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T his web page contains the Book IV of

Republic Act No. 386

June 18, 1949

T he Civil Code of the Philippines

AN ACT TO ORDAIN AND INST IT UT E T HE CIVIL CODE

OF T HE PHILIPPINES

BOOK IV

OBLIGAT IONS AND CONT RACTS

T itle. I. - OBLIGAT IONS

CHAPT ER 1

GENERAL PROVISIONS
 Art . 1156. An obligat ion is a juridical necessit y to give, to
do or not to do. (n)

Art . 1157. Obligat ions arise from:

(1) Law;

(2) Cont ract s;

(3) Quasi-cont ract s;

(4) Act s or omissions punished by law; and

(5) Quasi-delict s. (1089a)

Table of Contents
Art . 1158. Obligat ions derived from law are not
PRELIMINARY presumed. Only t hose expressly det ermined in t his Code
T IT LE or in special laws are demandable, and shall be
Articles 1-36 regulat ed by t he precept s of t he law which est ablishes
BOOK I t hem; and as to what has not been foreseen, by t he
Articles 37-413 provisions of t his Book. (1090)
BOOK II
Art . 1159. Obligat ions arising from cont ract s have t he
Articles 414-711
force of law bet ween t he cont ract ing part ies and
BOOK III
should be complied wit h in good fait h. (1091a)
Articles 712-1155
BOOK IV Art . 1160. Obligat ions derived from quasi-cont ract s
Articles 1156- shall be subject to t he provisions of Chapt er 1, T it le XVII,
2270 of t his Book. (n)
APPENDICES
Art . 1161. Civil obligat ions arising from criminal offenses
Philippine Laws: shall be governed by t he penal laws, subject to t he
provisions of Art icle 2177, and of t he pert inent
POLIT ICAL &
provisions of Chapt er 2, Preliminary T it le, on Human
INT ERNAT IONAL
Relat ions, and of T it le XVIII of t his Book, regulat ing
LAW
damages. (1092a)
LABOR LAW

CIVIL LAW Art . 1162. Obligat ions derived from quasi-delict s shall be
TAXAT ION LAW governed by t he provisions of Chapt er 2, T it le XVII of
MERCANT ILE/ t his Book, and by special laws. (1093a)
COMMERCIAL
CHAPT ER 2
LAW
NAT URE AND EFFECT OF OBLIGAT IONS
CRIMINAL LAW
 LEGAL ET HICS & Art . 1163. Every person obliged to give somet hing is also
PRACT ICAL obliged to t ake care of it wit h t he proper diligence of a
EXERCISES good fat her of a family, unless t he law or t he st ipulat ion
REMEDIAL LAW of t he part ies requires anot her st andard of care.
(1094a)
Relat ed Mat erials:
Art . 1164. T he creditor has a right to t he fruit s of t he
REPOSITORY OF
t hing from t he t ime t he obligat ion to deliver it arises.
LAWS, STAT UT ES
However, he shall acquire no real right over it unt il t he
& CODES
same has been delivered to him. (1095)
PHILIPPINE

SUPREME COURT Art . 1165. When what is to be delivered is a det erminat e

DECISIONS ON- t hing, t he creditor, in addit ion to t he right grant ed him by
LINE Art icle 1170, may compel t he debtor to make t he
US SUPREME delivery.
COURT
If t he t hing is indet erminat e or generic, he may ask t hat
DECISIONS ON-
t he obligat ion be complied wit h at t he expense of t he
LINE
debtor.

ChanRobles On-Line If t he obligor delays, or has promised to deliver t he same

Bar Review t hing to t wo or more persons who do not have t he same
int erest , he shall be responsible for any fort uitous event
unt il he has effect ed t he delivery. (1096)

Art . 1166. T he obligat ion to give a det erminat e t hing

includes t hat of delivering all it s accessions and
accessories, even t hough t hey may not have been
ment ioned. (1097a)

Art . 1167. If a person obliged to do somet hing fails to do

it , t he same shall be execut ed at his cost .

T his same rule shall be observed if he does it in

cont ravent ion of t he t enor of t he obligat ion.
Furt hermore, it may be decreed t hat what has been
poorly done be undone. (1098)

Art . 1168. When t he obligat ion consist s in not doing, and

t he obligor does what has been forbidden him, it shall
also be undone at his expense. (1099a)
 tratspm
Art . 1169. T hose obliged to deliver or to do somet hing
incur in delay from t he t ime t he obligee judicially or

tratspmuJ
ext rajudicially demands from t hem t he fulfillment of
t heir obligat ion.

Migrate to However, t he demand by t he creditor shall not be

necessary in order t hat delay may exist :

Greatness (1) When t he obligat ion or t he law expressly so

declare; or

(2) When from t he nat ure and t he circumst ances

Jumpstart Commerce
of t he obligat ion it appears t hat t he designat ion
of t he t ime when t he t hing is to be delivered or
t he service is to be rendered was a cont rolling
mot ive for t he est ablishment of t he cont ract ; or

(3) When demand would be useless, as when t he

obligor has rendered it beyond his power to
perform.

In reciprocal obligat ions, neit her part y incurs in delay if

t he ot her does not comply or is not ready to comply in a
proper manner wit h what is incumbent upon him. From
t he moment one of t he part ies fulfills his obligat ion,
delay by t he ot her begins. (1100a)
Open
Art . 1170. T hose who in t he performance of t heir
obligat ions are guilt y of fraud, negligence, or delay, and
t hose who in any manner cont ravene t he t enor t hereof,
are liable for damages. (1101)

Art . 1171. Responsibilit y arising from fraud is

demandable in all obligat ions. Any waiver of an act ion for
fut ure fraud is void. (1102a)

Art . 1172. Responsibilit y arising from negligence in t he

performance of every kind of obligat ion is also
demandable, but such liabilit y may be regulat ed by t he
court s, according to t he circumst ances. (1103)

Art . 1173. T he fault or negligence of t he obligor consist s

in t he omission of t hat diligence which is required by t he
nat ure of t he obligat ion and corresponds wit h t he
circumst ances of t he persons, of t he t ime and of t he
place. When negligence shows bad fait h, t he provisions
of Art icles 1171 and 2201, paragraph 2, shall apply.

If t he law or cont ract does not st at e t he diligence which

is to be observed in t he performance, t hat which is
expect ed of a good fat her of a family shall be required.
(1104a)

Art . 1174. Except in cases expressly specified by t he

law, or when it is ot herwise declared by st ipulat ion, or
when t he nat ure of t he obligat ion requires t he
assumpt ion of risk, no person shall be responsible for
t hose event s which could not be foreseen, or which,
t hough foreseen, were inevit able. (1105a)

Art . 1175. Usurious t ransact ions shall be governed by

special laws. (n)

Art . 1176. T he receipt of t he principal by t he creditor

wit hout reservat ion wit h respect to t he int erest , shall
give rise to t he presumpt ion t hat said int erest has been
paid.

T he receipt of a lat er inst allment of a debt wit hout

reservat ion as to prior inst allment s, shall likewise raise
t he presumpt ion t hat such inst allment s have been paid.
(1110a)

Art . 1177. T he creditors, aft er having pursued t he

propert y in possession of t he debtor to sat isfy t heir
claims, may exercise all t he right s and bring all t he
act ions of t he lat t er for t he same purpose, save t hose
which are inherent in his person; t hey may also impugn
t he act s which t he debtor may have done to defraud
t hem. (1111)

Art . 1178. Subject to t he laws, all right s acquired in

virt ue of an obligat ion are t ransmissible, if t here has
been no st ipulat ion to t he cont rary. (1112)
 CHAPT ER 3

DIFFERENT KINDS OF OBLIGAT IONS

SECT ION 1. - Pure and Conditional Obligations

Art . 1179. Every obligat ion whose performance does not

depend upon a fut ure or uncert ain event , or upon a past
event unknown to t he part ies, is demandable at once.

Every obligat ion which cont ains a resolutory condit ion

shall also be demandable, wit hout prejudice to t he
effect s of t he happening of t he event . (1113)

Art . 1180. When t he debtor binds himself to pay when

his means permit him to do so, t he obligat ion shall be
deemed to be one wit h a period, subject to t he
provisions of Art icle 1197. (n)

Art . 1181. In condit ional obligat ions, t he acquisit ion of

right s, as well as t he ext inguishment or loss of t hose
already acquired, shall depend upon t he happening of
t he event which const it ut es t he condit ion. (1114)

Art . 1182. When t he fulfillment of t he condit ion depends

upon t he sole will of t he debtor, t he condit ional
obligat ion shall be void. If it depends upon chance or
upon t he will of a t hird person, t he obligat ion shall t ake
effect in conformit y wit h t he provisions of t his Code.
(1115)

Art . 1183. Impossible condit ions, t hose cont rary to good

customs or public policy and t hose prohibit ed by law
shall annul t he obligat ion which depends upon t hem. If
t he obligat ion is divisible, t hat part t hereof which is not
affect ed by t he impossible or unlawful condit ion shall
be valid.

T he condit ion not to do an impossible t hing shall be

considered as not having been agreed upon. (1116a)

Art . 1184. T he condit ion t hat some event happen at a

det erminat e t ime shall ext inguish t he obligat ion as soon
as t he t ime expires or if it has become indubit able t hat
t he event will not t ake place. (1117)

Art . 1185. T he condit ion t hat some event will not

happen at a det erminat e t ime shall render t he obligat ion
effect ive from t he moment t he t ime indicat ed has
elapsed, or if it has become evident t hat t he event
cannot occur.

If no t ime has been fixed, t he condit ion shall be deemed

fulfilled at such t ime as may have probably been
cont emplat ed, bearing in mind t he nat ure of t he
obligat ion. (1118)

Art . 1186. T he condit ion shall be deemed fulfilled when

t he obligor volunt arily prevent s it s fulfillment . (1119)

Art . 1187. T he effect s of a condit ional obligat ion to give,

once t he condit ion has been fulfilled, shall ret roact to
t he day of t he const it ut ion of t he obligat ion.
Nevert heless, when t he obligat ion imposes reciprocal
prest at ions upon t he part ies, t he fruit s and int erest s
during t he pendency of t he condit ion shall be deemed to
have been mut ually compensat ed. If t he obligat ion is
unilat eral, t he debtor shall appropriat e t he fruit s and
int erest s received, unless from t he nat ure and
circumst ances of t he obligat ion it should be inferred
t hat t he int ent ion of t he person const it ut ing t he same
was different .

In obligat ions to do and not to do, t he court s shall

det ermine, in each case, t he ret roact ive effect of t he
condit ion t hat has been complied wit h. (1120)

Art . 1188. T he creditor may, before t he fulfillment of t he

condit ion, bring t he appropriat e act ions for t he
preservat ion of his right .

T he debtor may recover what during t he same t ime he

has paid by mist ake in case of a suspensive condit ion.
(1121a)
Art . 1189. When t he condit ions have been imposed wit h
t he int ent ion of suspending t he efficacy of an obligat ion
to give, t he following rules shall be observed in case of
t he improvement , loss or det eriorat ion of t he t hing
during t he pendency of t he condit ion:

(1) If t he t hing is lost wit hout t he fault of t he

debtor, t he obligat ion shall be ext inguished;

(2) If t he t hing is lost t hrough t he fault of t he

debtor, he shall be obliged to pay damages; it is
understood t hat t he t hing is lost when it perishes,
or goes out of commerce, or disappears in such a
way t hat it s exist ence is unknown or it cannot be
recovered;

(3) When t he t hing det eriorat es wit hout t he fault

of t he debtor, t he impairment is to be borne by
t he creditor;

(4) If it det eriorat es t hrough t he fault of t he

debtor, t he creditor may choose bet ween t he
rescission of t he obligat ion and it s fulfillment ,
wit h indemnit y for damages in eit her case;

(5) If t he t hing is improved by it s nat ure, or by

t ime, t he improvement shall inure to t he benefit
of t he creditor;

(6) If it is improved at t he expense of t he debtor,

he shall have no ot her right t han t hat grant ed to
t he usufruct uary. (1122)

Art . 1190. When t he condit ions have for t heir purpose

t he ext inguishment of an obligat ion to give, t he part ies,
upon t he fulfillment of said condit ions, shall ret urn to
each ot her what t hey have received.

In case of t he loss, det eriorat ion or improvement of t he

t hing, t he provisions which, wit h respect to t he debtor,
are laid down in t he preceding art icle shall be applied to
t he part y who is bound to ret urn.
As for t he obligat ions to do and not to do, t he provisions
of t he second paragraph of Art icle 1187 shall be
observed as regards t he effect of t he ext inguishment
of t he obligat ion. (1123)

Art . 1191. T he power to rescind obligat ions is implied in

reciprocal ones, in case one of t he obligors should not
comply wit h what is incumbent upon him.

T he injured part y may choose bet ween t he fulfillment

and t he rescission of t he obligat ion, wit h t he payment
of damages in eit her case. He may also seek rescission,
even aft er he has chosen fulfillment , if t he lat t er should
become impossible.

T he court shall decree t he rescission claimed, unless

t here be just cause aut horizing t he fixing of a period.

T his is understood to be wit hout prejudice to t he right s

of t hird persons who have acquired t he t hing, in
accordance wit h Art icles 1385 and 1388 and t he
Mort gage Law. (1124)

Art . 1192. In case bot h part ies have commit t ed a breach

of t he obligat ion, t he liabilit y of t he first infractor shall
be equit ably t empered by t he court s. If it cannot be
det ermined which of t he part ies first violat ed t he
cont ract , t he same shall be deemed ext inguished, and
each shall bear his own damages. (n)

SECT ION 2. - Obligations with a Period

Art . 1193. Obligat ions for whose fulfillment a day cert ain
has been fixed, shall be demandable only when t hat day
comes.

Obligat ions wit h a resolutory period t ake effect at once,

but t erminat e upon arrival of t he day cert ain.

A day cert ain is understood to be t hat which must

necessarily come, alt hough it may not be known when.
If t he uncert aint y consist s in whet her t he day will come
or not , t he obligat ion is condit ional, and it shall be
regulat ed by t he rules of t he preceding Sect ion. (1125a)

Art . 1194. In case of loss, det eriorat ion or improvement

of t he t hing before t he arrival of t he day cert ain, t he
rules in Art icle 1189 shall be observed. (n)

Art . 1195. Anyt hing paid or delivered before t he arrival of

t he period, t he obligor being unaware of t he period or
believing t hat t he obligat ion has become due and
demandable, may be recovered, wit h t he fruit s and
int erest s. (1126a)

Art . 1196. Whenever in an obligat ion a period is

designat ed, it is presumed to have been est ablished for
t he benefit of bot h t he creditor and t he debtor, unless
from t he t enor of t he same or ot her circumst ances it
should appear t hat t he period has been est ablished in
favor of one or of t he ot her. (1127)

Art . 1197. If t he obligat ion does not fix a period, but from
it s nat ure and t he circumst ances it can be inferred t hat
a period was int ended, t he court s may fix t he durat ion
t hereof.

T he court s shall also fix t he durat ion of t he period when

it depends upon t he will of t he debtor.

In every case, t he court s shall det ermine such period as

may under t he circumst ances have been probably
cont emplat ed by t he part ies. Once fixed by t he court s,
t he period cannot be changed by t hem. (1128a)

Art . 1198. T he debtor shall lose every right to make use

of t he period:

(1) When aft er t he obligat ion has been cont ract ed, he
becomes insolvent , unless he gives a guarant y or
securit y for t he debt ;

(2) When he does not furnish to t he creditor t he

guarant ies or securit ies which he has promised;
(3) When by his own act s he has impaired said
guarant ies or securit ies aft er t heir est ablishment , and
when t hrough a fort uitous event t hey disappear, unless
he immediat ely gives new ones equally sat isfactory;

(4) When t he debtor violat es any undert aking, in

considerat ion of which t he creditor agreed to t he period;

(5) When t he debtor at t empt s to abscond. (1129a)

SECT ION 3. - Alternative Obligations

Art . 1199. A person alt ernat ively bound by different

prest at ions shall complet ely perform one of t hem.

T he creditor cannot be compelled to receive part of one

and part of t he ot her undert aking. (1131)

Art . 1200. T he right of choice belongs to t he debtor,

unless it has been expressly grant ed to t he creditor.

T he debtor shall have no right to choose t hose

prest at ions which are impossible, unlawful or which
could not have been t he object of t he obligat ion. (1132)

Art . 1201. T he choice shall produce no effect except

from t he t ime it has been communicat ed. (1133)

Art . 1202. T he debtor shall lose t he right of choice when

among t he prest at ions whereby he is alt ernat ively
bound, only one is pract icable. (1134)

Art . 1203. If t hrough t he creditor's act s t he debtor

cannot make a choice according to t he t erms of t he
obligat ion, t he lat t er may rescind t he cont ract wit h
damages. (n)

Art . 1204. T he creditor shall have a right to indemnit y for

damages when, t hrough t he fault of t he debtor, all t he
t hings which are alt ernat ively t he object of t he
obligat ion have been lost , or t he compliance of t he
obligat ion has become impossible.
T he indemnit y shall be fixed t aking as a basis t he value
of t he last t hing which disappeared, or t hat of t he
service which last became impossible.

Damages ot her t han t he value of t he last t hing or

service may also be awarded. (1135a)

Art . 1205. When t he choice has been expressly given to

t he creditor, t he obligat ion shall cease to be alt ernat ive
from t he day when t he select ion has been
communicat ed to t he debtor.

Unt il t hen t he responsibilit y of t he debtor shall be

governed by t he following rules:

(1) If one of t he t hings is lost t hrough a fort uitous

event , he shall perform t he obligat ion by delivering
t hat which t he creditor should choose from
among t he remainder, or t hat which remains if
only one subsist s;

(2) If t he loss of one of t he t hings occurs t hrough

t he fault of t he debtor, t he creditor may claim any
of t hose subsist ing, or t he price of t hat which,
t hrough t he fault of t he former, has disappeared,
wit h a right to damages;

(3) If all t he t hings are lost t hrough t he fault of

t he debtor, t he choice by t he creditor shall fall
upon t he price of any one of t hem, also wit h
indemnit y for damages.

T he same rules shall be applied to obligat ions to do or

not to do in case one, some or all of t he prest at ions
should become impossible. (1136a)

Art . 1206. When only one prest at ion has been agreed
upon, but t he obligor may render anot her in subst it ut ion,
t he obligat ion is called facult at ive.

T he loss or det eriorat ion of t he t hing int ended as a

subst it ut e, t hrough t he negligence of t he obligor, does
not render him liable. But once t he subst it ut ion has
been made, t he obligor is liable for t he loss of t he
subst it ut e on account of his delay, negligence or fraud.
(n)

SECT ION 4. - Joint and Solidary Obligations

Art . 1207. T he concurrence of t wo or more creditors or

of t wo or more debtors in one and t he same obligat ion
does not imply t hat each one of t he former has a right
to demand, or t hat each one of t he lat t er is bound to
render, ent ire compliance wit h t he prest at ion. T here is a
solidary liabilit y only when t he obligat ion expressly so
st at es, or when t he law or t he nat ure of t he obligat ion
requires solidarit y. (1137a)

Art . 1208. If from t he law, or t he nat ure or t he wording of

t he obligat ions to which t he preceding art icle refers t he
cont rary does not appear, t he credit or debt shall be
presumed to be divided into as many shares as t here
are creditors or debtors, t he credit s or debt s being
considered dist inct from one anot her, subject to t he
Rules of Court governing t he mult iplicit y of suit s.
(1138a)

Art . 1209. If t he division is impossible, t he right of t he

creditors may be prejudiced only by t heir collect ive act s,
and t he debt can be enforced only by proceeding
against all t he debtors. If one of t he lat t er should be
insolvent , t he ot hers shall not be liable for his share.
(1139)

Art . 1210. T he indivisibilit y of an obligat ion does not

necessarily give rise to solidarit y. Nor does solidarit y of
it self imply indivisibilit y. (n)

Art . 1211. Solidarit y may exist alt hough t he creditors

and t he debtors may not be bound in t he same manner
and by t he same periods and condit ions. (1140)

Art . 1212. Each one of t he solidary creditors may do

what ever may be useful to t he ot hers, but not anyt hing
which may be prejudicial to t he lat t er. (1141a)
Art . 1213. A solidary creditor cannot assign his right s
wit hout t he consent of t he ot hers. (n)

Art . 1214. T he debtor may pay any one of t he solidary

creditors; but if any demand, judicial or ext rajudicial, has
been made by one of t hem, payment should be made to
him. (1142a)

Art . 1215. Novat ion, compensat ion, confusion or

remission of t he debt , made by any of t he solidary
creditors or wit h any of t he solidary debtors, shall
ext inguish t he obligat ion, wit hout prejudice to t he
provisions of Art icle 1219.

T he creditor who may have execut ed any of t hese act s,

as well as he who collect s t he debt , shall be liable to t he
ot hers for t he share in t he obligat ion corresponding to
t hem. (1143)

Art . 1216. T he creditor may proceed against any one of

t he solidary debtors or some or all of t hem
simult aneously. T he demand made against one of t hem
shall not be an obst acle to t hose which may
subsequent ly be direct ed against t he ot hers, so long as
t he debt has not been fully collect ed. (1144a)

Art . 1217. Payment made by one of t he solidary debtors

ext inguishes t he obligat ion. If t wo or more solidary
debtors offer to pay, t he creditor may choose which
offer to accept .

He who made t he payment may claim from his co-

debtors only t he share which corresponds to each, wit h
t he int erest for t he payment already made. If t he
payment is made before t he debt is due, no int erest for
t he int ervening period may be demanded.

When one of t he solidary debtors cannot , because of his

insolvency, reimburse his share to t he debtor paying t he
obligat ion, such share shall be borne by all his co-
debtors, in proport ion to t he debt of each. (1145a)
Art . 1218. Payment by a solidary debtor shall not ent it le
him to reimbursement from his co-debtors if such
payment is made aft er t he obligat ion has prescribed or
become illegal. (n)

Art . 1219. T he remission made by t he creditor of t he

share which affect s one of t he solidary debtors does
not release t he lat t er from his responsibilit y towards
t he co-debtors, in case t he debt had been tot ally paid by
anyone of t hem before t he remission was effect ed.
(1146a)

Art . 1220. T he remission of t he whole obligat ion,

obt ained by one of t he solidary debtors, does not ent it le
him to reimbursement from his co-debtors. (n)

Art . 1221. If t he t hing has been lost or if t he prest at ion

has become impossible wit hout t he fault of t he solidary
debtors, t he obligat ion shall be ext inguished.

If t here was fault on t he part of any one of t hem, all

shall be responsible to t he creditor, for t he price and t he
payment of damages and int erest , wit hout prejudice to
t heir act ion against t he guilt y or negligent debtor.

