment.

The test to determine whether an obligation is divisible or not, is the purpose of the
obligation or the intention of the parties. Therefore, even though the object or service
mat be physically divisible, an obligation is indivisible if so provided by law or intended
by the parties.

31
KINDS OF DIVISION:

1. Qualitative Division—one based on quality

2. Quantitative Division—one based on quantity
3. Ideal or intellectual division or one which exists only in the minds of the
parties—non-material divisibility

KINDS OF INDIVISIBILITY:

1. Legal indivisibility— where a particular provision of law declares as

indivisible, obligations, which by their nature, are divisible.
2. Conventional indivisibility—where the will of the parties makes an invisible,
obligations, which by their nature, are divisible.
3. Natural indivisibility—where the nature of the object or prestation does not
admit of division. (ex. to give a paricular car)

In indivisibility, the death of the debtor does not extinguish the prestation because the
heirs are bound to perform by the unfulfilled prestation.

Art. 1224. A joint indivisible obligation gives rise to indemnity for damages from
the time anyone of the debtors does not comply with his undertaking. The debtors
who may have been ready to fulfill their promises shall not contribute to the
indemnity beyond the corresponding portion of the price of the thing or of the
value of the service in which the obligation consists. (1150)

Art. 1225. For the purposes of the preceding articles, obligations to give definite
things and those which are not susceptible of partial performance shall be
deemed to be indivisible.

When the obligation has for its object the execution of a certain number of days of
work, the accomplishment of work by metrical units, or analogous things which
by their nature are susceptible of partial performance, it shall be divisible.

However, even though the object or service may be physically divisible, an

obligation is indivisible if so provided by law or intended by the parties.

In obligations not to do, divisibility or indivisibility shall be determined by the

character of the prestation in each particular case. (1151a)

OBLIGATIONS DEMEED INDIVISIBLE:

1. Obligations to give definite things. (e. g. to give a VIP lightstick, to deliver a

car)
2. Obligations which are not susceptible of partial performance.

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 Examples: to sing crooked by Gdragon, to dance ice cream by Blackpink
The obligation is indivisible by reason of its purpose which requires the
performance of all parts.

3. Obligations provided by law to be indivisible even if thing or service is

physically divisible (e.g. the amount of tax payable must be delivered in
toto, not partially)

4. Obligations intended by the parties to be indivisible even if thing or service

is physically divisible.

OBLIGATIONS DEEMED DIVISIBLE

1. Obligations which have for their object the execution of a certain number of days
of work. (e.g. obligation to pain a house)
2. Obligations which have for their object the accomplishment of work by metrical
units. (e.g. obligation to deliver 30 cubic meters dolomite sand)
3. Obligations which by their nature are susceptible of partial performance. (e.g.
obligation of A to teach for one year in CAPSU)

SECTION 6. - Obligations with a Penal Clause

Art. 1226. In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interests in case of noncompliance, if
there is no stipulation to the contrary. Nevertheless, damages shall be paid if the
obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the
obligation.

The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code. (1152a)

Principal obligation is one which can stand by itself and does not depend for its validity
and existence upon another obligation

Accessory obligation is one which is attached to a principal obligation and, therefore

cannot stand alone.

Obligation with a penal clause is one which contains an accessory undertaking to pay a
previously stipulated indemnity in case of breach of the principal prestation intended
primarily to induce its fulfillment.

PURPOSE OF PENAL CLAUSE:

1. To provide for liquidated damages

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 2. To strengthen the coercive force of the obligation by the threat of greater
responsibility in the event of breach.

General Rule: Penalty takes the place of indemnity for damages and the payment of
interests in case of non-compliance with the obligation.

Exceptions: Damages and interests may still be recovered on top of penalty.

1. When there is a stipulation to that effect

2. When the obligor having failed to comply with the principal obligation also
refuses to pay the penalty, the creditor is entitled of interest in the amount of
penalty.
3. When the obligor is guilty of fraud in the fulfillment of the obligation.

WHEN PENAL CLAUSE DEMANDABLE:

1. the total non-fulfillment of the obligation or the defective fulfillment is

chargeable to the fault of the debtor; or
2. that the penalty may be enforced in accordance with provisions of law.

