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    This document discusses obligations with a penal clause under Philippine law. It states that a penalty substitutes damages and interest for noncompliance, unless otherwise stipulated. Damages are still due if the obligor refuses to pay the penalty or acts fraudulently. The debtor cannot exempt performance by paying the penalty, unless expressly allowed. The creditor cannot demand both performance and payment of the penalty, unless the right to do so is clearly granted. Proof of actual damages is not needed to demand the penalty. The judge may equitably reduce the penalty if the obligation was partly or irregularly complied with, or if the penalty is iniquitous or unconscionable. Nullity of the penal clause does not nullify the

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    This document discusses obligations with a penal clause under Philippine law. It states that a penalty substitutes damages and interest for noncompliance, unless otherwise stipulated. Damages are still due if the obligor refuses to pay the penalty or acts fraudulently. The debtor cannot exempt performance by paying the penalty, unless expressly allowed. The creditor cannot demand both performance and payment of the penalty, unless the right to do so is clearly granted. Proof of actual damages is not needed to demand the penalty. The judge may equitably reduce the penalty if the obligation was partly or irregularly complied with, or if the penalty is iniquitous or unconscionable. Nullity of the penal clause does not nullify the

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    © All Rights Reserved
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    5 views1 page

    Chapter-3 6

    Uploaded by

    azazelrallos
    This document discusses obligations with a penal clause under Philippine law. It states that a penalty substitutes damages and interest for noncompliance, unless otherwise stipulated. Damages are still due if the obligor refuses to pay the penalty or acts fraudulently. The debtor cannot exempt performance by paying the penalty, unless expressly allowed. The creditor cannot demand both performance and payment of the penalty, unless the right to do so is clearly granted. Proof of actual damages is not needed to demand the penalty. The judge may equitably reduce the penalty if the obligation was partly or irregularly complied with, or if the penalty is iniquitous or unconscionable. Nullity of the penal clause does not nullify the

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    RFBT 1 – Law on Obligations and Contracts 13

    TITLE I: OBLIGATIONS (Arts. 1156-1304.) – Chapter 3.6: Obligations with a Penal Clause

    CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS


    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
    fulfilment of the obligation.
    General Rule
    Penalty serves as substitute to damages and interest
    Exceptions
    1. Stipulation to contrary
    2. Debtor refuses to pay penalty
    3. Debtor is guilty of fraud
    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 fulfilment 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 fulfilment of the
    obligation, the performance thereof should become
    impossible without his fault, the penalty may be enforced.
    Art. 1228. Proof of actual damages suffered by the creditor is
    not necessary in order that the penalty may be demanded.
    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.
    Art. 1230. The nullity of the penal clause does not carry with it
    that of the principal obligation.
    The nullity of the principal obligation carries with it
    that of the penal clause.
    Example Scenario:
    1. Y is a tenant of X. In their lease contract, there is a
    stipulation where should Y fail to pay two (2)
    consecutive monthly payments, she will agree to
    become X’s mistress.
    2. Y agreed to become X’s mistress. If ever Y wanted to
    back out from their agreement, Y must pay a penalty
    of PHP 10,000.

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