If t hrough a fort uitous event , t he t hing is lost or t he

performance has become impossible aft er one of t he
solidary debtors has incurred in delay t hrough t he
judicial or ext rajudicial demand upon him by t he creditor,
t he provisions of t he preceding paragraph shall apply.
(1147a)

Art . 1222. A solidary debtor may, in act ions filed by t he

creditor, avail himself of all defenses which are derived
from t he nat ure of t he obligat ion and of t hose which are
personal to him, or pert ain to his own share. Wit h
respect to t hose which personally belong to t he ot hers,
he may avail himself t hereof only as regards t hat part of
t he debt for which t he lat t er are responsible. (1148a)

SECT ION 5. - Divisible and Indivisible Obligations

Art . 1223. T he divisibilit y or indivisibilit y of t he t hings
t hat are t he object of obligat ions in which t here is only
one debtor and only one creditor does not alt er or
modify t he provisions of Chapt er 2 of t his T it le. (1149)

Art . 1224. A joint indivisible obligat ion gives rise to

indemnit y for damages from t he t ime anyone of t he
debtors does not comply wit h his undert aking. T he
debtors who may have been ready to fulfill t heir
promises shall not cont ribut e to t he indemnit y beyond
t he corresponding port ion of t he price of t he t hing or of
t he value of t he service in which t he obligat ion consist s.
(1150)

Art . 1225. For t he purposes of t he preceding art icles,

obligat ions to give definit e t hings and t hose which are
not suscept ible of part ial performance shall be deemed
to be indivisible.

When t he obligat ion has for it s object t he execut ion of a

cert ain number of days of work, t he accomplishment of
work by met rical unit s, or analogous t hings which by
t heir nat ure are suscept ible of part ial performance, it
shall be divisible.

However, even t hough t he object or service may be

physically divisible, an obligat ion is indivisible if so
provided by law or int ended by t he part ies.

In obligat ions not to do, divisibilit y or indivisibilit y shall be

det ermined by t he charact er of t he prest at ion in each
part icular case. (1151a)

SECT ION 6. - Obligations with a Penal Clause

Art . 1226. In obligat ions wit h a penal clause, t he penalt y

shall subst it ut e t he indemnit y for damages and t he
payment of int erest s in case of noncompliance, if t here
is no st ipulat ion to t he cont rary. Nevert heless, damages
shall be paid if t he obligor refuses to pay t he penalt y or
is guilt y of fraud in t he fulfillment of t he obligat ion.
T he penalt y may be enforced only when it is
demandable in accordance wit h t he provisions of t his
Code. (1152a)

Art . 1227. T he debtor cannot exempt himself from t he

performance of t he obligat ion by paying t he penalt y,
save in t he case where t his right has been expressly
reserved for him. Neit her can t he creditor demand t he
fulfillment of t he obligat ion and t he sat isfact ion of t he
penalt y at t he same t ime, unless t his right has been
clearly grant ed him. However, if aft er t he creditor has
decided to require t he fulfillment of t he obligat ion, t he
performance t hereof should become impossible
wit hout his fault , t he penalt y may be enforced. (1153a)

Art . 1228. Proof of act ual damages suffered by t he

creditor is not necessary in order t hat t he penalt y may
be demanded. (n)

Art . 1229. T he judge shall equit ably reduce t he penalt y

when t he principal obligat ion has been part ly or
irregularly complied wit h by t he debtor. Even if t here has
been no performance, t he penalt y may also be reduced
by t he court s if it is iniquitous or unconscionable.
(1154a)

Art . 1230. T he nullit y of t he penal clause does not carry

wit h it t hat of t he principal obligat ion.

T he nullit y of t he principal obligat ion carries wit h it t hat

of t he penal clause. (1155)

CHAPT ER 4

EXT INGUISHMENT OF OBLIGAT IONS

GENERAL PROVISIONS

Art . 1231. Obligat ions are ext inguished:

(1) By payment or performance:

(2) By t he loss of t he t hing due:

(3) By t he condonat ion or remission of t he debt ;

 (4) By t he confusion or merger of t he right s of
creditor and debtor;

(5) By compensat ion;

(6) By novat ion.

Ot her causes of ext inguishment of obligat ions, such as

annulment , rescission, fulfillment of a resolutory
condit ion, and prescript ion, are governed elsewhere in
t his Code. (1156a)

SECT ION 1. - Payment or Performance

Art . 1232. Payment means not only t he delivery of

money but also t he performance, in any ot her manner,
of an obligat ion. (n)

Art . 1233. A debt shall not be understood to have been

paid unless t he t hing or service in which t he obligat ion
consist s has been complet ely delivered or rendered, as
t he case may be. (1157)

Art . 1234. If t he obligat ion has been subst ant ially

performed in good fait h, t he obligor may recover as
t hough t here had been a st rict and complet e fulfillment ,
less damages suffered by t he obligee. (n)

Art . 1235. When t he obligee accept s t he performance,

knowing it s incomplet eness or irregularit y, and wit hout
expressing any prot est or object ion, t he obligat ion is
deemed fully complied wit h. (n)

Art . 1236. T he creditor is not bound to accept payment

or performance by a t hird person who has no int erest in
t he fulfillment of t he obligat ion, unless t here is a
st ipulat ion to t he cont rary.

Whoever pays for anot her may demand from t he debtor

what he has paid, except t hat if he paid wit hout t he
knowledge or against t he will of t he debtor, he can
recover only insofar as t he payment has been beneficial
to t he debtor. (1158a)

Art . 1237. Whoever pays on behalf of t he debtor wit hout

t he knowledge or against t he will of t he lat t er, cannot
compel t he creditor to subrogat e him in his right s, such
as t hose arising from a mort gage, guarant y, or penalt y.
(1159a)

Art . 1238. Payment made by a t hird person who does

not int end to be reimbursed by t he debtor is deemed to
be a donat ion, which requires t he debtor's consent . But
t he payment is in any case valid as to t he creditor who
has accept ed it . (n)

Art . 1239. In obligat ions to give, payment made by one

who does not have t he free disposal of t he t hing due
and capacit y to alienat e it shall not be valid, wit hout
prejudice to t he provisions of Art icle 1427 under t he
T it le on " Natural Obligations ." (1160a)

Art . 1240. Payment shall be made to t he person in

whose favor t he obligat ion has been const it ut ed, or his
successor in int erest , or any person aut horized to
receive it . (1162a)

Art . 1241. Payment to a person who is incapacit at ed to

administ er his propert y shall be valid if he has kept t he
t hing delivered, or insofar as t he payment has been
beneficial to him.

Payment made to a t hird person shall also be valid

insofar as it has redounded to t he benefit of t he
creditor. Such benefit to t he creditor need not be proved
in t he following cases:

(1) If aft er t he payment , t he t hird person acquires

t he creditor's right s;

(2) If t he creditor rat ifies t he payment to t he t hird

person;
 (3) If by t he creditor's conduct , t he debtor has
been led to believe t hat t he t hird person had
aut horit y to receive t he payment . (1163a)

Art . 1242. Payment made in good fait h to any

person in possession of t he credit shall release
t he debtor. (1164)

Art . 1243. Payment made to t he creditor by t he debtor

aft er t he lat t er has been judicially ordered to ret ain t he
debt shall not be valid. (1165)

Art . 1244. T he debtor of a t hing cannot compel t he

creditor to receive a different one, alt hough t he lat t er
may be of t he same value as, or more valuable t han t hat
which is due.

In obligat ions to do or not to do, an act or forbearance

cannot be subst it ut ed by anot her act or forbearance
against t he obligee's will. (1166a)

Art . 1245. Dat ion in payment , whereby propert y is

alienat ed to t he creditor in sat isfact ion of a debt in
money, shall be governed by t he law of sales. (n)

Art . 1246. When t he obligat ion consist s in t he delivery of

an indet erminat e or generic t hing, whose qualit y and
circumst ances have not been st at ed, t he creditor
cannot demand a t hing of superior qualit y. Neit her can
t he debtor deliver a t hing of inferior qualit y. T he purpose
of t he obligat ion and ot her circumst ances shall be
t aken into considerat ion. (1167a)

Art . 1247. Unless it is ot herwise st ipulat ed, t he

ext rajudicial expenses required by t he payment shall be
for t he account of t he debtor. Wit h regard to judicial
cost s, t he Rules of Court shall govern. (1168a)

Art . 1248. Unless t here is an express st ipulat ion to t hat

effect , t he creditor cannot be compelled part ially to
receive t he prest at ions in which t he obligat ion consist s.
Neit her may t he debtor be required to make part ial
payment s.

However, when t he debt is in part liquidat ed and in part

unliquidat ed, t he creditor may demand and t he debtor
may effect t he payment of t he former wit hout wait ing
for t he liquidat ion of t he lat t er. (1169a)

Art . 1249. T he payment of debt s in money shall be made

in t he currency st ipulat ed, and if it is not possible to
deliver such currency, t hen in t he currency which is legal
t ender in t he Philippines.

T he delivery of promissory not es payable to order, or

bills of exchange or ot her mercant ile document s shall
produce t he effect of payment only when t hey have
been cashed, or when t hrough t he fault of t he creditor
t hey have been impaired.

In t he meant ime, t he act ion derived from t he original

obligat ion shall be held in t he abeyance. (1170)

Art . 1250. In case an ext raordinary inflat ion or deflat ion

of t he currency st ipulat ed should supervene, t he value
of t he currency at t he t ime of t he est ablishment of t he
obligat ion shall be t he basis of payment , unless t here is
an agreement to t he cont rary. (n)

Art . 1251. Payment shall be made in t he place

designat ed in t he obligat ion.

T here being no express st ipulat ion and if t he

undert aking is to deliver a det erminat e t hing, t he
payment shall be made wherever t he t hing might be at
t he moment t he obligat ion was const it ut ed.

In any ot her case t he place of payment shall be t he

domicile of t he debtor.

If t he debtor changes his domicile in bad fait h or aft er

he has incurred in delay, t he addit ional expenses shall be
borne by him.
T hese provisions are wit hout prejudice to venue under
t he Rules of Court . (1171a)

SUBSECT ION 1. - Application of Payments

Art . 1252. He who has various debt s of t he same kind in

favor of one and t he same creditor, may declare at t he
t ime of making t he payment , to which of t hem t he
same must be applied. Unless t he part ies so st ipulat e,
or when t he applicat ion of payment is made by t he part y
for whose benefit t he t erm has been const it ut ed,
applicat ion shall not be made as to debt s which are not
yet due.

If t he debtor accept s from t he creditor a receipt in

which an applicat ion of t he payment is made, t he
former cannot complain of t he same, unless t here is a
cause for invalidat ing t he cont ract . (1172a)

Art . 1253. If t he debt produces int erest , payment of t he

principal shall not be deemed to have been made unt il
t he int erest s have been covered. (1173)

Art . 1254. When t he payment cannot be applied in

accordance wit h t he preceding rules, or if applicat ion
can not be inferred from ot her circumst ances, t he debt
which is most onerous to t he debtor, among t hose due,
shall be deemed to have been sat isfied.

If t he debt s due are of t he same nat ure and burden, t he

payment shall be applied to all of t hem proport ionat ely.
(1174a)

SUBSECT ION 2. - Payment by Cession

Art . 1255. T he debtor may cede or assign his propert y to

his creditors in payment of his debt s. T his cession,
unless t here is st ipulat ion to t he cont rary, shall only
release t he debtor from responsibilit y for t he net
proceeds of t he t hing assigned. T he agreement s which,
on t he effect of t he cession, are made bet ween t he
debtor and his creditors shall be governed by special
laws. (1175a)

SUBSECT ION 3. - Tender of Payment and

Consignation

Art . 1256. If t he creditor to whom t ender of payment

has been made refuses wit hout just cause to accept it ,
t he debtor shall be released from responsibilit y by t he
consignat ion of t he t hing or sum due.

Consignat ion alone shall produce t he same effect in t he

following cases:

(1) When t he creditor is absent or unknown, or

does not appear at t he place of payment ;

(2) When he is incapacit at ed to receive t he

payment at t he t ime it is due;

(3) When, wit hout just cause, he refuses to give a

receipt ;

(4) When t wo or more persons claim t he same

right to collect ;

(5) When t he t it le of t he obligat ion has been lost .

(1176a)

Art . 1257. In order t hat t he consignat ion of t he t hing due

may release t he obligor, it must first be announced to
t he persons int erest ed in t he fulfillment of t he
obligat ion.

T he consignat ion shall be ineffect ual if it is not made

st rict ly in consonance wit h t he provisions which
regulat e payment . (1177)

Art . 1258. Consignat ion shall be made by deposit ing t he

t hings due at t he disposal of judicial aut horit y, before
whom t he t ender of payment shall be proved, in a proper
case, and t he announcement of t he consignat ion in
ot her cases.

T he consignat ion having been made, t he int erest ed

part ies shall also be not ified t hereof. (1178)

Art . 1259. T he expenses of consignat ion, when properly

made, shall be charged against t he creditor. (1178)

Art . 1260. Once t he consignat ion has been duly made,

t he debtor may ask t he judge to order t he cancellat ion
of t he obligat ion.

Before t he creditor has accept ed t he consignat ion, or

before a judicial declarat ion t hat t he consignat ion has
been properly made, t he debtor may wit hdraw t he t hing
or t he sum deposit ed, allowing t he obligat ion to remain
in force. (1180)

Art . 1261. If, t he consignat ion having been made, t he

creditor should aut horize t he debtor to wit hdraw t he
same, he shall lose every preference which he may have
over t he t hing. T he co-debtors, guarantors and suret ies
shall be released. (1181a)

SECT ION 2. - Loss of the T hing Due

Art . 1262. An obligat ion which consist s in t he delivery of

a det erminat e t hing shall be ext inguished if it should be
lost or dest royed wit hout t he fault of t he debtor, and
before he has incurred in delay.

When by law or st ipulat ion, t he obligor is liable even for

fort uitous event s, t he loss of t he t hing does not
ext inguish t he obligat ion, and he shall be responsible for
damages. T he same rule applies when t he nat ure of t he
obligat ion requires t he assumpt ion of risk. (1182a)

Art . 1263. In an obligat ion to deliver a generic t hing, t he

loss or dest ruct ion of anyt hing of t he same kind does
not ext inguish t he obligat ion. (n)
Art . 1264. T he court s shall det ermine whet her, under
t he circumst ances, t he part ial loss of t he object of t he
obligat ion is so import ant as to ext inguish t he
obligat ion. (n)

Art . 1265. Whenever t he t hing is lost in t he possession

of t he debtor, it shall be presumed t hat t he loss was
due to his fault , unless t here is proof to t he cont rary,
and wit hout prejudice to t he provisions of art icle 1165.
T his presumpt ion does not apply in case of eart hquake,
flood, storm, or ot her nat ural calamit y. (1183a)

Art . 1266. T he debtor in obligat ions to do shall also be

released when t he prest at ion becomes legally or
physically impossible wit hout t he fault of t he obligor.
(1184a)

Art . 1267. When t he service has become so difficult as

to be manifest ly beyond t he cont emplat ion of t he
part ies, t he obligor may also be released t herefrom, in
whole or in part . (n)

Art . 1268. When t he debt of a t hing cert ain and

det erminat e proceeds from a criminal offense, t he
debtor shall not be exempt ed from t he payment of it s
price, what ever may be t he cause for t he loss, unless
t he t hing having been offered by him to t he person who
should receive it , t he lat t er refused wit hout just ificat ion
to accept it . (1185)

Art . 1269. T he obligat ion having been ext inguished by

t he loss of t he t hing, t he creditor shall have all t he right s
of act ion which t he debtor may have against t hird
persons by reason of t he loss. (1186)

SECT ION 3. - Condonation or Remission of the Debt

Art . 1270. Condonat ion or remission is essent ially

grat uitous, and requires t he accept ance by t he obligor.
It may be made expressly or impliedly.
One and t he ot her kind shall be subject to t he rules
which govern inofficious donat ions. Express
condonat ion shall, furt hermore, comply wit h t he forms
of donat ion. (1187)

Art . 1271. T he delivery of a privat e document evidencing

a credit , made volunt arily by t he creditor to t he debtor,
implies t he renunciat ion of t he act ion which t he former
had against t he lat t er.

If in order to nullify t his waiver it should be claimed to be

inofficious, t he debtor and his heirs may uphold it by
proving t hat t he delivery of t he document was made in
virt ue of payment of t he debt . (1188)

Art . 1272. Whenever t he privat e document in which t he

debt appears is found in t he possession of t he debtor, it
shall be presumed t hat t he creditor delivered it
volunt arily, unless t he cont rary is proved. (1189)

Art . 1273. T he renunciat ion of t he principal debt shall

ext inguish t he accessory obligat ions; but t he waiver of
t he lat t er shall leave t he former in force. (1190)

Art . 1274. It is presumed t hat t he accessory obligat ion

of pledge has been remit t ed when t he t hing pledged,
aft er it s delivery to t he creditor, is found in t he
possession of t he debtor, or of a t hird person who owns
t he t hing. (1191a)

SECT ION 4. - Confusion or Merger of Rights

Art . 1275. T he obligat ion is ext inguished from t he t ime

t he charact ers of creditor and debtor are merged in t he
same person. (1192a)

Art . 1276. Merger which t akes place in t he person of t he

principal debtor or creditor benefit s t he guarantors.
Confusion which t akes place in t he person of any of t he
lat t er does not ext inguish t he obligat ion. (1193)

Art . 1277. Confusion does not ext inguish a joint

obligat ion except as regards t he share corresponding to
t he creditor or debtor in whom t he t wo charact ers
concur. (1194)

SECT ION 5. - Compensation

Art . 1278. Compensat ion shall t ake place when t wo

persons, in t heir own right , are creditors and debtors of
each ot her. (1195)

Art . 1279. In order t hat compensat ion may be proper, it

is necessary:

(1) T hat each one of t he obligors be bound

principally, and t hat he be at t he same t ime a
principal creditor of t he ot her;

(2) T hat bot h debt s consist in a sum of money, or

if t he t hings due are consumable, t hey be of t he
same kind, and also of t he same qualit y if t he
lat t er has been st at ed;

(3) T hat t he t wo debt s be due;

(4) T hat t hey be liquidat ed and demandable;

(5) T hat over neit her of t hem t here be any

ret ent ion or cont roversy, commenced by t hird
persons and communicat ed in due t ime to t he
debtor. (1196)

Art . 1280. Not wit hst anding t he provisions of t he

preceding art icle, t he guarantor may set up
compensat ion as regards what t he creditor may owe
t he principal debtor. (1197)

Art . 1281. Compensat ion may be tot al or part ial. When

t he t wo debt s are of t he same amount , t here is a tot al
compensat ion. (n)

Art . 1282. T he part ies may agree upon t he

compensat ion of debt s which are not yet due. (n)

Art . 1283. If one of t he part ies to a suit over an

obligat ion has a claim for damages against t he ot her,
t he former may set it off by proving his right to said
damages and t he amount t hereof. (n)

Art . 1284. When one or bot h debt s are rescissible or

voidable, t hey may be compensat ed against each ot her
before t hey are judicially rescinded or avoided. (n)

Art . 1285. T he debtor who has consent ed to t he

assignment of right s made by a creditor in favor of a
t hird person, cannot set up against t he assignee t he
compensat ion which would pert ain to him against t he
assignor, unless t he assignor was not ified by t he debtor
at t he t ime he gave his consent , t hat he reserved his
right to t he compensat ion.

If t he creditor communicat ed t he cession to him but

t he debtor did not consent t hereto, t he lat t er may set
up t he compensat ion of debt s previous to t he cession,
but not of subsequent ones.

If t he assignment is made wit hout t he knowledge of t he

debtor, he may set up t he compensat ion of all credit s
prior to t he same and also lat er ones unt il he had
knowledge of t he assignment . (1198a)

Art . 1286. Compensat ion t akes place by operat ion of

law, even t hough t he debt s may be payable at different
places, but t here shall be an indemnit y for expenses of
exchange or t ransport at ion to t he place of payment .
(1199a)

Art . 1287. Compensat ion shall not be proper when one

of t he debt s arises from a deposit um or from t he
obligat ions of a deposit ary or of a bailee in
commodat um.

Neit her can compensat ion be set up against a creditor

who has a claim for support due by grat uitous t it le,
wit hout prejudice to t he provisions of paragraph 2 of
Art icle 301. (1200a)
Art . 1288. Neit her shall t here be compensat ion if one of
t he debt s consist s in civil liabilit y arising from a penal
offense. (n)

Art . 1289. If a person should have against him several

debt s which are suscept ible of compensat ion, t he rules
on t he applicat ion of payment s shall apply to t he order
of t he compensat ion. (1201)

Art . 1290. When all t he requisit es ment ioned in Art icle

1279 are present , compensat ion t akes effect by
operat ion of law, and ext inguishes bot h debt s to t he
concurrent amount , even t hough t he creditors and
debtors are not aware of t he compensat ion. (1202a)

SECT ION 6. - Novation

Art . 1291. Obligat ions may be modified by:

(1) Changing t heir object or principal condit ions;

(2) Subst it ut ing t he person of t he debtor;

(3) Subrogat ing a t hird person in t he right s of t he

creditor. (1203)

Art . 1292. In order t hat an obligat ion may be

ext inguished by anot her which subst it ut e t he same, it is
imperat ive t hat it be so declared in unequivocal t erms,
or t hat t he old and t he new obligat ions be on every point
incompat ible wit h each ot her. (1204)

Art . 1293. Novat ion which consist s in subst it ut ing a new

debtor in t he place of t he original one, may be made
even wit hout t he knowledge or against t he will of t he
lat t er, but not wit hout t he consent of t he creditor.
Payment by t he new debtor gives him t he right s
ment ioned in Art icles 1236 and 1237. (1205a)

Art . 1294. If t he subst it ut ion is wit hout t he knowledge or

against t he will of t he debtor, t he new debtor's
insolvency or non-fulfillment of t he obligat ions shall not
give rise to any liabilit y on t he part of t he original debtor.
(n)

Art . 1295. T he insolvency of t he new debtor, who has

been proposed by t he original debtor and accept ed by
t he creditor, shall not revive t he act ion of t he lat t er
against t he original obligor, except when said insolvency
was already exist ing and of public knowledge, or known
to t he debtor, when t he delegat ed his debt . (1206a)

Art . 1296. When t he principal obligat ion is ext inguished

in consequence of a novat ion, accessory obligat ions
may subsist only insofar as t hey may benefit t hird
persons who did not give t heir consent . (1207)

Art . 1297. If t he new obligat ion is void, t he original one

shall subsist , unless t he part ies int ended t hat t he
former relat ion should be ext inguished in any event . (n)

Art . 1298. T he novat ion is void if t he original obligat ion

was void, except when annulment may be claimed only
by t he debtor or when rat ificat ion validat es act s which
are voidable. (1208a)

Art . 1299. If t he original obligat ion was subject to a

suspensive or resolutory condit ion, t he new obligat ion
shall be under t he same condit ion, unless it is ot herwise
st ipulat ed. (n)

Art . 1300. Subrogat ion of a t hird person in t he right s of

t he creditor is eit her legal or convent ional. T he former is
not presumed, except in cases expressly ment ioned in
t his Code; t he lat t er must be clearly est ablished in order
t hat it may t ake effect . (1209a)

Art . 1301. Convent ional subrogat ion of a t hird person

requires t he consent of t he original part ies and of t he
t hird person. (n)

Art . 1302. It is presumed t hat t here is legal subrogat ion:

(1) When a creditor pays anot her creditor who is

preferred, even wit hout t he debtor's knowledge;
 (2) When a t hird person, not int erest ed in t he
obligat ion, pays wit h t he express or t acit approval
of t he debtor;

(3) When, even wit hout t he knowledge of t he

debtor, a person int erest ed in t he fulfillment of
t he obligat ion pays, wit hout prejudice to t he
effect s of confusion as to t he lat t er's share.
(1210a)

Art . 1303. Subrogat ion t ransfers to t he persons

subrogat ed t he credit wit h all t he right s t hereto
appert aining, eit her against t he debtor or against t hird
person, be t hey guarantors or possessors of
mort gages, subject to st ipulat ion in a convent ional
subrogat ion. (1212a)

Art . 1304. A creditor, to whom part ial payment has been

made, may exercise his right for t he remainder, and he
shall be preferred to t he person who has been
subrogat ed in his place in virt ue of t he part ial payment
of t he same credit . (1213)

T itle II. - CONT RACTS

CHAPT ER 1

GENERAL PROVISIONS

Art . 1305. A cont ract is a meet ing of minds bet ween

t wo persons whereby one binds himself, wit h respect to
t he ot her, to give somet hing or to render some service.
(1254a)

Art . 1306. T he cont ract ing part ies may est ablish such
st ipulat ions, clauses, t erms and condit ions as t hey may
deem convenient , provided t hey are not cont rary to law,
morals, good customs, public order, or public policy.
(1255a)

Art . 1307. Innominat e cont ract s shall be regulat ed by

t he st ipulat ions of t he part ies, by t he provisions of
T it les I and II of t his Book, by t he rules governing t he
most analogous nominat e cont ract s, and by t he
customs of t he place. (n)

Art . 1308. T he cont ract must bind bot h cont ract ing
part ies; it s validit y or compliance cannot be left to t he
will of one of t hem. (1256a)

Art . 1309. T he det erminat ion of t he performance may

be left to a t hird person, whose decision shall not be
binding unt il it has been made known to bot h
cont ract ing part ies. (n)

Art . 1310. T he det erminat ion shall not be obligatory if it

is evident ly inequit able. In such case, t he court s shall
decide what is equit able under t he circumst ances. (n)

Art . 1311. Cont ract s t ake effect only bet ween t he

part ies, t heir assigns and heirs, except in case where
t he right s and obligat ions arising from t he cont ract are
not t ransmissible by t heir nat ure, or by st ipulat ion or by
provision of law. T he heir is not liable beyond t he value of
t he propert y he received from t he decedent .