KINDS OF PENAL CLAUSE:

1. As to its origin
a. Legal Penal Clause—when it is provided by law; and,
b. Conventional Penal Clause—when it is provided for by stipulation of
the parties.
2. As to its purpose
a. Compensatory Penal Clause—when penalty takes the place of damages
b. Punitive Penal Clause—when penalty is imposed merely as
punishment for breach
3. As to its dependability or effect
a. Subsidiary or alternative Penal Clause—when only the penalty can be
enforced
b. Joint or cumulative Penal Clause—when both the principal obligation
and the penal clause can be enforced.

PENAL CLAUSE AND CONDITION DISTINGUISHED

Penal Clause Condition

An obligation although accessory Not an accessory obligation
May become demandable in default of the Never demandable
unperformed obligation and sometimes
jointly with it

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Art. 1227. The debtor cannot exempt himself from the performance of the
obligation by paying the penalty, save in the case where this right has been
expressly reserved for him. Neither can the creditor demand the fulfillment of the
obligation and the satisfaction of the penalty at the same time, unless this right
has been clearly granted him. However, if after the creditor has decided to
require the fulfillment of the obligation, the performance thereof should become
impossible without his fault, the penalty may be enforced. (1153a)

General rule: The debtor cannot exempt himself from the performance of the principal
obligation by paying the penalty.

Exception: If expressly agreed by the parties to have an alternative obligation.

General rule: The creditor cannot demand the fulfillment of the principal obligation and
the satisfaction of the penalty at the same time.

Exception: if such clearly granted to the creditor

When there is no performance of the obligation, the creditor may ask for the penalty or
require specific performance. The remedies are alternative and not cumulative nor
successive, subject to the exception that the penalty may be enforced, if after the
creditor has decided to require fulfillment, the same should become impossible without
his fault. If there was fraud on the part of the debtor, the creditor may recover the
penalty as well as damages for non-fulfillment.

Art. 1228. Proof of actual damages suffered by the creditor is not necessary in
order that the penalty may be demanded. (n)

In case of breach, the obligor would then be bound to pay the stipulated indemnity
without the necessity of proof of the existence and the measure of damages caused by
the breach.

Penalty Liquidated Damages

Punishment Agreed damages

Art. 1229. The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even if
there has been no performance, the penalty may also be reduced by the courts if it
is iniquitous or unconscionable. (1154a)

When penalty may be reduced by the courts:

1. When there is partial or irregular performance.

a. Where penalty is punitive

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 b. Where penalty is compensatory
2. When the penalty agreed upon is iniquitous or unconscionable

Art. 1230. The nullity of the penal clause does not carry with it that of the
principal obligation

The general principle that the accessory follows the principal and not vice versa is
illustrated in article 1230. If only the penal clause is void, the principal obligation
remains valid and demandable. The penal clause is just disregarded. The injured party
may recover indemnity for damages in case of non-performance of the obligation as if
no penalty had been stipulated.

If the principal obligation is void, the penal clause is likewise void. The reason is that the
clause cannot stand alone without the principal obligation to which it is subordinated.
But if the nullity of the principal obligation is due to the fault of the debtor who acted in
bad faith, by reason of which the creditor suffered damages on equitable grounds, the
penalty may be enforced

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EVALUATION

I. TRUE OR FALSE.
1. A pure obligation is immediately demandable.
2. If the obligation does not state a period and no period is intended, the court
is not authorized to fix a period.
3. A period is presumed to have been established for the benefit of the debtor.
4. Prescription is either acquisitive, in that an individual is allowed, after a
specified period of time, to acquire title, or extinctive.
5. A divisible obligation is one the object of which in its delivery or
performance, is not capable of partial fulfillment
6. A principal obligation is one which can stand by itself and does not depend
for its validity and existence upon another obligation.
7. The power to rescind obligations is not implied in reciprocal ones because
only the creditor may rescind the contract.
8. An alternative obligation is one wherein various prestations are due but
the performance of one of them is sufficient as determined by the choice
which as a general rule, belongs to the debtor.
9. Payment made by one of the solidary debtors extinguishes the obligation.
10. A penal clause is a principal undertaking attached to an obligation to
assume greater liability in case of breach.
II. ESSAY
1. Enumerate the classification of obligations. (10 points)

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 2. Explain briefly the distinctive feature of each kind of obligation. (10
points)

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References:

De Leon, H. (2014). The Law on Obligations and Contracts. Philippines: Rex Book Store.

Rabuya, T. (2019). Obligations and Contracts by Rex Bookstore.

The New Civil Code of the Philippines (Republic Act 386)

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