If a cont ract should cont ain some st ipulat ion in favor of

a t hird person, he may demand it s fulfillment provided
he communicat ed his accept ance to t he obligor before
it s revocat ion. A mere incident al benefit or int erest of a
person is not sufficient . T he cont ract ing part ies must
have clearly and deliberat ely conferred a favor upon a
t hird person. (1257a)

Art . 1312. In cont ract s creat ing real right s, t hird persons
who come into possession of t he object of t he cont ract
are bound t hereby, subject to t he provisions of t he
Mort gage Law and t he Land Regist rat ion Laws. (n)

Art . 1313. Creditors are prot ect ed in cases of cont ract s

int ended to defraud t hem. (n)

Art . 1314. Any t hird person who induces anot her to

violat e his cont ract shall be liable for damages to t he
ot her cont ract ing part y. (n)
Art . 1315. Cont ract s are perfect ed by mere consent ,
and from t hat moment t he part ies are bound not only to
t he fulfillment of what has been expressly st ipulat ed
but also to all t he consequences which, according to
t heir nat ure, may be in keeping wit h good fait h, usage
and law. (1258)

Art . 1316. Real cont ract s, such as deposit , pledge and

Commodat um, are not perfect ed unt il t he delivery of
t he object of t he obligat ion. (n)

Art . 1317. No one may cont ract in t he name of anot her

wit hout being aut horized by t he lat t er, or unless he has
by law a right to represent him.

A cont ract ent ered into in t he name of anot her by one

who has no aut horit y or legal represent at ion, or who has
act ed beyond his powers, shall be unenforceable, unless
it is rat ified, expressly or impliedly, by t he person on
whose behalf it has been execut ed, before it is revoked
by t he ot her cont ract ing part y. (1259a)

CHAPT ER 2

ESSENT IAL REQUISIT ES OF CONT RACTS

GENERAL PROVISIONS

Art . 1318. T here is no cont ract unless t he following

requisit es concur:

(1) Consent of t he cont ract ing part ies;

(2) Object cert ain which is t he subject mat t er of

t he cont ract ;

(3) Cause of t he obligat ion which is est ablished.

(1261)

SECT ION 1. - Consent

Art . 1319. Consent is manifest ed by t he meet ing of t he

offer and t he accept ance upon t he t hing and t he cause
which are to const it ut e t he cont ract . T he offer must be
cert ain and t he accept ance absolut e. A qualified
accept ance const it ut es a count er-offer.

Accept ance made by let t er or t elegram does not bind

t he offerer except from t he t ime it came to his
knowledge. T he cont ract , in such a case, is presumed to
have been ent ered into in t he place where t he offer was
made. (1262a)

Art . 1320. An accept ance may be express or implied. (n)

Art . 1321. T he person making t he offer may fix t he t ime,

place, and manner of accept ance, all of which must be
complied wit h. (n)

Art . 1322. An offer made t hrough an agent is accept ed

from t he t ime accept ance is communicat ed to him. (n)

Art . 1323. An offer becomes ineffect ive upon t he deat h,

civil int erdict ion, insanit y, or insolvency of eit her part y
before accept ance is conveyed. (n)

Art . 1324. When t he offerer has allowed t he offeree a

cert ain period to accept , t he offer may be wit hdrawn at
any t ime before accept ance by communicat ing such
wit hdrawal, except when t he opt ion is founded upon a
considerat ion, as somet hing paid or promised. (n)

Art . 1325. Unless it appears ot herwise, business

advert isement s of t hings for sale are not definit e
offers, but mere invit at ions to make an offer. (n)

Art . 1326. Advert isement s for bidders are simply

invit at ions to make proposals, and t he advert iser is not
bound to accept t he highest or lowest bidder, unless t he
cont rary appears. (n)

Art . 1327. T he following cannot give consent to a

cont ract :

(1) Unemancipat ed minors;

(2) Insane or dement ed persons, and deaf-mut es

who do not know how to writ e. (1263a)
Art . 1328. Cont ract s ent ered into during a lucid int erval
are valid. Cont ract s agreed to in a st at e of drunkenness
or during a hypnot ic spell are voidable. (n)

Art . 1329. T he incapacit y declared in Art icle 1327 is

subject to t he modificat ions det ermined by law, and is
understood to be wit hout prejudice to special
disqualificat ions est ablished in t he laws. (1264)

Art . 1330. A cont ract where consent is given t hrough

mist ake, violence, int imidat ion, undue influence, or fraud
is voidable. (1265a)

Art . 1331. In order t hat mist ake may invalidat e consent ,

it should refer to t he subst ance of t he t hing which is
t he object of t he cont ract , or to t hose condit ions which
have principally moved one or bot h part ies to ent er into
t he cont ract .

Mist ake as to t he ident it y or qualificat ions of one of t he

part ies will vit iat e consent only when such ident it y or
qualificat ions have been t he principal cause of t he
cont ract .

A simple mist ake of account shall give rise to it s

correct ion. (1266a)

Art . 1332. When one of t he part ies is unable to read, or if

t he cont ract is in a language not understood by him, and
mist ake or fraud is alleged, t he person enforcing t he
cont ract must show t hat t he t erms t hereof have been
fully explained to t he former. (n)

Art . 1333. T here is no mist ake if t he part y alleging it

knew t he doubt , cont ingency or risk affect ing t he object
of t he cont ract . (n)

Art . 1334. Mut ual error as to t he legal effect of an

agreement when t he real purpose of t he part ies is
frust rat ed, may vit iat e consent . (n)

Art . 1335. T here is violence when in order to wrest

consent , serious or irresist ible force is employed.
T here is int imidat ion when one of t he cont ract ing
part ies is compelled by a reasonable and well-grounded
fear of an imminent and grave evil upon his person or
propert y, or upon t he person or propert y of his spouse,
descendant s or ascendant s, to give his consent .

To det ermine t he degree of int imidat ion, t he age, sex

and condit ion of t he person shall be borne in mind.

A t hreat to enforce one's claim t hrough compet ent

aut horit y, if t he claim is just or legal, does not vit iat e
consent . (1267a)

Art . 1336. Violence or int imidat ion shall annul t he

obligat ion, alt hough it may have been employed by a
t hird person who did not t ake part in t he cont ract .
(1268)

Art . 1337. T here is undue influence when a person t akes

improper advant age of his power over t he will of
anot her, depriving t he lat t er of a reasonable freedom of
choice. T he following circumst ances shall be
considered: t he confident ial, family, spirit ual and ot her
relat ions bet ween t he part ies, or t he fact t hat t he
person alleged to have been unduly influenced was
suffering from ment al weakness, or was ignorant or in
financial dist ress. (n)

Art . 1338. T here is fraud when, t hrough insidious words

or machinat ions of one of t he cont ract ing part ies, t he
ot her is induced to ent er into a cont ract which, wit hout
t hem, he would not have agreed to. (1269)

Art . 1339. Failure to disclose fact s, when t here is a dut y

to reveal t hem, as when t he part ies are bound by
confident ial relat ions, const it ut es fraud. (n)

Art . 1340. T he usual exaggerat ions in t rade, when t he

ot her part y had an opport unit y to know t he fact s, are
not in t hemselves fraudulent . (n)
Art . 1341. A mere expression of an opinion does not
signify fraud, unless made by an expert and t he ot her
part y has relied on t he former's special knowledge. (n)

Art . 1342. Misrepresent at ion by a t hird person does not

vit iat e consent , unless such misrepresent at ion has
creat ed subst ant ial mist ake and t he same is mut ual.
(n)

Art . 1343. Misrepresent at ion made in good fait h is not

fraudulent but may const it ut e error. (n)

Art . 1344. In order t hat fraud may make a cont ract

voidable, it should be serious and should not have been
employed by bot h cont ract ing part ies.

Incident al fraud only obliges t he person employing it to

pay damages. (1270)

Art . 1345. Simulat ion of a cont ract may be absolut e or

relat ive. T he former t akes place when t he part ies do not
int end to be bound at all; t he lat t er, when t he part ies
conceal t heir t rue agreement . (n)

Art . 1346. An absolut ely simulat ed or fict it ious cont ract

is void. A relat ive simulat ion, when it does not prejudice
a t hird person and is not int ended for any purpose
cont rary to law, morals, good customs, public order or
public policy binds t he part ies to t heir real agreement .
(n)

SECT ION 2. - Object of Contracts

Art . 1347. All t hings which are not out side t he

commerce of men, including fut ure t hings, may be t he
object of a cont ract . All right s which are not
int ransmissible may also be t he object of cont ract s.

No cont ract may be ent ered into upon fut ure

inherit ance except in cases expressly aut horized by law.

All services which are not cont rary to law, morals, good
customs, public order or public policy may likewise be
t he object of a cont ract . (1271a)

Art . 1348. Impossible t hings or services cannot be t he

object of cont ract s. (1272)

Art . 1349. T he object of every cont ract must be

det erminat e as to it s kind. T he fact t hat t he quant it y is
not det erminat e shall not be an obst acle to t he
exist ence of t he cont ract , provided it is possible to
det ermine t he same, wit hout t he need of a new
cont ract bet ween t he part ies. (1273)

SECT ION 3. - Cause of Contracts

Art . 1350. In onerous cont ract s t he cause is understood

to be, for each cont ract ing part y, t he prest at ion or
promise of a t hing or service by t he ot her; in
remuneratory ones, t he service or benefit which is
remunerat ed; and in cont ract s of pure beneficence, t he
mere liberalit y of t he benefactor. (1274)

Art . 1351. T he part icular mot ives of t he part ies in

ent ering into a cont ract are different from t he cause
t hereof. (n)

Art . 1352. Cont ract s wit hout cause, or wit h unlawful

cause, produce no effect what ever. T he cause is
unlawful if it is cont rary to law, morals, good customs,
public order or public policy. (1275a)

Art . 1353. T he st at ement of a false cause in cont ract s

shall render t hem void, if it should not be proved t hat
t hey were founded upon anot her cause which is t rue
and lawful. (1276)

Art . 1354. Alt hough t he cause is not st at ed in t he

cont ract , it is presumed t hat it exist s and is lawful,
unless t he debtor proves t he cont rary. (1277)

Art . 1355. Except in cases specified by law, lesion or

inadequacy of cause shall not invalidat e a cont ract ,
unless t here has been fraud, mist ake or undue
influence. (n)
 CHAPT ER 3

FORM OF CONT RACTS

Art . 1356. Cont ract s shall be obligatory, in what ever

form t hey may have been ent ered into, provided all t he
essent ial requisit es for t heir validit y are present .
However, when t he law requires t hat a cont ract be in
some form in order t hat it may be valid or enforceable,
or t hat a cont ract be proved in a cert ain way, t hat
requirement is absolut e and indispensable. In such
cases, t he right of t he part ies st at ed in t he following
art icle cannot be exercised. (1278a)

Art . 1357. If t he law requires a document or ot her

special form, as in t he act s and cont ract s enumerat ed
in t he following art icle, t he cont ract ing part ies may
compel each ot her to observe t hat form, once t he
cont ract has been perfect ed. T his right may be
exercised simult aneously wit h t he act ion upon t he
cont ract . (1279a)

Art . 1358. T he following must appear in a public

document :

(1) Act s and cont ract s which have for t heir object
t he creat ion, t ransmission, modificat ion or
ext inguishment of real right s over immovable
propert y; sales of real propert y or of an int erest
t herein a governed by Art icles 1403, No. 2, and
1405;

(2) T he cession, repudiat ion or renunciat ion of

heredit ary right s or of t hose of t he conjugal
part nership of gains;

(3) T he power to administ er propert y, or any ot her

power which has for it s object an act appearing or
which should appear in a public document , or
should prejudice a t hird person;

(4) T he cession of act ions or right s proceeding

from an act appearing in a public document .
All ot her cont ract s where t he amount involved exceeds
five hundred pesos must appear in writ ing, even a
privat e one. But sales of goods, chat t els or t hings in
act ion are governed by Art icles, 1403, No. 2 and 1405.
(1280a)

CHAPT ER 4

REFORMAT ION OF INST RUMENTS (n)

Art . 1359. When, t here having been a meet ing of t he

minds of t he part ies to a cont ract , t heir t rue int ent ion is
not expressed in t he inst rument purport ing to embody
t he agreement , by reason of mist ake, fraud, inequit able
conduct or accident , one of t he part ies may ask for t he
reformat ion of t he inst rument to t he end t hat such t rue
int ent ion may be expressed.

If mist ake, fraud, inequit able conduct , or accident has

prevent ed a meet ing of t he minds of t he part ies, t he
proper remedy is not reformat ion of t he inst rument but
annulment of t he cont ract .

Art . 1360. T he principles of t he general law on t he

reformat ion of inst rument s are hereby adopt ed insofar
as t hey are not in conflict wit h t he provisions of t his
Code.

Art . 1361. When a mut ual mist ake of t he part ies causes
t he failure of t he inst rument to disclose t heir real
agreement , said inst rument may be reformed.

Art . 1362. If one part y was mist aken and t he ot her

act ed fraudulent ly or inequit ably in such a way t hat t he
inst rument does not show t heir t rue int ent ion, t he
former may ask for t he reformat ion of t he inst rument .

Art . 1363. When one part y was mist aken and t he ot her
knew or believed t hat t he inst rument did not st at e t heir
real agreement , but concealed t hat fact from t he
former, t he inst rument may be reformed.
Art . 1364. When t hrough t he ignorance, lack of skill,
negligence or bad fait h on t he part of t he person
draft ing t he inst rument or of t he clerk or t ypist , t he
inst rument does not express t he t rue int ent ion of t he
part ies, t he court s may order t hat t he inst rument be
reformed.

Art . 1365. If t wo part ies agree upon t he mort gage or

pledge of real or personal propert y, but t he inst rument
st at es t hat t he propert y is sold absolut ely or wit h a
right of repurchase, reformat ion of t he inst rument is
proper.

Art . 1366. T here shall be no reformat ion in t he following

cases:

(1) Simple donat ions int er vivos wherein no

condit ion is imposed;

(2) Wills;

(3) When t he real agreement is void.

Art . 1367. When one of t he part ies has brought an

act ion to enforce t he inst rument , he cannot
subsequent ly ask for it s reformat ion.

Art . 1368. Reformat ion may be ordered at t he inst ance

of eit her part y or his successors in int erest , if t he
mist ake was mut ual; ot herwise, upon pet it ion of t he
injured part y, or his heirs and assigns.

Art . 1369. T he procedure for t he reformat ion of

inst rument shall be governed by rules of court to be
promulgat ed by t he Supreme Court .

CHAPT ER 5

INT ERPRETAT ION OF CONT RACTS

Art . 1370. If t he t erms of a cont ract are clear and leave

no doubt upon t he int ent ion of t he cont ract ing part ies,
t he lit eral meaning of it s st ipulat ions shall cont rol.
If t he words appear to be cont rary to t he evident
int ent ion of t he part ies, t he lat t er shall prevail over t he
former. (1281)

Art . 1371. In order to judge t he int ent ion of t he

cont ract ing part ies, t heir cont emporaneous and
subsequent act s shall be principally considered. (1282)

Art . 1372. However general t he t erms of a cont ract may

be, t hey shall not be understood to comprehend t hings
t hat are dist inct and cases t hat are different from
t hose upon which t he part ies int ended to agree. (1283)

Art . 1373. If some st ipulat ion of any cont ract should

admit of several meanings, it shall be understood as
bearing t hat import which is most adequat e to render it
effect ual. (1284)

Art . 1374. T he various st ipulat ions of a cont ract shall be

int erpret ed toget her, at t ribut ing to t he doubt ful ones
t hat sense which may result from all of t hem t aken
joint ly. (1285)

Art . 1375. Words which may have different significat ions

shall be understood in t hat which is most in keeping
wit h t he nat ure and object of t he cont ract . (1286)

Art . 1376. T he usage or custom of t he place shall be

borne in mind in t he int erpret at ion of t he ambiguit ies of
a cont ract , and shall fill t he omission of st ipulat ions
which are ordinarily est ablished. (1287)

Art . 1377. T he int erpret at ion of obscure words or

st ipulat ions in a cont ract shall not favor t he part y who
caused t he obscurit y. (1288)

Art . 1378. When it is absolut ely impossible to set t le

doubt s by t he rules est ablished in t he preceding
art icles, and t he doubt s refer to incident al
circumst ances of a grat uitous cont ract , t he least
t ransmission of right s and int erest s shall prevail. If t he
cont ract is onerous, t he doubt shall be set t led in favor
of t he great est reciprocit y of int erest s.

If t he doubt s are cast upon t he principal object of t he

cont ract in such a way t hat it cannot be known what
may have been t he int ent ion or will of t he part ies, t he
cont ract shall be null and void. (1289)

Art . 1379. T he principles of int erpret at ion st at ed in Rule

123 of t he Rules of Court shall likewise be observed in
t he const ruct ion of cont ract s. (n)

CHAPT ER 6

RESCISSIBLE CONT RACTS

Art . 1380. Cont ract s validly agreed upon may be

rescinded in t he cases est ablished by law. (1290)

Art . 1381. T he following cont ract s are rescissible:

(1) T hose which are ent ered into by guardians

whenever t he wards whom t hey represent suffer
lesion by more t han one-fourt h of t he value of t he
t hings which are t he object t hereof;

(2) T hose agreed upon in represent at ion of

absent ees, if t he lat t er suffer t he lesion st at ed in
t he preceding number;

(3) T hose undert aken in fraud of creditors when

t he lat t er cannot in any ot her manner collect t he
claims due t hem;

(4) T hose which refer to t hings under lit igat ion if

t hey have been ent ered into by t he defendant
wit hout t he knowledge and approval of t he
lit igant s or of compet ent judicial aut horit y;

(5) All ot her cont ract s specially declared by law to

be subject to rescission. (1291a)

Art . 1382. Payment s made in a st at e of insolvency for

obligat ions to whose fulfillment t he debtor could not be
compelled at t he t ime t hey were effect ed, are also
rescissible. (1292)

Art . 1383. T he act ion for rescission is subsidiary; it

cannot be inst it ut ed except when t he part y suffering
damage has no ot her legal means to obt ain reparat ion
for t he same. (1294)

Art . 1384. Rescission shall be only to t he ext ent

necessary to cover t he damages caused. (n)

Art . 1385. Rescission creat es t he obligat ion to ret urn

t he t hings which were t he object of t he cont ract ,
toget her wit h t heir fruit s, and t he price wit h it s int erest ;
consequent ly, it can be carried out only when he who
demands rescission can ret urn what ever he may be
obliged to restore.

Neit her shall rescission t ake place when t he t hings

which are t he object of t he cont ract are legally in t he
possession of t hird persons who did not act in bad fait h.

In t his case, indemnit y for damages may be demanded

from t he person causing t he loss. (1295)

Art . 1386. Rescission referred to in Nos. 1 and 2 of

Art icle 1381 shall not t ake place wit h respect to
cont ract s approved by t he court s. (1296a)

Art . 1387. All cont ract s by virt ue of which t he debtor

alienat es propert y by grat uitous t it le are presumed to
have been ent ered into in fraud of creditors, when t he
donor did not reserve sufficient propert y to pay all debt s
cont ract ed before t he donat ion.

Alienat ions by onerous t it le are also presumed

fraudulent when made by persons against whom some
judgment has been issued. T he decision or at t achment
need not refer to t he propert y alienat ed, and need not
have been obt ained by t he part y seeking t he rescission.

In addit ion to t hese presumpt ions, t he design to

defraud creditors may be proved in any ot her manner
recognized by t he law of evidence. (1297a)

Art . 1388. Whoever acquires in bad fait h t he t hings

alienat ed in fraud of creditors, shall indemnify t he lat t er
for damages suffered by t hem on account of t he
alienat ion, whenever, due to any cause, it should be
impossible for him to ret urn t hem.

If t here are t wo or more alienat ions, t he first acquirer

shall be liable first , and so on successively. (1298a)

Art . 1389. T he act ion to claim rescission must be

commenced wit hin four years.

For persons under guardianship and for absent ees, t he

period of four years shall not begin unt il t he t erminat ion
of t he former's incapacit y, or unt il t he domicile of t he
lat t er is known. (1299)

CHAPT ER 7

VOIDABLE CONT RACTS

Art . 1390. T he following cont ract s are voidable or

annullable, even t hough t here may have been no
damage to t he cont ract ing part ies:

(1) T hose where one of t he part ies is incapable of

giving consent to a cont ract ;

(2) T hose where t he consent is vit iat ed by

mist ake, violence, int imidat ion, undue influence or
fraud.

T hese cont ract s are binding, unless t hey are annulled

by a proper act ion in court . T hey are suscept ible of
rat ificat ion. (n)

Art . 1391. T he act ion for annulment shall be brought

wit hin four years.

T his period shall begin:

In cases of int imidat ion, violence or undue

influence, from t he t ime t he defect of t he
 consent ceases.

In case of mist ake or fraud, from t he t ime of t he

discovery of t he same.

And when t he act ion refers to cont ract s ent ered into by
minors or ot her incapacit at ed persons, from t he t ime
t he guardianship ceases. (1301a)

Art . 1392. Rat ificat ion ext inguishes t he act ion to annul a
voidable cont ract . (1309a)

Art . 1393. Rat ificat ion may be effect ed expressly or

t acit ly. It is understood t hat t here is a t acit rat ificat ion
if, wit h knowledge of t he reason which renders t he
cont ract voidable and such reason having ceased, t he
person who has a right to invoke it should execut e an
act which necessarily implies an int ent ion to waive his
right . (1311a)

Art . 1394. Rat ificat ion may be effect ed by t he guardian

of t he incapacit at ed person. (n)

Art . 1395. Rat ificat ion does not require t he conformit y

of t he cont ract ing part y who has no right to bring t he
act ion for annulment . (1312)

Art . 1396. Rat ificat ion cleanses t he cont ract from all it s
defect s from t he moment it was const it ut ed. (1313)

Art . 1397. T he act ion for t he annulment of cont ract s

may be inst it ut ed by all who are t hereby obliged
principally or subsidiarily. However, persons who are
capable cannot allege t he incapacit y of t hose wit h
whom t hey cont ract ed; nor can t hose who exert ed
int imidat ion, violence, or undue influence, or employed
fraud, or caused mist ake base t heir act ion upon t hese
flaws of t he cont ract . (1302a)

Art . 1398. An obligat ion having been annulled, t he

cont ract ing part ies shall restore to each ot her t he
t hings which have been t he subject mat t er of t he
cont ract , wit h t heir fruit s, and t he price wit h it s int erest ,
except in cases provided by law.

In obligat ions to render service, t he value t hereof shall

be t he basis for damages. (1303a)

Art . 1399. When t he defect of t he cont ract consist s in

t he incapacit y of one of t he part ies, t he incapacit at ed
person is not obliged to make any rest it ut ion except
insofar as he has been benefit ed by t he t hing or price
received by him. (1304)

Art . 1400. Whenever t he person obliged by t he decree of

annulment to ret urn t he t hing can not do so because it
has been lost t hrough his fault , he shall ret urn t he fruit s
received and t he value of t he t hing at t he t ime of t he
loss, wit h int erest from t he same dat e. (1307a)

Art . 1401. T he act ion for annulment of cont ract s shall

be ext inguished when t he t hing which is t he object
t hereof is lost t hrough t he fraud or fault of t he person
who has a right to inst it ut e t he proceedings.

If t he right of act ion is based upon t he incapacit y of any

one of t he cont ract ing part ies, t he loss of t he t hing
shall not be an obst acle to t he success of t he act ion,
unless said loss took place t hrough t he fraud or fault of
t he plaint iff. (1314a)

Art . 1402. As long as one of t he cont ract ing part ies

does not restore what in virt ue of t he decree of
annulment he is bound to ret urn, t he ot her cannot be
compelled to comply wit h what is incumbent upon him.
(1308)

CHAPT ER 8

UNENFORCEABLE CONT RACTS (n)

Art . 1403. T he following cont ract s are unenforceable,

unless t hey are rat ified:

(1) T hose ent ered into in t he name of anot her

person by one who has been given no aut horit y or
legal represent at ion, or who has act ed beyond his
powers;

(2) T hose t hat do not comply wit h t he St at ut e of

Frauds as set fort h in t his number. In t he following
cases an agreement hereaft er made shall be
unenforceable by act ion, unless t he same, or
some not e or memorandum, t hereof, be in writ ing,
and subscribed by t he part y charged, or by his
agent ; evidence, t herefore, of t he agreement
cannot be received wit hout t he writ ing, or a
secondary evidence of it s cont ent s:

(a) An agreement t hat by it s t erms is not to be

performed wit hin a year from t he making t hereof;

(b) A special promise to answer for t he debt ,

default , or miscarriage of anot her;

(c) An agreement made in considerat ion of

marriage, ot her t han a mut ual promise to marry;

(d) An agreement for t he sale of goods, chat t els

or t hings in act ion, at a price not less t han five
hundred pesos, unless t he buyer accept and
receive part of such goods and chat t els, or t he
evidences, or some of t hem, of such t hings in
act ion or pay at t he t ime some part of t he
purchase money; but when a sale is made by
auct ion and ent ry is made by t he auct ioneer in his
sales book, at t he t ime of t he sale, of t he amount
and kind of propert y sold, t erms of sale, price,
names of t he purchasers and person on whose
account t he sale is made, it is a sufficient
memorandum;

(e) An agreement of t he leasing for a longer

period t han one year, or for t he sale of real
propert y or of an int erest t herein;

(f) A represent at ion as to t he credit of a t hird

person.
 (3) T hose where bot h part ies are incapable of
giving consent to a cont ract .

Art . 1404. Unaut horized cont ract s are governed by

Art icle 1317 and t he principles of agency in T it le X of
t his Book.

Art . 1405. Cont ract s infringing t he St at ut e of Frauds,

referred to in No. 2 of Art icle 1403, are rat ified by t he
failure to object to t he present at ion of oral evidence to
prove t he same, or by t he accept ance of benefit under
t hem.

Art . 1406. When a cont ract is enforceable under t he

St at ut e of Frauds, and a public document is necessary
for it s regist rat ion in t he Regist ry of Deeds, t he part ies
may avail t hemselves of t he right under Art icle 1357.

Art . 1407. In a cont ract where bot h part ies are incapable
of giving consent , express or implied rat ificat ion by t he
parent , or guardian, as t he case may be, of one of t he
cont ract ing part ies shall give t he cont ract t he same
effect as if only one of t hem were incapacit at ed.

If rat ificat ion is made by t he parent s or guardians, as

t he case may be, of bot h cont ract ing part ies, t he
cont ract shall be validat ed from t he incept ion.

Art . 1408. Unenforceable cont ract s cannot be assailed

by t hird persons.

CHAPT ER 9

VOID AND INEXIST ENT CONT RACTS

Art . 1409. T he following cont ract s are inexist ent and

void from t he beginning:

(1) T hose whose cause, object or purpose is

cont rary to law, morals, good customs, public
order or public policy;

(2) T hose which are absolut ely simulat ed or

fict it ious;
 (3) T hose whose cause or object did not exist at
t he t ime of t he t ransact ion;

(4) T hose whose object is out side t he commerce

of men;

(5) T hose which cont emplat e an impossible

service;

(6) T hose where t he int ent ion of t he part ies

relat ive to t he principal object of t he cont ract
cannot be ascert ained;

(7) T hose expressly prohibit ed or declared void by

law.

T hese cont ract s cannot be rat ified. Neit her can t he

right to set up t he defense of illegalit y be waived.

Art . 1410. T he act ion or defense for t he declarat ion of

t he inexist ence of a cont ract does not prescribe.

Art . 1411. When t he nullit y proceeds from t he illegalit y of

t he cause or object of t he cont ract , and t he act
const it ut es a criminal offense, bot h part ies being in pari
delicto, t hey shall have no act ion against each ot her,
and bot h shall be prosecut ed. Moreover, t he provisions
of t he Penal Code relat ive to t he disposal of effect s or
inst rument s of a crime shall be applicable to t he t hings
or t he price of t he cont ract .

T his rule shall be applicable when only one of t he part ies

is guilt y; but t he innocent one may claim what he has
given, and shall not be bound to comply wit h his
promise. (1305)

Art . 1412. If t he act in which t he unlawful or forbidden

cause consist s does not const it ut e a criminal offense,
t he following rules shall be observed:

(1) When t he fault is on t he part of bot h

cont ract ing part ies, neit her may recover what he
 has given by virt ue of t he cont ract , or demand t he
performance of t he ot her's undert aking;

(2) When only one of t he cont ract ing part ies is at

fault , he cannot recover what he has given by
reason of t he cont ract , or ask for t he fulfillment
of what has been promised him. T he ot her, who is
not at fault , may demand t he ret urn of what he
has given wit hout any obligat ion to comply his
promise. (1306)

Art . 1413. Int erest paid in excess of t he int erest allowed

by t he usury laws may be recovered by t he debtor, wit h
int erest t hereon from t he dat e of t he payment .

Art . 1414. When money is paid or propert y delivered for

an illegal purpose, t he cont ract may be repudiat ed by
one of t he part ies before t he purpose has been
accomplished, or before any damage has been caused
to a t hird person. In such case, t he court s may, if t he
public int erest will t hus be subserved, allow t he part y
repudiat ing t he cont ract to recover t he money or
propert y.

Art . 1415. Where one of t he part ies to an illegal cont ract

is incapable of giving consent , t he court s may, if t he
int erest of just ice so demands allow recovery of money
or propert y delivered by t he incapacit at ed person.

Art . 1416. When t he agreement is not illegal per se but is

merely prohibit ed, and t he prohibit ion by t he law is
designat ed for t he prot ect ion of t he plaint iff, he may, if
public policy is t hereby enhanced, recover what he has
paid or delivered.

Art . 1417. When t he price of any art icle or commodit y is

det ermined by st at ut e, or by aut horit y of law, any
person paying any amount in excess of t he maximum
price allowed may recover such excess.

Art . 1418. When t he law fixes, or aut horizes t he fixing of

t he maximum number of hours of labor, and a cont ract
is ent ered into whereby a laborer undert akes to work
longer t han t he maximum t hus fixed, he may demand
addit ional compensat ion for service rendered beyond
t he t ime limit .

Art . 1419. When t he law set s, or aut horizes t he set t ing

of a minimum wage for laborers, and a cont ract is
agreed upon by which a laborer accept s a lower wage,
he shall be ent it led to recover t he deficiency.

Art . 1420. In case of a divisible cont ract , if t he illegal

t erms can be separat ed from t he legal ones, t he lat t er
may be enforced.

Art . 1421. T he defense of illegalit y of cont ract is not

available to t hird persons whose int erest s are not
direct ly affect ed.

Art . 1422. A cont ract which is t he direct result of a

previous illegal cont ract , is also void and inexist ent .

T itle III. - NAT URAL OBLIGAT IONS

Art . 1423. Obligat ions are civil or nat ural. Civil obligat ions
give a right of act ion to compel t heir performance.
Nat ural obligat ions, not being based on posit ive law but
on equit y and nat ural law, do not grant a right of act ion
to enforce t heir performance, but aft er volunt ary
fulfillment by t he obligor, t hey aut horize t he ret ent ion of
what has been delivered or rendered by reason t hereof.
Some nat ural obligat ions are set fort h in t he following
art icles.

Art . 1424. When a right to sue upon a civil obligat ion has
lapsed by ext inct ive prescript ion, t he obligor who
volunt arily performs t he cont ract cannot recover what
he has delivered or t he value of t he service he has
rendered.

Art . 1425. When wit hout t he knowledge or against t he

will of t he debtor, a t hird person pays a debt which t he
obligor is not legally bound to pay because t he act ion
t hereon has prescribed, but t he debtor lat er volunt arily
reimburses t he t hird person, t he obligor cannot recover
what he has paid.

Art . 1426. When a minor bet ween eight een and t went y-
one years of age who has ent ered into a cont ract
wit hout t he consent of t he parent or guardian, aft er t he
annulment of t he cont ract volunt arily ret urns t he whole
t hing or price received, not wit hst anding t he fact t he he
has not been benefit ed t hereby, t here is no right to
demand t he t hing or price t hus ret urned.

Art . 1427. When a minor bet ween eight een and t went y-
one years of age, who has ent ered into a cont ract
wit hout t he consent of t he parent or guardian,
volunt arily pays a sum of money or delivers a fungible
t hing in fulfillment of t he obligat ion, t here shall be no
right to recover t he same from t he obligee who has
spent or consumed it in good fait h. (1160A)

Art . 1428. When, aft er an act ion to enforce a civil

obligat ion has failed t he defendant volunt arily performs
t he obligat ion, he cannot demand t he ret urn of what he
has delivered or t he payment of t he value of t he service
he has rendered.

Art . 1429. When a t est at e or int est at e heir volunt arily

pays a debt of t he decedent exceeding t he value of t he
propert y which he received by will or by t he law of
int est acy from t he est at e of t he deceased, t he
payment is valid and cannot be rescinded by t he payer.

Art . 1430. When a will is declared void because it has not

been execut ed in accordance wit h t he formalit ies
required by law, but one of t he int est at e heirs, aft er t he
set t lement of t he debt s of t he deceased, pays a legacy
in compliance wit h a clause in t he defect ive will, t he
payment is effect ive and irrevocable.
 T itle IV. - ESTOPPEL (n)

Art . 1431. T hrough estoppel an admission or

represent at ion is rendered conclusive upon t he person
making it , and cannot be denied or disproved as against
t he person relying t hereon.

Art . 1432. T he principles of estoppel are hereby adopt ed

insofar as t hey are not in conflict wit h t he provisions of
t his Code, t he Code of Commerce, t he Rules of Court
and special laws.

Art . 1433. Estoppel may be in pais or by deed.

Art . 1434. When a person who is not t he owner of a t hing

sells or alienat es and delivers it , and lat er t he seller or
grantor acquires t it le t hereto, such t it le passes by
operat ion of law to t he buyer or grant ee.

Art . 1435. If a person in represent at ion of anot her sells

or alienat es a t hing, t he former cannot subsequent ly
set up his own t it le as against t he buyer or grant ee.

Art . 1436. A lessee or a bailee is estopped from

assert ing t it le to t he t hing leased or received, as
against t he lessor or bailor.

Art . 1437. When in a cont ract bet ween t hird persons

concerning immovable propert y, one of t hem is misled
by a person wit h respect to t he ownership or real right
over t he real est at e, t he lat t er is precluded from
assert ing his legal t it le or int erest t herein, provided all
t hese requisit es are present :

(1) T here must be fraudulent represent at ion or

wrongful concealment of fact s known to t he
part y estopped;

(2) T he part y precluded must int end t hat t he

ot her should act upon t he fact s as
misrepresent ed;
 (3) T he part y misled must have been unaware of
t he t rue fact s; and

(4) T he part y defrauded must have act ed in

accordance wit h t he misrepresent at ion.

Art . 1438. One who has allowed anot her to assume

apparent ownership of personal propert y for t he
purpose of making any t ransfer of it , cannot , if he
received t he sum for which a pledge has been
const it ut ed, set up his own t it le to defeat t he pledge of
t he propert y, made by t he ot her to a pledgee who
received t he same in good fait h and for value.

Art . 1439. Estoppel is effect ive only as bet ween t he

part ies t hereto or t heir successors in int erest .

T itle V. - T RUSTS (n)

CHAPT ER 1

GENERAL PROVISIONS

Art . 1440. A person who est ablishes a t rust is called t he

t rustor; one in whom confidence is reposed as regards
propert y for t he benefit of anot her person is known as
t he t rust ee; and t he person for whose benefit t he t rust
has been creat ed is referred to as t he beneficiary.

Art . 1441. Trust s are eit her express or implied. Express

t rust s are creat ed by t he int ent ion of t he t rustor or of
t he part ies. Implied t rust s come into being by operat ion
of law.

Art . 1442. T he principles of t he general law of t rust s,

insofar as t hey are not in conflict wit h t his Code, t he
Code of Commerce, t he Rules of Court and special laws
are hereby adopt ed.

CHAPT ER 2

EXPRESS T RUSTS

Art . 1443. No express t rust s concerning an immovable

or any int erest t herein may be proved by parol evidence.
Art . 1444. No part icular words are required for t he
creat ion of an express t rust , it being sufficient t hat a
t rust is clearly int ended.

Art . 1445. No t rust shall fail because t he t rust ee

appoint ed declines t he designat ion, unless t he cont rary
should appear in t he inst rument const it ut ing t he t rust .

Art . 1446. Accept ance by t he beneficiary is necessary.

Nevert heless, if t he t rust imposes no onerous condit ion
upon t he beneficiary, his accept ance shall be presumed,
if t here is no proof to t he cont rary.

CHAPT ER 3

IMPLIED T RUSTS

Art . 1447. T he enumerat ion of t he following cases of

implied t rust does not exclude ot hers est ablished by
t he general law of t rust , but t he limit at ion laid down in
Art icle 1442 shall be applicable.

Art . 1448. T here is an implied t rust when propert y is

sold, and t he legal est at e is grant ed to one part y but t he
price is paid by anot her for t he purpose of having t he
beneficial int erest of t he propert y. T he former is t he
t rust ee, while t he lat t er is t he beneficiary. However, if
t he person to whom t he t it le is conveyed is a child,
legit imat e or illegit imat e, of t he one paying t he price of
t he sale, no t rust is implied by law, it being disput ably
presumed t hat t here is a gift in favor of t he child.

Art . 1449. T here is also an implied t rust when a donat ion

is made to a person but it appears t hat alt hough t he
legal est at e is t ransmit t ed to t he donee, he
nevert heless is eit her to have no beneficial int erest or
only a part t hereof.

Art . 1450. If t he price of a sale of propert y is loaned or

paid by one person for t he benefit of anot her and t he
conveyance is made to t he lender or payor to secure t he
payment of t he debt , a t rust arises by operat ion of law
in favor of t he person to whom t he money is loaned or
for whom it s is paid. T he lat t er may redeem t he
propert y and compel a conveyance t hereof to him.

Art . 1451. When land passes by succession to any

person and he causes t he legal t it le to be put in t he
name of anot her, a t rust is est ablished by implicat ion of
law for t he benefit of t he t rue owner.

Art . 1452. If t wo or more persons agree to purchase

propert y and by common consent t he legal t it le is t aken
in t he name of one of t hem for t he benefit of all, a t rust
is creat ed by force of law in favor of t he ot hers in
proport ion to t he int erest of each.

Art . 1453. When propert y is conveyed to a person in

reliance upon his declared int ent ion to hold it for, or
t ransfer it to anot her or t he grantor, t here is an implied
t rust in favor of t he person whose benefit is
cont emplat ed.

Art . 1454. If an absolut e conveyance of propert y is

made in order to secure t he performance of an
obligat ion of t he grantor toward t he grant ee, a t rust by
virt ue of law is est ablished. If t he fulfillment of t he
obligat ion is offered by t he grantor when it becomes
due, he may demand t he reconveyance of t he propert y
to him.

Art . 1455. When any t rust ee, guardian or ot her person

holding a fiduciary relat ionship uses t rust funds for t he
purchase of propert y and causes t he conveyance to be
made to him or to a t hird person, a t rust is est ablished
by operat ion of law in favor of t he person to whom t he
funds belong.

Art . 1456. If propert y is acquired t hrough mist ake or

fraud, t he person obt aining it is, by force of law,
considered a t rust ee of an implied t rust for t he benefit
of t he person from whom t he propert y comes.

Art . 1457. An implied t rust may be proved by oral

evidence.
 T itle VI. - SALES

CHAPT ER 1

NAT URE AND FORM OF T HE CONT RACT

Art . 1458. By t he cont ract of sale one of t he cont ract ing

part ies obligat es himself to t ransfer t he ownership and
to deliver a det erminat e t hing, and t he ot her to pay
t herefor a price cert ain in money or it s equivalent .

A cont ract of sale may be absolut e or condit ional.

(1445a)

Art . 1459. T he t hing must be licit and t he vendor must

have a right to t ransfer t he ownership t hereof at t he
t ime it is delivered. (n)

Art . 1460. A t hing is det erminat e when it is part icularly

designat ed or physical segregat ed from all ot her of t he
same class.

T he requisit e t hat a t hing be det erminat e is sat isfied if

at t he t ime t he cont ract is ent ered into, t he t hing is
capable of being made det erminat e wit hout t he
necessit y of a new or furt her agreement bet ween t he
part ies. (n)

Art . 1461. T hings having a pot ent ial exist ence may be
t he object of t he cont ract of sale.

T he efficacy of t he sale of a mere hope or expect ancy is

deemed subject to t he condit ion t hat t he t hing will
come into exist ence.

T he sale of a vain hope or expect ancy is void. (n)

Art . 1462. T he goods which form t he subject of a

cont ract of sale may be eit her exist ing goods, owned or
possessed by t he seller, or goods to be manufact ured,
raised, or acquired by t he seller aft er t he perfect ion of
t he cont ract of sale, in t his T it le called " future goods ."
T here may be a cont ract of sale of goods, whose
acquisit ion by t he seller depends upon a cont ingency
which may or may not happen. (n)

Art . 1463. T he sole owner of a t hing may sell an

undivided int erest t herein. (n)

Art . 1464. In t he case of fungible goods, t here may be a

sale of an undivided share of a specific mass, t hough
t he seller purport s to sell and t he buyer to buy a definit e
number, weight or measure of t he goods in t he mass,
and t hough t he number, weight or measure of t he goods
in t he mass is undet ermined. By such a sale t he buyer
becomes owner in common of such a share of t he
mass as t he number, weight or measure bought bears
to t he number, weight or measure of t he mass. If t he
mass cont ains less t han t he number, weight or
measure bought , t he buyer becomes t he owner of t he
whole mass and t he seller is bound to make good t he
deficiency from goods of t he same kind and qualit y,
unless a cont rary int ent appears. (n)

Art . 1465. T hings subject to a resolutory condit ion may

be t he object of t he cont ract of sale. (n)

Art . 1466. In const ruing a cont ract cont aining provisions

charact erist ic of bot h t he cont ract of sale and of t he
cont ract of agency to sell, t he essent ial clauses of t he
whole inst rument shall be considered. (n)

Art . 1467. A cont ract for t he delivery at a cert ain price of

an art icle which t he vendor in t he ordinary course of his
business manufact ures or procures for t he general
market , whet her t he same is on hand at t he t ime or not ,
is a cont ract of sale, but if t he goods are to be
manufact ured specially for t he customer and upon his
special order, and not for t he general market , it is a
cont ract for a piece of work. (n)

Art . 1468. If t he considerat ion of t he cont ract consist s

part ly in money, and part ly in anot her t hing, t he
t ransact ion shall be charact erized by t he manifest
int ent ion of t he part ies. If such int ent ion does not
clearly appear, it shall be considered a bart er if t he value
of t he t hing given as a part of t he considerat ion
exceeds t he amount of t he money or it s equivalent ;
ot herwise, it is a sale. (1446a)

Art . 1469. In order t hat t he price may be considered

cert ain, it shall be sufficient t hat it be so wit h reference
to anot her t hing cert ain, or t hat t he det erminat ion
t hereof be left to t he judgment of a special person or
persons.

Should such person or persons be unable or unwilling to

fix it , t he cont ract shall be inefficacious, unless t he
part ies subsequent ly agree upon t he price.

If t he t hird person or persons act ed in bad fait h or by

mist ake, t he court s may fix t he price.

Where such t hird person or persons are prevent ed from

fixing t he price or t erms by fault of t he seller or t he
buyer, t he part y not in fault may have such remedies
against t he part y in fault as are allowed t he seller or t he
buyer, as t he case may be. (1447a)

Art . 1470. Gross inadequacy of price does not affect a

cont ract of sale, except as it may indicat e a defect in
t he consent , or t hat t he part ies really int ended a
donat ion or some ot her act or cont ract . (n)

Art . 1471. If t he price is simulat ed, t he sale is void, but

t he act may be shown to have been in realit y a donat ion,
or some ot her act or cont ract . (n)

Art . 1472. T he price of securit ies, grain, liquids, and

ot her t hings shall also be considered cert ain, when t he
price fixed is t hat which t he t hing sold would have on a
definit e day, or in a part icular exchange or market , or
when an amount is fixed above or below t he price on
such day, or in such exchange or market , provided said
amount be cert ain. (1448)
Art . 1473. T he fixing of t he price can never be left to t he
discret ion of one of t he cont ract ing part ies. However, if
t he price fixed by one of t he part ies is accept ed by t he
ot her, t he sale is perfect ed. (1449a)

Art . 1474. Where t he price cannot be det ermined in

accordance wit h t he preceding art icles, or in any ot her
manner, t he cont ract is inefficacious. However, if t he
t hing or any part t hereof has been delivered to and
appropriat ed by t he buyer he must pay a reasonable
price t herefor. What is a reasonable price is a quest ion
of fact dependent on t he circumst ances of each
part icular case. (n)

Art . 1475. T he cont ract of sale is perfect ed at t he

moment t here is a meet ing of minds upon t he t hing
which is t he object of t he cont ract and upon t he price.

From t hat moment , t he part ies may reciprocally

demand performance, subject to t he provisions of t he
law governing t he form of cont ract s. (1450a)

Art . 1476. In t he case of a sale by auct ion:

(1) Where goods are put up for sale by auct ion in

lot s, each lot is t he subject of a separat e
cont ract of sale.

(2) A sale by auct ion is perfect ed when t he

auct ioneer announces it s perfect ion by t he fall of
t he hammer, or in ot her customary manner. Unt il
such announcement is made, any bidder may
ret ract his bid; and t he auct ioneer may wit hdraw
t he goods from t he sale unless t he auct ion has
been announced to be wit hout reserve.

(3) A right to bid may be reserved expressly by or

on behalf of t he seller, unless ot herwise provided
by law or by st ipulat ion.

(4) Where not ice has not been given t hat a sale by
auct ion is subject to a right to bid on behalf of t he
 seller, it shall not be lawful for t he seller to bid
himself or to employ or induce any person to bid
at such sale on his behalf or for t he auct ioneer, to
employ or induce any person to bid at such sale
on behalf of t he seller or knowingly to t ake any bid
from t he seller or any person employed by him.
Any sale cont ravening t his rule may be t reat ed as
fraudulent by t he buyer. (n)

Art . 1477. T he ownership of t he t hing sold shall be

t ransferred to t he vendee upon t he act ual or
const ruct ive delivery t hereof. (n)

Art . 1478. T he part ies may st ipulat e t hat ownership in

t he t hing shall not pass to t he purchaser unt il he has
fully paid t he price. (n)

Art . 1479. A promise to buy and sell a det erminat e t hing

for a price cert ain is reciprocally demandable.

An accept ed unilat eral promise to buy or to sell a

det erminat e t hing for a price cert ain is binding upon t he
promissor if t he promise is support ed by a
considerat ion dist inct from t he price. (1451a)

Art . 1480. Any injury to or benefit from t he t hing sold,

aft er t he cont ract has been perfect ed, from t he
moment of t he perfect ion of t he cont ract to t he t ime
of delivery, shall be governed by Art icles 1163 to 1165,
and 1262.

T his rule shall apply to t he sale of fungible t hings, made

independent ly and for a single price, or wit hout
considerat ion of t heir weight , number, or measure.

Should fungible t hings be sold for a price fixed according

to weight , number, or measure, t he risk shall not be
imput ed to t he vendee unt il t hey have been weighed,
count ed, or measured and delivered, unless t he lat t er
has incurred in delay. (1452a)
Art . 1481. In t he cont ract of sale of goods by descript ion
or by sample, t he cont ract may be rescinded if t he bulk
of t he goods delivered do not correspond wit h t he
descript ion or t he sample, and if t he cont ract be by
sample as well as descript ion, it is not sufficient t hat
t he bulk of goods correspond wit h t he sample if t hey do
not also correspond wit h t he descript ion.

T he buyer shall have a reasonable opport unit y of

comparing t he bulk wit h t he descript ion or t he sample.
(n)

Art . 1482. Whenever earnest money is given in a

cont ract of sale, it shall be considered as part of t he
price and as proof of t he perfect ion of t he cont ract .
(1454a)

Art . 1483. Subject to t he provisions of t he St at ut e of

Frauds and of any ot her applicable st at ut e, a cont ract
of sale may be made in writ ing, or by word of mout h, or
part ly in writ ing and part ly by word of mout h, or may be
inferred from t he conduct of t he part ies. (n)

Art . 1484. In a cont ract of sale of personal propert y t he

price of which is payable in inst allment s, t he vendor may
exercise any of t he following remedies:

(1) Exact fulfillment of t he obligat ion, should t he

vendee fail to pay;

(2) Cancel t he sale, should t he vendee's failure to

pay cover t wo or more inst allment s;

(3) Foreclose t he chat t el mort gage on t he t hing

sold, if one has been const it ut ed, should t he
vendee's failure to pay cover t wo or more
inst allment s. In t his case, he shall have no furt her
act ion against t he purchaser to recover any
unpaid balance of t he price. Any agreement to t he
cont rary shall be void. (1454-A-a)
Art . 1485. T he preceding art icle shall be applied to
cont ract s purport ing to be leases of personal propert y
wit h opt ion to buy, when t he lessor has deprived t he
lessee of t he possession or enjoyment of t he t hing.
(1454-A-a)

Art . 1486. In t he case referred to in t wo preceding

art icles, a st ipulat ion t hat t he inst allment s or rent s paid
shall not be ret urned to t he vendee or lessee shall be
valid insofar as t he same may not be unconscionable
under t he circumst ances. (n)

Art . 1487. T he expenses for t he execut ion and

regist rat ion of t he sale shall be borne by t he vendor,
unless t here is a st ipulat ion to t he cont rary. (1455a)

Art . 1488. T he expropriat ion of propert y for public use is

governed by special laws. (1456)

CHAPT ER 2

CAPACIT Y TO BUY OR SELL

Art . 1489. All persons who are aut horized in t his Code to
obligat e t hemselves, may ent er into a cont ract of sale,
saving t he modificat ions cont ained in t he following
art icles.

Where necessaries are t hose sold and delivered to a

minor or ot her person wit hout capacit y to act , he must
pay a reasonable price t herefor. Necessaries are t hose
referred to in Art icle 290. (1457a)

Art . 1490. T he husband and t he wife cannot sell

propert y to each ot her, except :

(1) When a separat ion of propert y was agreed

upon in t he marriage set t lement s; or

(2) When t here has been a judicial separat ion or

propert y under Art icle 191. (1458a)

Art . 1491. T he following persons cannot acquire by

purchase, even at a public or judicial auct ion, eit her in
person or t hrough t he mediat ion of anot her:

(1) T he guardian, t he propert y of t he person or

persons who may be under his guardianship;

(2) Agent s, t he propert y whose administ rat ion or

sale may have been ent rust ed to t hem, unless
t he consent of t he principal has been given;

(3) Executors and administ rators, t he propert y of

t he est at e under administ rat ion;

(4) Public officers and employees, t he propert y of

t he St at e or of any subdivision t hereof, or of any
government -owned or cont rolled corporat ion, or
inst it ut ion, t he administ rat ion of which has been
int rust ed to t hem; t his provision shall apply to
judges and government expert s who, in any
manner what soever, t ake part in t he sale;

(5) Just ices, judges, prosecut ing at torneys,

clerks of superior and inferior court s, and ot her
officers and employees connect ed wit h t he
administ rat ion of just ice, t he propert y and right s
in lit igat ion or levied upon an execut ion before t he
court wit hin whose jurisdict ion or t erritory t hey
exercise t heir respect ive funct ions; t his
prohibit ion includes t he act of acquiring by
assignment and shall apply to lawyers, wit h
respect to t he propert y and right s which may be
t he object of any lit igat ion in which t hey may t ake
part by virt ue of t heir profession.

(6) Any ot hers specially disqualified by law.

(1459a)

Art . 1492. T he prohibit ions in t he t wo preceding art icles

are applicable to sales in legal redempt ion,
compromises and renunciat ions. (n)

CHAPT ER 3
 EFFECTS OF T HE CONT RACT

WHEN T HE T HINGSOLD HAS BEEN LOST

Art . 1493. If at t he t ime t he cont ract of sale is

perfect ed, t he t hing which is t he object of t he cont ract
has been ent irely lost , t he cont ract shall be wit hout any
effect .

But if t he t hing should have been lost in part only, t he

vendee may choose bet ween wit hdrawing from t he
cont ract and demanding t he remaining part , paying it s
price in proport ion to t he tot al sum agreed upon.
(1460a)

Art . 1494. Where t he part ies purport a sale of specific

goods, and t he goods wit hout t he knowledge of t he
seller have perished in part or have wholly or in a
mat erial part so det eriorat ed in qualit y as to be
subst ant ially changed in charact er, t he buyer may at his
opt ion t reat t he sale:

(1) As avoided; or

(2) As valid in all of t he exist ing goods or in so

much t hereof as have not det eriorat ed, and as
binding t he buyer to pay t he agreed price for t he
goods in which t he ownership will pass, if t he sale
was divisible. (n)

CHAPT ER 4

OBLIGAT IONS OF T HE VENDOR

SECT ION 1. - General Provisions

Art . 1495. T he vendor is bound to t ransfer t he

ownership of and deliver, as well as warrant t he t hing
which is t he object of t he sale. (1461a)

Art . 1496. T he ownership of t he t hing sold is acquired by

t he vendee from t he moment it is delivered to him in any
of t he ways specified in Art icles 1497 to 1501, or in any
ot her manner signifying an agreement t hat t he
possession is t ransferred from t he vendor to t he
vendee. (n)

SECT ION 2. - Delivery of the T hing Sold

Art . 1497. T he t hing sold shall be understood as

delivered, when it is placed in t he cont rol and
possession of t he vendee. (1462a)

Art . 1498. When t he sale is made t hrough a public

inst rument , t he execut ion t hereof shall be equivalent to
t he delivery of t he t hing which is t he object of t he
cont ract , if from t he deed t he cont rary does not appear
or cannot clearly be inferred.

Wit h regard to movable propert y, it s delivery may also be

made by t he delivery of t he keys of t he place or
depository where it is stored or kept . (1463a)

Art . 1499. T he delivery of movable propert y may likewise

be made by t he mere consent or agreement of t he
cont ract ing part ies, if t he t hing sold cannot be
t ransferred to t he possession of t he vendee at t he t ime
of t he sale, or if t he lat t er already had it in his
possession for any ot her reason. (1463a)

Art . 1500. T here may also be t radit ion constitutum

possessorium. (n)

Art . 1501. Wit h respect to incorporeal propert y, t he

provisions of t he first paragraph of art icle 1498 shall
govern. In any ot her case wherein said provisions are not
applicable, t he placing of t he t it les of ownership in t he
possession of t he vendee or t he use by t he vendee of
his right s, wit h t he vendor's consent , shall be
understood as a delivery. (1464)

Art . 1502. When goods are delivered to t he buyer "on sale

or return" to give t he buyer an opt ion to ret urn t he goods
inst ead of paying t he price, t he ownership passes to t he
buyer of delivery, but he may revest t he ownership in t he
seller by ret urning or t endering t he goods wit hin t he
t ime fixed in t he cont ract , or, if no t ime has been fixed,
wit hin a reasonable t ime. (n)

When goods are delivered to t he buyer on approval or on

t rial or on sat isfact ion, or ot her similar t erms, t he
ownership t herein passes to t he buyer:

(1) When he signifies his approval or accept ance

to t he seller or does any ot her act adopt ing t he
t ransact ion;

(2) If he does not signify his approval or

accept ance to t he seller, but ret ains t he goods
wit hout giving not ice of reject ion, t hen if a t ime
has been fixed for t he ret urn of t he goods, on t he
expirat ion of such t ime, and, if no t ime has been
fixed, on t he expirat ion of a reasonable t ime. What
is a reasonable t ime is a quest ion of fact . (n)

Art . 1503. When t here is a cont ract of sale of specific

goods, t he seller may, by t he t erms of t he cont ract ,
reserve t he right of possession or ownership in t he
goods unt il cert ain condit ions have been fulfilled. T he
right of possession or ownership may be t hus reserved
not wit hst anding t he delivery of t he goods to t he buyer
or to a carrier or ot her bailee for t he purpose of
t ransmission to t he buyer.

Where goods are shipped, and by t he bill of lading t he

goods are deliverable to t he seller or his agent , or to t he
order of t he seller or of his agent , t he seller t hereby
reserves t he ownership in t he goods. But , if except for
t he form of t he bill of lading, t he ownership would have
passed to t he buyer on shipment of t he goods, t he
seller's propert y in t he goods shall be deemed to be only
for t he purpose of securing performance by t he buyer
of his obligat ions under t he cont ract .

Where goods are shipped, and by t he bill of lading t he

goods are deliverable to order of t he buyer or of his
agent , but possession of t he bill of lading is ret ained by
t he seller or his agent , t he seller t hereby reserves a right
to t he possession of t he goods as against t he buyer.

Where t he seller of goods draws on t he buyer for t he

price and t ransmit s t he bill of exchange and bill of lading
toget her to t he buyer to secure accept ance or payment
of t he bill of exchange, t he buyer is bound to ret urn t he
bill of lading if he does not honor t he bill of exchange,
and if he wrongfully ret ains t he bill of lading he acquires
no added right t hereby. If, however, t he bill of lading
provides t hat t he goods are deliverable to t he buyer or
to t he order of t he buyer, or is indorsed in blank, or to t he
buyer by t he consignee named t herein, one who
purchases in good fait h, for value, t he bill of lading, or
goods from t he buyer will obt ain t he ownership in t he
goods, alt hough t he bill of exchange has not been
honored, provided t hat such purchaser has received
delivery of t he bill of lading indorsed by t he consignee
named t herein, or of t he goods, wit hout not ice of t he
fact s making t he t ransfer wrongful. (n)

Art . 1504. Unless ot herwise agreed, t he goods remain at

t he seller's risk unt il t he ownership t herein is
t ransferred to t he buyer, but when t he ownership
t herein is t ransferred to t he buyer t he goods are at t he
buyer's risk whet her act ual delivery has been made or
not , except t hat :

(1) Where delivery of t he goods has been made to

t he buyer or to a bailee for t he buyer, in pursuance
of t he cont ract and t he ownership in t he goods
has been ret ained by t he seller merely to secure
performance by t he buyer of his obligat ions under
t he cont ract , t he goods are at t he buyer's risk
from t he t ime of such delivery;

(2) Where act ual delivery has been delayed

t hrough t he fault of eit her t he buyer or seller t he
goods are at t he risk of t he part y in fault . (n)
Art . 1505. Subject to t he provisions of t his T it le, where
goods are sold by a person who is not t he owner
t hereof, and who does not sell t hem under aut horit y or
wit h t he consent of t he owner, t he buyer acquires no
bet t er t it le to t he goods t han t he seller had, unless t he
owner of t he goods is by his conduct precluded from
denying t he seller's aut horit y to sell.

Not hing in t his T it le, however, shall affect :

(1) T he provisions of any factors' act , recording

laws, or any ot her provision of law enabling t he
apparent owner of goods to dispose of t hem as if
he were t he t rue owner t hereof;

(2) T he validit y of any cont ract of sale under

st at utory power of sale or under t he order of a
court of compet ent jurisdict ion;

(3) Purchases made in a merchant 's store, or in

fairs, or market s, in accordance wit h t he Code of
Commerce and special laws. (n)

Art . 1506. Where t he seller of goods has a voidable t it le

t hereto, but his t it le has not been avoided at t he t ime of
t he sale, t he buyer acquires a good t it le to t he goods,
provided he buys t hem in good fait h, for value, and
wit hout not ice of t he seller's defect of t it le. (n)

Art . 1507. A document of t it le in which it is st at ed t hat

t he goods referred to t herein will be delivered to t he
bearer, or to t he order of any person named in such
document is a negot iable document of t it le. (n)

Art . 1508. A negot iable document of t it le may be

negot iat ed by delivery:

(1) Where by t he t erms of t he document t he

carrier, warehouseman or ot her bailee issuing t he
same undert akes to deliver t he goods to t he
bearer; or
 (2) Where by t he t erms of t he document t he
carrier, warehouseman or ot her bailee issuing t he
same undert akes to deliver t he goods to t he
order of a specified person, and such person or a
subsequent endorsee of t he document has
indorsed it in blank or to t he bearer.

Where by t he t erms of a negot iable document of t it le

t he goods are deliverable to bearer or where a
negot iable document of t it le has been indorsed in blank
or to bearer, any holder may indorse t he same to himself
or to any specified person, and in such case t he
document shall t hereaft er be negot iat ed only by t he
endorsement of such endorsee. (n)

Art . 1509. A negot iable document of t it le may be

negot iat ed by t he endorsement of t he person to whose
order t he goods are by t he t erms of t he document
deliverable. Such endorsement may be in blank, to
bearer or to a specified person. If indorsed to a specified
person, it may be again negot iat ed by t he endorsement
of such person in blank, to bearer or to anot her specified
person. Subsequent negot iat ions may be made in like
manner. (n)

Art . 1510. If a document of t it le which cont ains an

undert aking by a carrier, warehouseman or ot her bailee
to deliver t he goods to bearer, to a specified person or
order of a specified person or which cont ains words of
like import , has placed upon it t he words "not negotiable,"
"non-negotiable" or t he like, such document may
nevert heless be negot iat ed by t he holder and is a
negot iable document of t it le wit hin t he meaning of t his
T it le. But not hing in t his T it le cont ained shall be
const rued as limit ing or defining t he effect upon t he
obligat ions of t he carrier, warehouseman, or ot her bailee
issuing a document of t it le or placing t hereon t he words
"not negotiable," "non-negotiable," or t he like. (n)

Art . 1511. A document of t it le which is not in such form

t hat it can be negot iat ed by delivery may be t ransferred
by t he holder by delivery to a purchaser or donee. A non-
negot iable document cannot be negot iat ed and t he
endorsement of such a document gives t he t ransferee
no addit ional right . (n)

Art . 1512. A negot iable document of t it le may be

negot iat ed:

(1) By t he owner t herefor; or

(2) By any person to whom t he possession or

custody of t he document has been ent rust ed by
t he owner, if, by t he t erms of t he document t he
bailee issuing t he document undert akes to deliver
t he goods to t he order of t he person to whom t he
possession or custody of t he document has been
ent rust ed, or if at t he t ime of such ent rust ing t he
document is in such form t hat it may be
negot iat ed by delivery. (n)

Art . 1513. A person to whom a negot iable document of

t it le has been duly negot iat ed acquires t hereby:

(1) Such t it le to t he goods as t he person

negot iat ing t he document to him had or had
abilit y to convey to a purchaser in good fait h for
value and also such t it le to t he goods as t he
person to whose order t he goods were to be
delivered by t he t erms of t he document had or
had abilit y to convey to a purchaser in good fait h
for value; and

(2) T he direct obligat ion of t he bailee issuing t he

document to hold possession of t he goods for
him according to t he t erms of t he document as
fully as if such bailee had cont ract ed direct ly wit h
him. (n)

Art . 1514. A person to whom a document of t it le has

been t ransferred, but not negot iat ed, acquires t hereby,
as against t he t ransferor, t he t it le to t he goods, subject
to t he t erms of any agreement wit h t he t ransferor.
If t he document is non-negot iable, such person also
acquires t he right to not ify t he bailee who issued t he
document of t he t ransfer t hereof, and t hereby to
acquire t he direct obligat ion of such bailee to hold
possession of t he goods for him according to t he t erms
of t he document .

Prior to t he not ificat ion to such bailee by t he t ransferor

or t ransferee of a non-negot iable document of t it le, t he
t it le of t he t ransferee to t he goods and t he right to
acquire t he obligat ion of such bailee may be defeat ed
by t he levy of an at t achment of execut ion upon t he
goods by a creditor of t he t ransferor, or by a not ificat ion
to such bailee by t he t ransferor or a subsequent
purchaser from t he t ransfer of a subsequent sale of
t he goods by t he t ransferor. (n)

Art . 1515. Where a negot iable document of t it le is

t ransferred for value by delivery, and t he endorsement
of t he t ransferor is essent ial for negot iat ion, t he
t ransferee acquires a right against t he t ransferor to
compel him to endorse t he document unless a cont rary
int ent ion appears. T he negot iat ion shall t ake effect as
of t he t ime when t he endorsement is act ually made. (n)

Art . 1516. A person who for value negot iat es or

t ransfers a document of t it le by endorsement or
delivery, including one who assigns for value a claim
secured by a document of t it le unless a cont rary
int ent ion appears, warrant s:

(1) T hat t he document is genuine;

(2) T hat he has a legal right to negot iat e or

t ransfer it ;

(3) T hat he has knowledge of no fact which would

impair t he validit y or wort h of t he document ; and

(4) T hat he has a right to t ransfer t he t it le to t he

goods and t hat t he goods are merchant able or fit
for a part icular purpose, whenever such
 warrant ies would have been implied if t he
cont ract of t he part ies had been to t ransfer
wit hout a document of t it le t he goods
represent ed t hereby. (n)

Art . 1517. T he endorsement of a document of t it le shall

not make t he endorser liable for any failure on t he part
of t he bailee who issued t he document or previous
endorsers t hereof to fulfill t heir respect ive obligat ions.
(n)

Art . 1518. T he validit y of t he negot iat ion of a negot iable

document of t it le is not impaired by t he fact t hat t he
negot iat ion was a breach of dut y on t he part of t he
person making t he negot iat ion, or by t he fact t hat t he
owner of t he document was deprived of t he possession
of t he same by loss, t heft , fraud, accident , mist ake,
duress, or conversion, if t he person to whom t he
document was negot iat ed or a person to whom t he
document was subsequent ly negot iat ed paid value
t herefor in good fait h wit hout not ice of t he breach of
dut y, or loss, t heft , fraud, accident , mist ake, duress or
conversion. (n)

Art . 1519. If goods are delivered to a bailee by t he owner

or by a person whose act in conveying t he t it le to t hem
to a purchaser in good fait h for value would bind t he
owner and a negot iable document of t it le is issued for
t hem t hey cannot t hereaft er, while in possession of
such bailee, be at t ached by garnishment or ot herwise or
be levied under an execut ion unless t he document be
first surrendered to t he bailee or it s negot iat ion
enjoined. T he bailee shall in no case be compelled to
deliver up t he act ual possession of t he goods unt il t he
document is surrendered to him or impounded by t he
court . (n)

Art . 1520. A creditor whose debtor is t he owner of a

negot iable document of t it le shall be ent it led to such
aid from court s of appropriat e jurisdict ion by injunct ion
and ot herwise in at t aching such document or in
sat isfying t he claim by means t hereof as is allowed at
law or in equit y in regard to propert y which cannot
readily be at t ached or levied upon by ordinary legal
process. (n)

Art . 1521. Whet her it is for t he buyer to t ake possession

of t he goods or of t he seller to send t hem to t he buyer
is a quest ion depending in each case on t he cont ract ,
express or implied, bet ween t he part ies. Apart from any
such cont ract , express or implied, or usage of t rade to
t he cont rary, t he place of delivery is t he seller's place of
business if he has one, and if not his residence; but in
case of a cont ract of sale of specific goods, which to
t he knowledge of t he part ies when t he cont ract or t he
sale was made were in some ot her place, t hen t hat
place is t he place of delivery.

Where by a cont ract of sale t he seller is bound to send

t he goods to t he buyer, but no t ime for sending t hem is
fixed, t he seller is bound to send t hem wit hin a
reasonable t ime.

Where t he goods at t he t ime of sale are in t he

possession of a t hird person, t he seller has not fulfilled
his obligat ion to deliver to t he buyer unless and unt il
such t hird person acknowledges to t he buyer t hat he
holds t he goods on t he buyer's behalf.

Demand or t ender of delivery may be t reat ed as

ineffect ual unless made at a reasonable hour. What is a
reasonable hour is a quest ion of fact .

Unless ot herwise agreed, t he expenses of and

incident al to put t ing t he goods into a deliverable st at e
must be borne by t he seller. (n)

Art . 1522. Where t he seller delivers to t he buyer a

quant it y of goods less t han he cont ract ed to sell, t he
buyer may reject t hem, but if t he buyer accept s or
ret ains t he goods so delivered, knowing t hat t he seller is
not going to perform t he cont ract in full, he must pay
for t hem at t he cont ract rat e. If, however, t he buyer has
used or disposed of t he goods delivered before he
knows t hat t he seller is not going to perform his
cont ract in full, t he buyer shall not be liable for more
t han t he fair value to him of t he goods so received.

Where t he seller delivers to t he buyer a quant it y of

goods larger t han he cont ract ed to sell, t he buyer may
accept t he goods included in t he cont ract and reject
t he rest . If t he buyer accept s t he whole of t he goods so
delivered he must pay for t hem at t he cont ract rat e.

Where t he seller delivers to t he buyer t he goods he

cont ract ed to sell mixed wit h goods of a different
descript ion not included in t he cont ract , t he buyer may
accept t he goods which are in accordance wit h t he
cont ract and reject t he rest .

In t he preceding t wo paragraphs, if t he subject mat t er

is indivisible, t he buyer may reject t he whole of t he
goods.

T he provisions of t his art icle are subject to any usage

of t rade, special agreement , or course of dealing
bet ween t he part ies. (n)

Art . 1523. Where, in pursuance of a cont ract of sale, t he

seller is aut horized or required to send t he goods to t he
buyer, delivery of t he goods to a carrier, whet her named
by t he buyer or not , for t he purpose of t ransmission to
t he buyer is deemed to be a delivery of t he goods to t he
buyer, except in t he case provided for in Art icle 1503,
first , second and t hird paragraphs, or unless a cont rary
int ent appears.

Unless ot herwise aut horized by t he buyer, t he seller

must make such cont ract wit h t he carrier on behalf of
t he buyer as may be reasonable, having regard to t he
nat ure of t he goods and t he ot her circumst ances of t he
case. If t he seller omit so to do, and t he goods are lost
or damaged in course of t ransit , t he buyer may decline
to t reat t he delivery to t he carrier as a delivery to
himself, or may hold t he seller responsible in damages.

Unless ot herwise agreed, where goods are sent by t he

seller to t he buyer under circumst ances in which t he
seller knows or ought to know t hat it is usual to insure,
t he seller must give such not ice to t he buyer as may
enable him to insure t hem during t heir t ransit , and, if t he
seller fails to do so, t he goods shall be deemed to be at
his risk during such t ransit . (n)

Art . 1524. T he vendor shall not be bound to deliver t he

t hing sold, if t he vendee has not paid him t he price, or if
no period for t he payment has been fixed in t he
cont ract . (1466)

Art . 1525. T he seller of goods is deemed to be an unpaid

seller wit hin t he meaning of t his T it le:

(1) When t he whole of t he price has not been paid

or t endered;

(2) When a bill of exchange or ot her negot iable

inst rument has been received as condit ional
payment , and t he condit ion on which it was
received has been broken by reason of t he
dishonor of t he inst rument , t he insolvency of t he
buyer, or ot herwise.

In Art icles 1525 to 1535 t he t erm "seller" includes an

agent of t he seller to whom t he bill of lading has been
indorsed, or a consignor or agent who has himself paid,
or is direct ly responsible for t he price, or any ot her
person who is in t he posit ion of a seller. (n)

Art . 1526. Subject to t he provisions of t his T it le,

not wit hst anding t hat t he ownership in t he goods may
have passed to t he buyer, t he unpaid seller of goods, as
such, has:

(1) A lien on t he goods or right to ret ain t hem for

t he price while he is in possession of t hem;
 (2) In case of t he insolvency of t he buyer, a right
of stopping t he goods in t ransit u aft er he has
part ed wit h t he possession of t hem;

(3) A right of resale as limit ed by t his T it le;

(4) A right to rescind t he sale as likewise limit ed

by t his T it le.

Where t he ownership in t he goods has not passed to

t he buyer, t he unpaid seller has, in addit ion to his ot her
remedies a right of wit hholding delivery similar to and
coext ensive wit h his right s of lien and stoppage in
t ransit u where t he ownership has passed to t he buyer.
(n)

Art . 1527. Subject to t he provisions of t his T it le, t he

unpaid seller of goods who is in possession of t hem is
ent it led to ret ain possession of t hem unt il payment or
t ender of t he price in t he following cases, namely:

(1) Where t he goods have been sold wit hout any

st ipulat ion as to credit ;

(2) Where t he goods have been sold on credit , but

t he t erm of credit has expired;

(3) Where t he buyer becomes insolvent .

T he seller may exercise his right of lien not wit hst anding
t hat he is in possession of t he goods as agent or bailee
for t he buyer. (n)

Art . 1528. Where an unpaid seller has made part delivery

of t he goods, he may exercise his right of lien on t he
remainder, unless such part delivery has been made
under such circumst ances as to show an int ent to
waive t he lien or right of ret ent ion. (n)

Art . 1529. T he unpaid seller of goods loses his lien

t hereon:

(1) When he delivers t he goods to a carrier or

ot her bailee for t he purpose of t ransmission to
 t he buyer wit hout reserving t he ownership in t he
goods or t he right to t he possession t hereof;

(2) When t he buyer or his agent lawfully obt ains

possession of t he goods;

(3) By waiver t hereof.

T he unpaid seller of goods, having a lien t hereon, does

not lose his lien by reason only t hat he has obt ained
judgment or decree for t he price of t he goods. (n)

Art . 1530. Subject to t he provisions of t his T it le, when

t he buyer of goods is or becomes insolvent , t he unpaid
seller who has part ed wit h t he possession of t he goods
has t he right of stopping t hem in t ransit u, t hat is to say,
he may resume possession of t he goods at any t ime
while t hey are in t ransit , and he will t hen become
ent it led to t he same right s in regard to t he goods as he
would have had if he had never part ed wit h t he
possession. (n)

Art . 1531. Goods are in t ransit wit hin t he meaning of t he

preceding art icle:

(1) From t he t ime when t hey are delivered to a

carrier by land, wat er, or air, or ot her bailee for t he
purpose of t ransmission to t he buyer, unt il t he
buyer, or his agent in t hat behalf, t akes delivery of
t hem from such carrier or ot her bailee;

(2) If t he goods are reject ed by t he buyer, and t he

carrier or ot her bailee cont inues in possession of
t hem, even if t he seller has refused to receive
t hem back.

Goods are no longer in t ransit wit hin t he meaning of t he

preceding art icle:

(1) If t he buyer, or his agent in t hat behalf, obt ains

delivery of t he goods before t heir arrival at t he
appoint ed dest inat ion;
 (2) If, aft er t he arrival of t he goods at t he
appoint ed dest inat ion, t he carrier or ot her bailee
acknowledges to t he buyer or his agent t hat he
holds t he goods on his behalf and cont inues in
possession of t hem as bailee for t he buyer or his
agent ; and it is immat erial t hat furt her
dest inat ion for t he goods may have been
indicat ed by t he buyer;

(3) If t he carrier or ot her bailee wrongfully refuses

to deliver t he goods to t he buyer or his agent in
t hat behalf.

If t he goods are delivered to a ship, freight t rain, t ruck, or

airplane chart ered by t he buyer, it is a quest ion
depending on t he circumst ances of t he part icular case,
whet her t hey are in t he possession of t he carrier as
such or as agent of t he buyer.

If part delivery of t he goods has been made to t he buyer,

or his agent in t hat behalf, t he remainder of t he goods
may be stopped in t ransit u, unless such part delivery
has been under such circumst ances as to show an
agreement wit h t he buyer to give up possession of t he
whole of t he goods. (n)

Art . 1532. T he unpaid seller may exercise his right of

stoppage in t ransit u eit her by obt aining act ual
possession of t he goods or by giving not ice of his claim
to t he carrier or ot her bailee in whose possession t he
goods are. Such not ice may be given eit her to t he
person in act ual possession of t he goods or to his
principal. In t he lat t er case t he not ice, to be effect ual,
must be given at such t ime and under such
circumst ances t hat t he principal, by t he exercise of
reasonable diligence, may prevent a delivery to t he
buyer.

When not ice of stoppage in t ransit u is given by t he

seller to t he carrier, or ot her bailee in possession of t he
goods, he must redeliver t he goods to, or according to
t he direct ions of, t he seller. T he expenses of such
delivery must be borne by t he seller. If, however, a
negot iable document of t it le represent ing t he goods
has been issued by t he carrier or ot her bailee, he shall
not obliged to deliver or just ified in delivering t he goods
to t he seller unless such document is first surrendered
for cancellat ion. (n)

Art . 1533. Where t he goods are of perishable nat ure, or

where t he seller expressly reserves t he right of resale in
case t he buyer should make default , or where t he buyer
has been in default in t he payment of t he price for an
unreasonable t ime, an unpaid seller having a right of lien
or having stopped t he goods in t ransit u may resell t he
goods. He shall not t hereaft er be liable to t he original
buyer upon t he cont ract of sale or for any profit made
by such resale, but may recover from t he buyer
damages for any loss occasioned by t he breach of t he
cont ract of sale.

Where a resale is made, as aut horized in t his art icle, t he

buyer acquires a good t it le as against t he original buyer.

It is not essent ial to t he validit y of resale t hat not ice of

an int ent ion to resell t he goods be given by t he seller to
t he original buyer. But where t he right to resell is not
based on t he perishable nat ure of t he goods or upon an
express provision of t he cont ract of sale, t he giving or
failure to give such not ice shall be relevant in any issue
involving t he quest ion whet her t he buyer had been in
default for an unreasonable t ime before t he resale was
made.

It is not essent ial to t he validit y of a resale t hat not ice

of t he t ime and place of such resale should be given by
t he seller to t he original buyer.

T he seller is bound to exercise reasonable care and

judgment in making a resale, and subject to t his
requirement may make a resale eit her by public or
privat e sale. He cannot , however, direct ly or indirect ly
buy t he goods. (n)

Art . 1534. An unpaid seller having t he right of lien or

having stopped t he goods in t ransit u, may rescind t he
t ransfer of t it le and resume t he ownership in t he goods,
where he expressly reserved t he right to do so in case
t he buyer should make default , or where t he buyer has
been in default in t he payment of t he price for an
unreasonable t ime. T he seller shall not t hereaft er be
liable to t he buyer upon t he cont ract of sale, but may
recover from t he buyer damages for any loss
occasioned by t he breach of t he cont ract .

T he t ransfer of t it le shall not be held to have been

rescinded by an unpaid seller unt il he has manifest ed by
not ice to t he buyer or by some ot her overt act an
int ent ion to rescind. It is not necessary t hat such overt
act should be communicat ed to t he buyer, but t he giving
or failure to give not ice to t he buyer of t he int ent ion to
rescind shall be relevant in any issue involving t he
quest ion whet her t he buyer had been in default for an
unreasonable t ime before t he right of rescission was
assert ed. (n)

Art . 1535. Subject to t he provisions of t his T it le, t he

unpaid seller's right of lien or stoppage in t ransit u is not
affect ed by any sale, or ot her disposit ion of t he goods
which t he buyer may have made, unless t he seller has
assent ed t hereto.

If, however, a negot iable document of t it le has been

issued for goods, no seller's lien or right of stoppage in
t ransit u shall defeat t he right of any purchaser for value
in good fait h to whom such document has been
negot iat ed, whet her such negot iat ion be prior or
subsequent to t he not ificat ion to t he carrier, or ot her
bailee who issued such document , of t he seller's claim
to a lien or right of stoppage in t ransit u. (n)
Art . 1536. T he vendor is not bound to deliver t he t hing
sold in case t he vendee should lose t he right to make
use of t he t erms as provided in Art icle 1198. (1467a)

Art . 1537. T he vendor is bound to deliver t he t hing sold

and it s accessions and accessories in t he condit ion in
which t hey were upon t he perfect ion of t he cont ract .

All t he fruit s shall pert ain to t he vendee from t he day on

which t he cont ract was perfect ed. (1468a)

Art . 1538. In case of loss, det eriorat ion or improvement

of t he t hing before it s delivery, t he rules in Art icle 1189
shall be observed, t he vendor being considered t he
debtor. (n)

Art . 1539. T he obligat ion to deliver t he t hing sold

includes t hat of placing in t he cont rol of t he vendee all
t hat is ment ioned in t he cont ract , in conformit y wit h t he
following rules:

If t he sale of real est at e should be made wit h a

st at ement of it s area, at t he rat e of a cert ain price for a
unit of measure or number, t he vendor shall be obliged
to deliver to t he vendee, if t he lat t er should demand it ,
all t hat may have been st at ed in t he cont ract ; but ,
should t his be not possible, t he vendee may choose
bet ween a proport ional reduct ion of t he price and t he
rescission of t he cont ract , provided t hat , in t he lat t er
case, t he lack in t he area be not less t han one-t ent h of
t hat st at ed.

T he same shall be done, even when t he area is t he

same, if any part of t he immovable is not of t he qualit y
specified in t he cont ract .

T he rescission, in t his case, shall only t ake place at t he

will of t he vendee, when t he inferior value of t he t hing
sold exceeds one-t ent h of t he price agreed upon.

Nevert heless, if t he vendee would not have bought t he

immovable had he known of it s smaller area of inferior
qualit y, he may rescind t he sale. (1469a)

Art . 1540. If, in t he case of t he preceding art icle, t here is

a great er area or number in t he immovable t han t hat
st at ed in t he cont ract , t he vendee may accept t he area
included in t he cont ract and reject t he rest . If he
accept s t he whole area, he must pay for t he same at
t he cont ract rat e. (1470a)

Art . 1541. T he provisions of t he t wo preceding art icles

shall apply to judicial sales. (n)

Art . 1542. In t he sale of real est at e, made for a lump

sum and not at t he rat e of a cert ain sum for a unit of
measure or number, t here shall be no increase or
decrease of t he price, alt hough t here be a great er or
less area or number t han t hat st at ed in t he cont ract .

T he same rule shall be applied when t wo or more

immovables as sold for a single price; but if, besides
ment ioning t he boundaries, which is indispensable in
every conveyance of real est at e, it s area or number
should be designat ed in t he cont ract , t he vendor shall
be bound to deliver all t hat is included wit hin said
boundaries, even when it exceeds t he area or number
specified in t he cont ract ; and, should he not be able to
do so, he shall suffer a reduct ion in t he price, in
proport ion to what is lacking in t he area or number,
unless t he cont ract is rescinded because t he vendee
does not accede to t he failure to deliver what has been
st ipulat ed. (1471)

Art . 1543. T he act ions arising from Art icles 1539 and
1542 shall prescribe in six mont hs, count ed from t he
day of delivery. (1472a)

Art . 1544. If t he same t hing should have been sold to

different vendees, t he ownership shall be t ransferred to
t he person who may have first t aken possession
t hereof in good fait h, if it should be movable propert y.
Should it be immovable propert y, t he ownership shall
belong to t he person acquiring it who in good fait h first
recorded it in t he Regist ry of Propert y.

Should t here be no inscript ion, t he ownership shall

pert ain to t he person who in good fait h was first in t he
possession; and, in t he absence t hereof, to t he person
who present s t he oldest t it le, provided t here is good
fait h. (1473)

SECT ION 3. - Conditions and Warranties

Art . 1545. Where t he obligat ion of eit her part y to a

cont ract of sale is subject to any condit ion which is not
performed, such part y may refuse to proceed wit h t he
cont ract or he may waive performance of t he condit ion.
If t he ot her part y has promised t hat t he condit ion
should happen or be performed, such first ment ioned
part y may also t reat t he nonperformance of t he
condit ion as a breach of warrant y.

Where t he ownership in t he t hing has not passed, t he

buyer may t reat t he fulfillment by t he seller of his
obligat ion to deliver t he same as described and as
warrant ed expressly or by implicat ion in t he cont ract of
sale as a condit ion of t he obligat ion of t he buyer to
perform his promise to accept and pay for t he t hing. (n)

Art . 1546. Any affirmat ion of fact or any promise by t he

seller relat ing to t he t hing is an express warrant y if t he
nat ural t endency of such affirmat ion or promise is to
induce t he buyer to purchase t he same, and if t he buyer
purchase t he t hing relying t hereon. No affirmat ion of t he
value of t he t hing, nor any st at ement purport ing to be a
st at ement of t he seller's opinion only, shall be
const rued as a warrant y, unless t he seller made such
affirmat ion or st at ement as an expert and it was relied
upon by t he buyer. (n)

Art . 1547. In a cont ract of sale, unless a cont rary

int ent ion appears, t here is:
 (1) An implied warrant y on t he part of t he seller
t hat he has a right to sell t he t hing at t he t ime
when t he ownership is to pass, and t hat t he buyer
shall from t hat t ime have and enjoy t he legal and
peaceful possession of t he t hing;

(2) An implied warrant y t hat t he t hing shall be free

from any hidden fault s or defect s, or any charge
or encumbrance not declared or known to t he
buyer.

T his Art icle shall not , however, be held to render liable a

sheriff, auct ioneer, mort gagee, pledgee, or ot her person
professing to sell by virt ue of aut horit y in fact or law, for
t he sale of a t hing in which a t hird person has a legal or
equit able int erest . (n)

SUBSECT ION 1. - Warranty in Case of Eviction

Art . 1548. Evict ion shall t ake place whenever by a final

judgment based on a right prior to t he sale or an act
imput able to t he vendor, t he vendee is deprived of t he
whole or of a part of t he t hing purchased.

T he vendor shall answer for t he evict ion even t hough

not hing has been said in t he cont ract on t he subject .

T he cont ract ing part ies, however, may increase,

diminish, or suppress t his legal obligat ion of t he vendor.
(1475a)

Art . 1549. T he vendee need not appeal from t he

decision in order t hat t he vendor may become liable for
evict ion. (n)

Art . 1550. When adverse possession had been

commenced before t he sale but t he prescript ive period
is complet ed aft er t he t ransfer, t he vendor shall not be
liable for evict ion. (n)

Art . 1551. If t he propert y is sold for nonpayment of

t axes due and not made known to t he vendee before
t he sale, t he vendor is liable for evict ion. (n)

Art . 1552. T he judgment debtor is also responsible for

evict ion in judicial sales, unless it is ot herwise decreed
in t he judgment . (n)

Art . 1553. Any st ipulat ion exempt ing t he vendor from

t he obligat ion to answer for evict ion shall be void, if he
act ed in bad fait h. (1476)

Art . 1554. If t he vendee has renounced t he right to

warrant y in case of evict ion, and evict ion should t ake
place, t he vendor shall only pay t he value which t he t hing
sold had at t he t ime of t he evict ion. Should t he vendee
have made t he waiver wit h knowledge of t he risks of
evict ion and assumed it s consequences, t he vendor
shall not be liable. (1477)

Art . 1555. When t he warrant y has been agreed upon or

not hing has been st ipulat ed on t his point , in case
evict ion occurs, t he vendee shall have t he right to
demand of t he vendor:

(1) T he ret urn of t he value which t he t hing sold

had at t he t ime of t he evict ion, be it great er or
less t han t he price of t he sale;

(2) T he income or fruit s, if he has been ordered to

deliver t hem to t he part y who won t he suit
against him;

(3) T he cost s of t he suit which caused t he

evict ion, and, in a proper case, t hose of t he suit
brought against t he vendor for t he warrant y;

(4) T he expenses of t he cont ract , if t he vendee

has paid t hem;

(5) T he damages and int erest s, and ornament al

expenses, if t he sale was made in bad fait h.
(1478)
Art . 1556. Should t he vendee lose, by reason of t he
evict ion, a part of t he t hing sold of such import ance, in
relat ion to t he whole, t hat he would not have bought it
wit hout said part , he may demand t he rescission of t he
cont ract ; but wit h t he obligat ion to ret urn t he t hing
wit hout ot her encumbrances t hat t hose which it had
when he acquired it .

He may exercise t his right of act ion, inst ead of

enforcing t he vendor's liabilit y for evict ion.

T he same rule shall be observed when t wo or more

t hings have been joint ly sold for a lump sum, or for a
separat e price for each of t hem, if it should clearly
appear t hat t he vendee would not have purchased one
wit hout t he ot her. (1479a)

Art . 1557. T he warrant y cannot be enforced unt il a final

judgment has been rendered, whereby t he vendee loses
t he t hing acquired or a part t hereof. (1480)

Art . 1558. T he vendor shall not be obliged to make good

t he proper warrant y, unless he is summoned in t he suit
for evict ion at t he inst ance of t he vendee. (1481a)

Art . 1559. T he defendant vendee shall ask, wit hin t he

t ime fixed in t he Rules of Court for answering t he
complaint , t hat t he vendor be made a co-defendant .
(1482a)

Art . 1560. If t he immovable sold should be encumbered

wit h any non-apparent burden or servit ude, not
ment ioned in t he agreement , of such a nat ure t hat it
must be presumed t hat t he vendee would not have
acquired it had he been aware t hereof, he may ask for
t he rescission of t he cont ract , unless he should prefer
t he appropriat e indemnit y. Neit her right can be
exercised if t he non-apparent burden or servit ude is
recorded in t he Regist ry of Propert y, unless t here is an
express warrant y t hat t he t hing is free from all burdens
and encumbrances.
Wit hin one year, to be comput ed from t he execut ion of
t he deed, t he vendee may bring t he act ion for
rescission, or sue for damages.

One year having elapsed, he may only bring an act ion for
damages wit hin an equal period, to be count ed from t he
dat e on which he discovered t he burden or servit ude.
(1483a)

SUBSECT ION 2. - Warranty Against Hidden Defects

of orEncumbrances Upon the T hing Sold

Art . 1561. T he vendor shall be responsible for warrant y

against t he hidden defect s which t he t hing sold may
have, should t hey render it unfit for t he use for which it
is int ended, or should t hey diminish it s fit ness for such
use to such an ext ent t hat , had t he vendee been aware
t hereof, he would not have acquired it or would have
given a lower price for it ; but said vendor shall not be
answerable for pat ent defect s or t hose which may be
visible, or for t hose which are not visible if t he vendee is
an expert who, by reason of his t rade or profession,
should have known t hem. (1484a)

Art . 1562. In a sale of goods, t here is an implied warrant y

or condit ion as to t he qualit y or fit ness of t he goods, as
follows:

(1) Where t he buyer, expressly or by implicat ion,

makes known to t he seller t he part icular purpose
for which t he goods are acquired, and it appears
t hat t he buyer relies on t he seller's skill or
judgment (whet her he be t he grower or
manufact urer or not ), t here is an implied warrant y
t hat t he goods shall be reasonably fit for such
purpose;

(2) Where t he goods are brought by descript ion

from a seller who deals in goods of t hat
descript ion (whet her he be t he grower or
 manufact urer or not ), t here is an implied warrant y
t hat t he goods shall be of merchant able qualit y.
(n)

Art . 1563. In t he case of cont ract of sale of a specified

art icle under it s pat ent or ot her t rade name, t here is no
warrant y as to it s fit ness for any part icular purpose,
unless t here is a st ipulat ion to t he cont rary. (n)

Art . 1564. An implied warrant y or condit ion as to t he

qualit y or fit ness for a part icular purpose may be
annexed by t he usage of t rade. (n)

Art . 1565. In t he case of a cont ract of sale by sample, if

t he seller is a dealer in goods of t hat kind, t here is an
implied warrant y t hat t he goods shall be free from any
defect rendering t hem unmerchant able which would
not be apparent on reasonable examinat ion of t he
sample. (n)

Art . 1566. T he vendor is responsible to t he vendee for

any hidden fault s or defect s in t he t hing sold, even
t hough he was not aware t hereof.

T his provision shall not apply if t he cont rary has been

st ipulat ed, and t he vendor was not aware of t he hidden
fault s or defect s in t he t hing sold. (1485)

Art . 1567. In t he cases of Art icles 1561, 1562, 1564,

1565 and 1566, t he vendee may elect bet ween
wit hdrawing from t he cont ract and demanding a
proport ionat e reduct ion of t he price, wit h damages in
eit her case. (1486a)

Art . 1568. If t he t hing sold should be lost in

consequence of t he hidden fault s, and t he vendor was
aware of t hem, he shall bear t he loss, and shall be
obliged to ret urn t he price and refund t he expenses of
t he cont ract , wit h damages. If he was not aware of
t hem, he shall only ret urn t he price and int erest t hereon,
and reimburse t he expenses of t he cont ract which t he
vendee might have paid. (1487a)
Art . 1569. If t he t hing sold had any hidden fault at t he
t ime of t he sale, and should t hereaft er be lost by a
fort uitous event or t hrough t he fault of t he vendee, t he
lat t er may demand of t he vendor t he price which he
paid, less t he value which t he t hing had when it was lost .

If t he vendor act ed in bad fait h, he shall pay damages to

t he vendee. (1488a)

Art . 1570. T he preceding art icles of t his Subsect ion

shall be applicable to judicial sales, except t hat t he
judgment debtor shall not be liable for damages.
(1489a)

Art . 1571. Act ions arising from t he provisions of t he

preceding t en art icles shall be barred aft er six mont hs,
from t he delivery of t he t hing sold. (1490)

Art . 1572. If t wo or more animals are sold toget her,

whet her for a lump sum or for a separat e price for each
of t hem, t he redhibitory defect of one shall only give rise
to it s redhibit ion, and not t hat of t he ot hers; unless it
should appear t hat t he vendee would not have
purchased t he sound animal or animals wit hout t he
defect ive one.

T he lat t er case shall be presumed when a t eam, yoke

pair, or set is bought , even if a separat e price has been
fixed for each one of t he animals composing t he same.
(1491)

Art . 1573. T he provisions of t he preceding art icle wit h

respect to t he sale of animals shall in like manner be
applicable to t he sale of ot her t hings. (1492)

Art . 1574. T here is no warrant y against hidden defect s

of animals sold at fairs or at public auct ions, or of live
stock sold as condemned. (1493a)

Art . 1575. T he sale of animals suffering from

cont agious diseases shall be void.
A cont ract of sale of animals shall also be void if t he use
or service for which t hey are acquired has been st at ed
in t he cont ract , and t hey are found to be unfit t herefor.
(1494a)

Art . 1576. If t he hidden defect of animals, even in case a

professional inspect ion has been made, should be of
such a nat ure t hat expert knowledge is not sufficient to
discover it , t he defect shall be considered as redhibitory.

But if t he vet erinarian, t hrough ignorance or bad fait h

should fail to discover or disclose it , he shall be liable for
damages. (1495)

Art . 1577. T he redhibitory act ion, based on t he fault s or

defect s of animals, must be brought wit hin fort y days
from t he dat e of t heir delivery to t he vendee.

T his act ion can only be exercised wit h respect to fault s

and defect s which are det ermined by law or by local
customs. (1496a)

Art . 1578. If t he animal should die wit hin t hree days aft er
it s purchase, t he vendor shall be liable if t he disease
which cause t he deat h exist ed at t he t ime of t he
cont ract . (1497a)

Art . 1579. If t he sale be rescinded, t he animal shall be

ret urned in t he condit ion in which it was sold and
delivered, t he vendee being answerable for any injury
due to his negligence, and not arising from t he
redhibitory fault or defect . (1498)

Art . 1580. In t he sale of animals wit h redhibitory defect s,

t he vendee shall also enjoy t he right ment ioned in art icle
1567; but he must make use t hereof wit hin t he same
period which has been fixed for t he exercise of t he
redhibitory act ion. (1499)

Art . 1581. T he form of sale of large cat t le shall be

governed by special laws. (n)

CHAPT ER 5
 OBLIGAT IONS OF T HE VENDEE

Art . 1582. T he vendee is bound to accept delivery and to

pay t he price of t he t hing sold at t he t ime and place
st ipulat ed in t he cont ract .

If t he t ime and place should not have been st ipulat ed,

t he payment must be made at t he t ime and place of t he
delivery of t he t hing sold. (1500a)

Art . 1583. Unless ot herwise agreed, t he buyer of goods

is not bound to accept delivery t hereof by inst allment s.

Where t here is a cont ract of sale of goods to be

delivered by st at ed inst allment s, which are to be
separat ely paid for, and t he seller makes defect ive
deliveries in respect of one or more inst alment s, or t he
buyer neglect s or refuses wit hout just cause to t ake
delivery of or pay for one more inst alment s, it depends
in each case on t he t erms of t he cont ract and t he
circumst ances of t he case, whet her t he breach of
cont ract is so mat erial as to just ify t he injured part y in
refusing to proceed furt her and suing for damages for
breach of t he ent ire cont ract , or whet her t he breach is
severable, giving rise to a claim for compensat ion but
not to a right to t reat t he whole cont ract as broken. (n)

Art . 1584. Where goods are delivered to t he buyer, which

he has not previously examined, he is not deemed to
have accept ed t hem unless and unt il he has had a
reasonable opport unit y of examining t hem for t he
purpose of ascert aining whet her t hey are in conformit y
wit h t he cont ract if t here is no st ipulat ion to t he
cont rary.

Unless ot herwise agreed, when t he seller t enders

delivery of goods to t he buyer, he is bound, on request ,
to afford t he buyer a reasonable opport unit y of
examining t he goods for t he purpose of ascert aining
whet her t hey are in conformit y wit h t he cont ract .
Where goods are delivered to a carrier by t he seller, in
accordance wit h an order from or agreement wit h t he
buyer, upon t he t erms t hat t he goods shall not be
delivered by t he carrier to t he buyer unt il he has paid t he
price, whet her such t erms are indicat ed by marking t he
goods wit h t he words "collect on delivery," or ot herwise,
t he buyer is not ent it led to examine t he goods before
t he payment of t he price, in t he absence of agreement
or usage of t rade permit t ing such examinat ion. (n)

Art . 1585. T he buyer is deemed to have accept ed t he

goods when he int imat es to t he seller t hat he has
accept ed t hem, or when t he goods have been delivered
to him, and he does any act in relat ion to t hem which is
inconsist ent wit h t he ownership of t he seller, or when,
aft er t he lapse of a reasonable t ime, he ret ains t he
goods wit hout int imat ing to t he seller t hat he has
reject ed t hem. (n)

Art . 1586. In t he absence of express or implied

agreement of t he part ies, accept ance of t he goods by
t he buyer shall not discharge t he seller from liabilit y in
damages or ot her legal remedy for breach of any
promise or warrant y in t he cont ract of sale. But , if, aft er
accept ance of t he goods, t he buyer fails to give not ice
to t he seller of t he breach in any promise of warrant y
wit hin a reasonable t ime aft er t he buyer knows, or
ought to know of such breach, t he seller shall not be
liable t herefor. (n)

Art . 1587. Unless ot herwise agreed, where goods are

delivered to t he buyer, and he refuses to accept t hem,
having t he right so to do, he is not bound to ret urn t hem
to t he seller, but it is sufficient if he not ifies t he seller
t hat he refuses to accept t hem. If he volunt arily
const it ut es himself a deposit ary t hereof, he shall be
liable as such. (n)

Art . 1588. If t here is no st ipulat ion as specified in t he

first paragraph of art icle 1523, when t he buyer's refusal
to accept t he goods is wit hout just cause, t he t it le
t hereto passes to him from t he moment t hey are
placed at his disposal. (n)

Art . 1589. T he vendee shall owe int erest for t he period

bet ween t he delivery of t he t hing and t he payment of
t he price, in t he following t hree cases:

(1) Should it have been so st ipulat ed;

(2) Should t he t hing sold and delivered produce

fruit s or income;

(3) Should he be in default , from t he t ime of

judicial or ext rajudicial demand for t he payment of
t he price. (1501a)

Art . 1590. Should t he vendee be dist urbed in t he

possession or ownership of t he t hing acquired, or
should he have reasonable grounds to fear such
dist urbance, by a vindicatory act ion or a foreclosure of
mort gage, he may suspend t he payment of t he price
unt il t he vendor has caused t he dist urbance or danger
to cease, unless t he lat t er gives securit y for t he ret urn
of t he price in a proper case, or it has been st ipulat ed
t hat , not wit hst anding any such cont ingency, t he vendee
shall be bound to make t he payment . A mere act of
t respass shall not aut horize t he suspension of t he
payment of t he price. (1502a)

Art . 1591. Should t he vendor have reasonable grounds to

fear t he loss of immovable propert y sold and it s price,
he may immediat ely sue for t he rescission of t he sale.

Should such ground not exist , t he provisions of Art icle

1191 shall be observed. (1503)

Art . 1592. In t he sale of immovable propert y, even

t hough it may have been st ipulat ed t hat upon failure to
pay t he price at t he t ime agreed upon t he rescission of
t he cont ract shall of right t ake place, t he vendee may
pay, even aft er t he expirat ion of t he period, as long as no
demand for rescission of t he cont ract has been made
upon him eit her judicially or by a not arial act . Aft er t he
demand, t he court may not grant him a new t erm.
(1504a)

Art . 1593. Wit h respect to movable propert y, t he

rescission of t he sale shall of right t ake place in t he
int erest of t he vendor, if t he vendee, upon t he expirat ion
of t he period fixed for t he delivery of t he t hing, should
not have appeared to receive it , or, having appeared, he
should not have t endered t he price at t he same t ime,
unless a longer period has been st ipulat ed for it s
payment . (1505)

CHAPT ER 6

ACT IONS FOR BREACH OF CONT RACT OF SALE OF

GOODS

Art . 1594. Act ions for breach of t he cont ract of sale of

goods shall be governed part icularly by t he provisions of
t his Chapt er, and as to mat t ers not specifically provided
for herein, by ot her applicable provisions of t his T it le. (n)

Art . 1595. Where, under a cont ract of sale, t he

ownership of t he goods has passed to t he buyer and he
wrongfully neglect s or refuses to pay for t he goods
according to t he t erms of t he cont ract of sale, t he
seller may maint ain an act ion against him for t he price
of t he goods.

Where, under a cont ract of sale, t he price is payable on a

cert ain day, irrespect ive of delivery or of t ransfer of t it le
and t he buyer wrongfully neglect s or refuses to pay
such price, t he seller may maint ain an act ion for t he
price alt hough t he ownership in t he goods has not
passed. But it shall be a defense to such an act ion t hat
t he seller at any t ime before t he judgment in such
act ion has manifest ed an inabilit y to perform t he
cont ract of sale on his part or an int ent ion not to
perform it .
Alt hough t he ownership in t he goods has not passed, if
t hey cannot readily be resold for a reasonable price, and
if t he provisions of art icle 1596, fourt h paragraph, are
not applicable, t he seller may offer to deliver t he goods
to t he buyer, and, if t he buyer refuses to receive t hem,
may not ify t he buyer t hat t he goods are t hereaft er held
by t he seller as bailee for t he buyer. T hereaft er t he
seller may t reat t he goods as t he buyer's and may
maint ain an act ion for t he price. (n)

Art . 1596. Where t he buyer wrongfully neglect s or

refuses to accept and pay for t he goods, t he seller may
maint ain an act ion against him for damages for
nonaccept ance.

T he measure of damages is t he est imat ed loss direct ly

and nat urally result ing in t he ordinary course of event s
from t he buyer's breach of cont ract .

Where t here is an available market for t he goods in

quest ion, t he measure of damages is, in t he absence of
special circumst ances showing proximat e damage of a
different amount , t he difference bet ween t he cont ract
price and t he market or current price at t he t ime or
t imes when t he goods ought to have been accept ed, or,
if no t ime was fixed for accept ance, t hen at t he t ime of
t he refusal to accept .

If, while labor or expense of mat erial amount is

necessary on t he part of t he seller to enable him to
fulfill his obligat ions under t he cont ract of sale, t he
buyer repudiat es t he cont ract or not ifies t he seller to
proceed no furt her t herewit h, t he buyer shall be liable to
t he seller for labor performed or expenses made before
receiving not ice of t he buyer's repudiat ion or
count ermand. T he profit t he seller would have made if
t he cont ract or t he sale had been fully performed shall
be considered in awarding t he damages. (n)

Art . 1597. Where t he goods have not been delivered to

t he buyer, and t he buyer has repudiat ed t he cont ract of
sale, or has manifest ed his inabilit y to perform his
obligat ions t hereunder, or has commit t ed a breach
t hereof, t he seller may tot ally rescind t he cont ract of
sale by giving not ice of his elect ion so to do to t he buyer.
(n)

Art . 1598. Where t he seller has broken a cont ract to

deliver specific or ascert ained goods, a court may, on
t he applicat ion of t he buyer, direct t hat t he cont ract
shall be performed specifically, wit hout giving t he seller
t he opt ion of ret aining t he goods on payment of
damages. T he judgment or decree may be
uncondit ional, or upon such t erms and condit ions as to
damages, payment of t he price and ot herwise, as t he
court may deem just . (n)

Art . 1599. Where t here is a breach of warrant y by t he

seller, t he buyer may, at his elect ion:

(1) Accept or keep t he goods and set up against

t he seller, t he breach of warrant y by way of
recoupment in diminut ion or ext inct ion of t he
price;

(2) Accept or keep t he goods and maint ain an

act ion against t he seller for damages for t he
breach of warrant y;

(3) Refuse to accept t he goods, and maint ain an

act ion against t he seller for damages for t he
breach of warrant y;

(4) Rescind t he cont ract of sale and refuse to

receive t he goods or if t he goods have already
been received, ret urn t hem or offer to ret urn
t hem to t he seller and recover t he price or any
part t hereof which has been paid.

When t he buyer has claimed and been grant ed a

remedy in anyone of t hese ways, no ot her remedy
can t hereaft er be grant ed, wit hout prejudice to
t he provisions of t he second paragraph of Art icle
1191.

Where t he goods have been delivered to t he buyer,

he cannot rescind t he sale if he knew of t he
breach of warrant y when he accept ed t he goods
wit hout prot est , or if he fails to not ify t he seller
wit hin a reasonable t ime of t he elect ion to
rescind, or if he fails to ret urn or to offer to ret urn
t he goods to t he seller in subst ant ially as good
condit ion as t hey were in at t he t ime t he
ownership was t ransferred to t he buyer. But if
det eriorat ion or injury of t he goods is due to t he
breach or warrant y, such det eriorat ion or injury
shall not prevent t he buyer from ret urning or
offering to ret urn t he goods to t he seller and
rescinding t he sale.

Where t he buyer is ent it led to rescind t he sale and

elect s to do so, he shall cease to be liable for t he
price upon ret urning or offering to ret urn t he
goods. If t he price or any part t hereof has already
been paid, t he seller shall be liable to repay so
much t hereof as has been paid, concurrent ly wit h
t he ret urn of t he goods, or immediat ely aft er an
offer to ret urn t he goods in exchange for
repayment of t he price.

Where t he buyer is ent it led to rescind t he sale and

elect s to do so, if t he seller refuses to accept an
offer of t he buyer to ret urn t he goods, t he buyer
shall t hereaft er be deemed to hold t he goods as
bailee for t he seller, but subject to a lien to secure
payment of any port ion of t he price which has
been paid, and wit h t he remedies for t he
enforcement of such lien allowed to an unpaid
seller by Art icle 1526.

(5) In t he case of breach of warrant y of qualit y,

such loss, in t he absence of special
circumst ances showing proximat e damage of a
 great er amount , is t he difference bet ween t he
value of t he goods at t he t ime of delivery to t he
buyer and t he value t hey would have had if t hey
had answered to t he warrant y. (n)

CHAPT ER 7

EXT INGUISHMENT OF SALE

Art . 1600. Sales are ext inguished by t he same causes

as all ot her obligat ions, by t hose st at ed in t he preceding
art icles of t his T it le, and by convent ional or legal
redempt ion. (1506)

SECT ION 1. - Conventional Redemption

Art . 1601. Convent ional redempt ion shall t ake place

when t he vendor reserves t he right to repurchase t he
t hing sold, wit h t he obligat ion to comply wit h t he
provisions of Art icle 1616 and ot her st ipulat ions which
may have been agreed upon. (1507)

Art . 1602. T he cont ract shall be presumed to be an

equit able mort gage, in any of t he following cases:

(1) When t he price of a sale wit h right to

repurchase is unusually inadequat e;

(2) When t he vendor remains in possession as

lessee or ot herwise;

(3) When upon or aft er t he expirat ion of t he right

to repurchase anot her inst rument ext ending t he
period of redempt ion or grant ing a new period is
execut ed;

(4) When t he purchaser ret ains for himself a part

of t he purchase price;

(5) When t he vendor binds himself to pay t he

t axes on t he t hing sold;
 (6) In any ot her case where it may be fairly
inferred t hat t he real int ent ion of t he part ies is
t hat t he t ransact ion shall secure t he payment of
a debt or t he performance of any ot her obligat ion.

In any of t he foregoing cases, any money, fruit s, or ot her

benefit to be received by t he vendee as rent or
ot herwise shall be considered as int erest which shall be
subject to t he usury laws. (n)

Art . 1603. In case of doubt , a cont ract purport ing to be a

sale wit h right to repurchase shall be const rued as an
equit able mort gage. (n)

Art . 1604. T he provisions of Art icle 1602 shall also apply

to a cont ract purport ing to be an absolut e sale. (n)

Art . 1605. In t he cases referred to in Art icles 1602 and

1604, t he apparent vendor may ask for t he reformat ion
of t he inst rument . (n)

Art . 1606. T he right referred to in Art icle 1601, in t he

absence of an express agreement , shall last four years
from t he dat e of t he cont ract .

Should t here be an agreement , t he period cannot

exceed t en years.

However, t he vendor may st ill exercise t he right to

repurchase wit hin t hirt y days from t he t ime final
judgment was rendered in a civil act ion on t he basis t hat
t he cont ract was a t rue sale wit h right to repurchase.
(1508a)

Art . 1607. In case of real propert y, t he consolidat ion of

ownership in t he vendee by virt ue of t he failure of t he
vendor to comply wit h t he provisions of art icle 1616
shall not be recorded in t he Regist ry of Propert y wit hout
a judicial order, aft er t he vendor has been duly heard. (n)

Art . 1608. T he vendor may bring his act ion against every
possessor whose right is derived from t he vendee, even
if in t he second cont ract no ment ion should have been
made of t he right to repurchase, wit hout prejudice to
t he provisions of t he Mort gage Law and t he Land
Regist rat ion Law wit h respect to t hird persons. (1510)

Art . 1609. T he vendee is subrogat ed to t he vendor's

right s and act ions. (1511)

Art . 1610. T he creditors of t he vendor cannot make use

of t he right of redempt ion against t he vendee, unt il
aft er t hey have exhaust ed t he propert y of t he vendor.
(1512)

Art . 1611. In a sale wit h a right to repurchase, t he

vendee of a part of an undivided immovable who
acquires t he whole t hereof in t he case of art icle 498,
may compel t he vendor to redeem t he whole propert y, if
t he lat t er wishes to make use of t he right of
redempt ion. (1513)

Art . 1612. If several persons, joint ly and in t he same

cont ract , should sell an undivided immovable wit h a
right of repurchase, none of t hem may exercise t his
right for more t han his respect ive share.

T he same rule shall apply if t he person who sold an

immovable alone has left several heirs, in which case
each of t he lat t er may only redeem t he part which he
may have acquired. (1514)

Art . 1613. In t he case of t he preceding art icle, t he

vendee may demand of all t he vendors or co-heirs t hat
t hey come to an agreement upon t he purchase of t he
whole t hing sold; and should t hey fail to do so, t he
vendee cannot be compelled to consent to a part ial
redempt ion. (1515)

Art . 1614. Each one of t he co-owners of an undivided

immovable who may have sold his share separat ely,
may independent ly exercise t he right of repurchase as
regards his own share, and t he vendee cannot compel
him to redeem t he whole propert y. (1516)
Art . 1615. If t he vendee should leave several heirs, t he
act ion for redempt ion cannot be brought against each
of t hem except for his own share, whet her t he t hing be
undivided, or it has been part it ioned among t hem.

But if t he inherit ance has been divided, and t he t hing

sold has been awarded to one of t he heirs, t he act ion
for redempt ion may be inst it ut ed against him for t he
whole. (1517)

Art . 1616. T he vendor cannot avail himself of t he right of

repurchase wit hout ret urning to t he vendee t he price of
t he sale, and in addit ion:

(1) T he expenses of t he cont ract , and any ot her

legit imat e payment s made by reason of t he sale;

(2) T he necessary and useful expenses made on

t he t hing sold. (1518)

Art . 1617. If at t he t ime of t he execut ion of t he sale

t here should be on t he land, visible or growing fruit s,
t here shall be no reimbursement for or prorat ing of
t hose exist ing at t he t ime of redempt ion, if no
indemnit y was paid by t he purchaser when t he sale was
execut ed.

Should t here have been no fruit s at t he t ime of t he sale

and some exist at t he t ime of redempt ion, t hey shall be
prorat ed bet ween t he redempt ioner and t he vendee,
giving t he lat t er t he part corresponding to t he t ime he
possessed t he land in t he last year, count ed from t he
anniversary of t he dat e of t he sale. (1519a)

Art . 1618. T he vendor who recovers t he t hing sold shall

receive it free from all charges or mort gages
const it ut ed by t he vendee, but he shall respect t he
leases which t he lat t er may have execut ed in good
fait h, and in accordance wit h t he custom of t he place
where t he land is sit uat ed. (1520)

SECT ION 2. - Legal Redemption

Art . 1619. Legal redempt ion is t he right to be
subrogat ed, upon t he same t erms and condit ions
st ipulat ed in t he cont ract , in t he place of one who
acquires a t hing by purchase or dat ion in payment , or by
any ot her t ransact ion whereby ownership is
t ransmit t ed by onerous t it le. (1521a)

Art . 1620. A co-owner of a t hing may exercise t he right

of redempt ion in case t he shares of all t he ot her co-
owners or of any of t hem, are sold to a t hird person. If
t he price of t he alienat ion is grossly excessive, t he
redempt ioner shall pay only a reasonable one.

Should t wo or more co-owners desire to exercise t he

right of redempt ion, t hey may only do so in proport ion to
t he share t hey may respect ively have in t he t hing owned
in common. (1522a)

Art . 1621. T he owners of adjoining lands shall also have

t he right of redempt ion when a piece of rural land, t he
area of which does not exceed one hect are, is alienat ed,
unless t he grant ee does not own any rural land.

T his right is not applicable to adjacent lands which are

separat ed by brooks, drains, ravines, roads and ot her
apparent servit udes for t he benefit of ot her est at es.

If t wo or more adjoining owners desire to exercise t he

right of redempt ion at t he same t ime, t he owner of t he
adjoining land of smaller area shall be preferred; and
should bot h lands have t he same area, t he one who first
request ed t he redempt ion. (1523a)

Art . 1622. Whenever a piece of urban land which is so

small and so sit uat ed t hat a major port ion t hereof
cannot be used for any pract ical purpose wit hin a
reasonable t ime, having been bought merely for
speculat ion, is about to be re-sold, t he owner of any
adjoining land has a right of pre-empt ion at a reasonable
price.
If t he re-sale has been perfect ed, t he owner of t he
adjoining land shall have a right of redempt ion, also at a
reasonable price.

When t wo or more owners of adjoining lands wish to

exercise t he right of

pre-empt ion or redempt ion, t he owner whose int ended

use of t he land in quest ion appears best just ified shall
be preferred. (n)

Art . 1623. T he right of legal pre-empt ion or redempt ion

shall not be exercised except wit hin t hirt y days from t he
not ice in writ ing by t he prospect ive vendor, or by t he
vendor, as t he case may be. T he deed of sale shall not
be recorded in t he Regist ry of Propert y, unless
accompanied by an affidavit of t he vendor t hat he has
given writ t en not ice t hereof to all possible
redempt ioners.

T he right of redempt ion of co-owners excludes t hat of

adjoining owners. (1524a)

CHAPT ER 8

ASSIGNMENT OF CREDITS AND OT HER INCORPOREAL

RIGHTS

Art . 1624. An assignment of creditors and ot her

incorporeal right s shall be perfect ed in accordance wit h
t he provisions of Art icle 1475. (n)

Art . 1625. An assignment of a credit , right or act ion shall

produce no effect as against t hird person, unless it
appears in a public inst rument , or t he inst rument is
recorded in t he Regist ry of Propert y in case t he
assignment involves real propert y. (1526)

Art . 1626. T he debtor who, before having knowledge of

t he assignment , pays his creditor shall be released from
t he obligat ion. (1527)

Art . 1627. T he assignment of a credit includes all t he

accessory right s, such as a guarant y, mort gage, pledge
or preference. (1528)

Art . 1628. T he vendor in good fait h shall be responsible

for t he exist ence and legalit y of t he credit at t he t ime of
t he sale, unless it should have been sold as doubt ful;
but not for t he solvency of t he debtor, unless it has
been so expressly st ipulat ed or unless t he insolvency
was prior to t he sale and of common knowledge.

Even in t hese cases he shall only be liable for t he price

received and for t he expenses specified in No. 1 of
Art icle 1616.

T he vendor in bad fait h shall always be answerable for

t he payment of all expenses, and for damages. (1529)

Art . 1629. In case t he assignor in good fait h should have

made himself responsible for t he solvency of t he
debtor, and t he cont ract ing part ies should not have
agreed upon t he durat ion of t he liabilit y, it shall last for
one year only, from t he t ime of t he assignment if t he
period had already expired.

If t he credit should be payable wit hin a t erm or period

which has not yet expired, t he liabilit y shall cease one
year aft er t he mat urit y. (1530a)

Art . 1630. One who sells an inherit ance wit hout

enumerat ing t he t hings of which it is composed, shall
only be answerable for his charact er as an heir. (1531)

Art . 1631. One who sells for a lump sum t he whole of

cert ain right s, rent s, or product s, shall comply by
answering for t he legit imacy of t he whole in general; but
he shall not be obliged to warrant each of t he various
part s of which it may be composed, except in t he case
of evict ion from t he whole or t he part of great er value.
(1532a)

Art . 1632. Should t he vendor have profit ed by some of

t he fruit s or received anyt hing from t he inherit ance
sold, he shall pay t he vendee t hereof, if t he cont rary has
not been st ipulat ed. (1533)

Art . 1633. T he vendee shall, on his part , reimburse t he

vendor for all t hat t he lat t er may have paid for t he debt s
of and charges on t he est at e and sat isfy t he credit s he
may have against t he same, unless t here is an
agreement to t he cont rary. (1534)

Art . 1634. When a credit or ot her incorporeal right in

lit igat ion is sold, t he debtor shall have a right to
ext inguish it by reimbursing t he assignee for t he price
t he lat t er paid t herefor, t he judicial cost s incurred by
him, and t he int erest on t he price from t he day on which
t he same was paid.

A credit or ot her incorporeal right shall be considered in

lit igat ion from t he t ime t he complaint concerning t he
same is answered.

T he debtor may exercise his right wit hin t hirt y days

from t he dat e t he assignee demands payment from
him. (1535)

Art . 1635. From t he provisions of t he preceding art icle

shall be except ed t he assignment s or sales made:

(1) To a co-heir or co-owner of t he right assigned;

(2) To a creditor in payment of his credit ;

(3) To t he possessor of a t enement or piece of

land which is subject to t he right in lit igat ion
assigned. (1536)

CHAPT ER 9

GENERAL PROVISIONS

Art . 1636. In t he preceding art icles in t his T it le governing

t he sale of goods, unless t he cont ext or subject mat t er
ot herwise requires:

(1) "Document of title to goods" includes any bill of

lading, dock warrant , "quedan," or warehouse
 receipt or order for t he delivery of goods, or any
ot her document used in t he ordinary course of
business in t he sale or t ransfer of goods, as proof
of t he possession or cont rol of t he goods, or
aut horizing or purport ing to aut horize t he
possessor of t he document to t ransfer or
receive, eit her by endorsement or by delivery,
goods represent ed by such document .

"Goods" includes all chat t els personal but not

t hings in act ion or money of legal t ender in t he
Philippines. T he t erm includes growing fruit s or
crops.

"Order" relat ing to document s of t it le means an

order by endorsement on t he document s.

"Quality of goods" includes t heir st at e or condit ion.

"Specific goods" means goods ident ified and

agreed upon at t he t ime a cont ract of sale is
made.

An ant ecedent or pre-exist ing claim, whet her for

money or not , const it ut es "value" where goods or
document s of t it le are t aken eit her in
sat isfact ion t hereof or as securit y t herefor.

(2) A person is insolvent wit hin t he meaning of

t his T it le who eit her has ceased to pay his debt s
in t he ordinary course of business or cannot pay
his debt s as t hey become due, whet her
insolvency proceedings have been commenced or
not .

(3) Goods are in a "deliverable state" wit hin t he

meaning of t his T it le when t hey are in such a
st at e t hat t he buyer would, under t he cont ract , be
bound to t ake delivery of t hem. (n)

Art . 1637. T he provisions of t his T it le are subject to t he

rules laid down by t he Mort gage Law and t he Land
Regist rat ion Law wit h regard to immovable propert y.
(1537a)

T itle VII. - BART ER OR EXCHANGE

Art . 1638. By t he cont ract of bart er or exchange one of

t he part ies binds himself to give one t hing in
considerat ion of t he ot her's promise to give anot her
t hing. (1538a)

Art . 1639. If one of t he cont ract ing part ies, having

received t he t hing promised him in bart er, should prove
t hat it did not belong to t he person who gave it , he
cannot be compelled to deliver t hat which he offered in
exchange, but he shall be ent it led to damages. (1539a)

Art . 1640. One who loses by evict ion t he t hing received

in bart er may recover t hat which he gave in exchange
wit h a right to damages, or he may only demand an
indemnit y for damages. However, he can only make use
of t he right to recover t he t hing which he has delivered
while t he same remains in t he possession of t he ot her
part y, and wit hout prejudice to t he right s acquired in
good fait h in t he meant ime by a t hird person. (1540a)

Art . 1641. As to all mat t ers not specifically provided for

in t his T it le, bart er shall be governed by t he provisions of
t he preceding T it le relat ing to sales. (1541a)

T itle VIII. - LEASE

CHAPT ER 1

GENERAL PROVISIONS

Art . 1642. T he cont ract of lease may be of t hings, or of

work and service. (1542)

Art . 1643. In t he lease of t hings, one of t he part ies binds

himself to give to anot her t he enjoyment or use of a
t hing for a price cert ain, and for a period which may be
definit e or indefinit e. However, no lease for more t han
ninet y-nine years shall be valid. (1543a)

Art . 1644. In t he lease of work or service, one of t he

part ies binds himself to execut e a piece of work or to
render to t he ot her some service for a price cert ain, but
t he relat ion of principal and agent does not exist
bet ween t hem. (1544a)

Art . 1645. Consumable goods cannot be t he subject

mat t er of a cont ract of lease, except when t hey are
merely to be exhibit ed or when t hey are accessory to an
indust rial est ablishment . (1545a)

CHAPT ER 2

LEASE OF RURAL AND URBAN LANDS

SECT ION 1. - General Provisions

Art . 1646. T he persons disqualified to buy referred to in

Art icles 1490 and 1491, are also disqualified to become
lessees of t he t hings ment ioned t herein. (n)

Art . 1647. If a lease is to be recorded in t he Regist ry of

Propert y, t he following persons cannot const it ut e t he
same wit hout proper aut horit y: t he husband wit h
respect to t he wife's paraphernal real est at e, t he fat her
or guardian as to t he propert y of t he minor or ward, and
t he manager wit hout special power. (1548a)

Art . 1648. Every lease of real est at e may be recorded in

t he Regist ry of Propert y. Unless a lease is recorded, it
shall not be binding upon t hird persons. (1549a)

Art . 1649. T he lessee cannot assign t he lease wit hout

t he consent of t he lessor, unless t here is a st ipulat ion
to t he cont rary. (n)

Art . 1650. When in t he cont ract of lease of t hings t here

is no express prohibit ion, t he lessee may sublet t he
t hing leased, in whole or in part , wit hout prejudice to his
responsibilit y for t he performance of t he cont ract
toward t he lessor. (1550)
Art . 1651. Wit hout prejudice to his obligat ion toward t he
sublessor, t he sublessee is bound to t he lessor for all
act s which refer to t he use and preservat ion of t he
t hing leased in t he manner st ipulat ed bet ween t he
lessor and t he lessee. (1551)

Art . 1652. T he sublessee is subsidiarily liable to t he

lessor for any rent due from t he lessee. However, t he
sublessee shall not be responsible beyond t he amount
of rent due from him, in accordance wit h t he t erms of
t he sublease, at t he t ime of t he ext rajudicial demand by
t he lessor.

Payment s of rent in advance by t he sublessee shall be

deemed not to have been made, so far as t he lessor's
claim is concerned, unless said payment s were
effect ed in virt ue of t he custom of t he place. (1552a)

Art . 1653. T he provisions governing warrant y, cont ained

in t he T it le on Sales, shall be applicable to t he cont ract
of lease.

In t he cases where t he ret urn of t he price is required,

reduct ion shall be made in proport ion to t he t ime during
which t he lessee enjoyed t he t hing. (1553)

SECT ION 2. - Rights and Obligations of the Lessor

andthe Lessee

Art . 1654. T he lessor is obliged:

(1) To deliver t he t hing which is t he object of t he

cont ract in such a condit ion as to render it fit for
t he use int ended;

(2) To make on t he same during t he lease all t he

necessary repairs in order to keep it suit able for
t he use to which it has been devot ed, unless
t here is a st ipulat ion to t he cont rary;

(3) To maint ain t he lessee in t he peaceful and

adequat e enjoyment of t he lease for t he ent ire
durat ion of t he cont ract . (1554a)
Art . 1655. If t he t hing leased is tot ally dest royed by a
fort uitous event , t he lease is ext inguished. If t he
dest ruct ion is part ial, t he lessee may choose bet ween a
proport ional reduct ion of t he rent and a rescission of
t he lease. (n)

Art . 1656. T he lessor of a business or indust rial

est ablishment may cont inue engaging in t he same
business or indust ry to which t he lessee devot es t he
t hing leased, unless t here is a st ipulat ion to t he
cont rary. (n)

Art . 1657. T he lessee is obliged:

(1) To pay t he price of t he lease according to t he

t erms st ipulat ed;

(2) To use t he t hing leased as a diligent fat her of

a family, devot ing it to t he use st ipulat ed; and in
t he absence of st ipulat ion, to t hat which may be
inferred from t he nat ure of t he t hing leased,
according to t he custom of t he place;

(3) To pay expenses for t he deed of lease. (1555)

Art . 1658. T he lessee may suspend t he payment of t he

rent in case t he lessor fails to make t he necessary
repairs or to maint ain t he lessee in peaceful and
adequat e enjoyment of t he propert y leased. (n)

Art . 1659. If t he lessor or t he lessee should not comply

wit h t he obligat ions set fort h in Art icles 1654 and 1657,
t he aggrieved part y may ask for t he rescission of t he
cont ract and indemnificat ion for damages, or only t he
lat t er, allowing t he cont ract to remain in force. (1556)

Art . 1660. If a dwelling place or any ot her building

int ended for human habit at ion is in such a condit ion
t hat it s use brings imminent and serious danger to life
or healt h, t he lessee may t erminat e t he lease at once
by not ifying t he lessor, even if at t he t ime t he cont ract
was perfect ed t he former knew of t he dangerous
condit ion or waived t he right to rescind t he lease on
account of t his condit ion. (n)

Art . 1661. T he lessor cannot alt er t he form of t he t hing

leased in such a way as to impair t he use to which t he
t hing is devot ed under t he t erms of t he lease. (1557a)

Art . 1662. If during t he lease it should become

necessary to make some urgent repairs upon t he t hing
leased, which cannot be deferred unt il t he t erminat ion
of t he lease, t he lessee is obliged to tolerat e t he work,
alt hough it may be very annoying to him, and alt hough
during t he same, he may be deprived of a part of t he
premises.

If t he repairs last more t han fort y days t he rent shall be

reduced in proport ion to t he t ime - including t he first
fort y days - and t he part of t he propert y of which t he
lessee has been deprived.

When t he work is of such a nat ure t hat t he port ion

which t he lessee and his family need for t heir dwelling
becomes uninhabit able, he may rescind t he cont ract if
t he main purpose of t he lease is to provide a dwelling
place for t he lessee. (1558a)

Art . 1663. T he lessee is obliged to bring to t he

knowledge of t he proprietor, wit hin t he short est
possible t ime, every usurpat ion or untoward act which
any t hird person may have commit t ed or may be openly
preparing to carry out upon t he t hing leased.

He is also obliged to advise t he owner, wit h t he same

urgency, of t he need of all repairs included in No. 2 of
Art icle 1654.

In bot h cases t he lessee shall be liable for t he damages

which, t hrough his negligence, may be suffered by t he
proprietor.

If t he lessor fails to make urgent repairs, t he lessee, in

order to avoid an imminent danger, may order t he
repairs at t he lessor's cost . (1559a)

Art . 1664. T he lessor is not obliged to answer for a mere

act of t respass which a t hird person may cause on t he
use of t he t hing leased; but t he lessee shall have a
direct act ion against t he int ruder.

T here is a mere act of t respass when t he t hird person

claims no right what ever. (1560a)

Art . 1665. T he lessee shall ret urn t he t hing leased, upon

t he t erminat ion of t he lease, as he received it , save
what has been lost or impaired by t he lapse of t ime, or
by ordinary wear and t ear, or from an inevit able cause.
(1561a)

Art . 1666. In t he absence of a st at ement concerning t he

condit ion of t he t hing at t he t ime t he lease was
const it ut ed, t he law presumes t hat t he lessee received
it in good condit ion, unless t here is proof to t he cont rary.
(1562)

Art . 1667. T he lessee is responsible for t he det eriorat ion

or loss of t he t hing leased, unless he proves t hat it took
place wit hout his fault . T his burden of proof on t he
lessee does not apply when t he dest ruct ion is due to
eart hquake, flood, storm or ot her nat ural calamit y.
(1563a)

Art . 1668. T he lessee is liable for any det eriorat ion

caused by members of his household and by guest s and
visitors. (1564a)

Art . 1669. If t he lease was made for a det erminat e t ime,

it ceases upon t he day fixed, wit hout t he need of a
demand. (1565)

Art . 1670. If at t he end of t he cont ract t he lessee should

cont inue enjoying t he t hing leased for fift een days wit h
t he acquiescence of t he lessor, and unless a not ice to
t he cont rary by eit her part y has previously been given, it
is understood t hat t here is an implied new lease, not for
t he period of t he original cont ract , but for t he t ime
est ablished in Art icles 1682 and 1687. T he ot her t erms
of t he original cont ract shall be revived. (1566a)

Art . 1671. If t he lessee cont inues enjoying t he t hing

aft er t he expirat ion of t he cont ract , over t he lessor's
object ion, t he former shall be subject to t he
responsibilit ies of a possessor in bad fait h. (n)

Art . 1672. In case of an implied new lease, t he

obligat ions cont ract ed by a t hird person for t he securit y
of t he principal cont ract shall cease wit h respect to t he
new lease. (1567)

Art . 1673. T he lessor may judicially eject t he lessee for

any of t he following causes:

(1) When t he period agreed upon, or t hat which is

fixed for t he durat ion of leases under Art icles
1682 and 1687, has expired;

(2) Lack of payment of t he price st ipulat ed;

(3) Violat ion of any of t he condit ions agreed upon

in t he cont ract ;

(4) When t he lessee devot es t he t hing leased to

any use or service not st ipulat ed which causes
t he det eriorat ion t hereof; or if he does not
observe t he requirement in No. 2 of Art icle 1657,
as regards t he use t hereof.

T he eject ment of t enant s of agricult ural lands is

governed by special laws. (1569a)

Art . 1674. In eject ment cases where an appeal is t aken

t he remedy grant ed in Art icle 539, second paragraph,
shall also apply, if t he higher court is sat isfied t hat t he
lessee's appeal is frivolous or dilatory, or t hat t he
lessor's appeal is prima facie meritorious. T he period of
t en days referred to in said art icle shall be count ed from
t he t ime t he appeal is perfect ed. (n)
Art . 1675. Except in cases st at ed in Art icle 1673, t he
lessee shall have a right to make use of t he periods
est ablished in Art icles 1682 and 1687. (1570)

Art . 1676. T he purchaser of a piece of land which is

under a lease t hat is not recorded in t he Regist ry of
Propert y may t erminat e t he lease, save when t here is a
st ipulat ion to t he cont rary in t he cont ract of sale, or
when t he purchaser knows of t he exist ence of t he
lease.

If t he buyer makes use of t his right , t he lessee may

demand t hat he be allowed to gat her t he fruit s of t he
harvest which corresponds to t he current agricult ural
year and t hat t he vendor indemnify him for damages
suffered.

If t he sale is fict it ious, for t he purpose of ext inguishing

t he lease, t he supposed vendee cannot make use of t he
right grant ed in t he first paragraph of t his art icle. T he
sale is presumed to be fict it ious if at t he t ime t he
supposed vendee demands t he t erminat ion of t he
lease, t he sale is not recorded in t he Regist ry of
Propert y. (1571a)

Art . 1677. T he purchaser in a sale wit h t he right of

redempt ion cannot make use of t he power to eject t he
lessee unt il t he end of t he period for t he redempt ion.
(1572)

Art . 1678. If t he lessee makes, in good fait h, useful

improvement s which are suit able to t he use for which
t he lease is int ended, wit hout alt ering t he form or
subst ance of t he propert y leased, t he lessor upon t he
t erminat ion of t he lease shall pay t he lessee one-half of
t he value of t he improvement s at t hat t ime. Should t he
lessor refuse to reimburse said amount , t he lessee may
remove t he improvement s, even t hough t he principal
t hing may suffer damage t hereby. He shall not , however,
cause any more impairment upon t he propert y leased
t han is necessary.
Wit h regard to ornament al expenses, t he lessee shall
not be ent it led to any reimbursement , but he may
remove t he ornament al object s, provided no damage is
caused to t he principal t hing, and t he lessor does not
choose to ret ain t hem by paying t heir value at t he t ime
t he lease is ext inguished. (n)

Art . 1679. If not hing has been st ipulat ed concerning t he

place and t he t ime for t he payment of t he lease, t he
provisions or Art icle 1251 shall be observed as regards
t he place; and wit h respect to t he t ime, t he custom of
t he place shall be followed. (1574)

SECT ION 3. - Special Provisions for Leases ofRural

Lands

Art . 1680. T he lessee shall have no right to a reduct ion

of t he rent on account of t he st erilit y of t he land leased,
or by reason of t he loss of fruit s due to ordinary
fort uitous event s; but he shall have such right in case of
t he loss of more t han one-half of t he fruit s t hrough
ext raordinary and unforeseen fort uitous event s, save
always when t here is a specific st ipulat ion to t he
cont rary.

Ext raordinary fort uitous event s are understood to be:

fire, war, pest ilence, unusual flood, locust s, eart hquake,
or ot hers which are uncommon, and which t he
cont ract ing part ies could not have reasonably foreseen.
(1575)

Art . 1681. Neit her does t he lessee have any right to a

reduct ion of t he rent if t he fruit s are lost aft er t hey
have been separat ed from t heir st alk, root or t runk.
(1576)

Art . 1682. T he lease of a piece of rural land, when it s

durat ion has not been fixed, is understood to have been
for all t he t ime necessary for t he gat hering of t he fruit s
which t he whole est at e leased may yield in one year, or
which it may yield once, alt hough t wo or more years
have to elapse for t he purpose. (1577a)

Art . 1683. T he out going lessee shall allow t he incoming

lessee or t he lessor t he use of t he premises and ot her
means necessary for t he preparatory labor for t he
following year; and, reciprocally, t he incoming lessee or
t he lessor is under obligat ion to permit t he out going
lessee to do what ever may be necessary for t he
gat hering or harvest ing and ut ilizat ion of t he fruit s, all in
accordance wit h t he custom of t he place. (1578a)

Art . 1684. Land t enancy on shares shall be governed by

special laws, t he st ipulat ions of t he part ies, t he
provisions on part nership and by t he customs of t he
place. (1579a)

Art . 1685. T he t enant on shares cannot be eject ed

except in cases specified by law. (n)

SECT ION 4. - Special Provisions of the Lease ofUrban

Lands

Art . 1686. In default of a special st ipulat ion, t he custom

of t he place shall be observed wit h regard to t he kind of
repairs on urban propert y for which t he lessor shall be
liable. In case of doubt it is understood t hat t he repairs
are chargeable against him. (1580a)

Art . 1687. If t he period for t he lease has not been fixed, it

is understood to be from year to year, if t he rent agreed
upon is annual; from mont h to mont h, if it is mont hly;
from week to week, if t he rent is weekly; and from day to
day, if t he rent is to be paid daily. However, even t hough a
mont hly rent is paid, and no period for t he lease has
been set , t he court s may fix a longer t erm for t he lease
aft er t he lessee has occupied t he premises for over one
year. If t he rent is weekly, t he court s may likewise
det ermine a longer period aft er t he lessee has been in
possession for over six mont hs. In case of daily rent , t he
court s may also fix a longer period aft er t he lessee has
st ayed in t he place for over one mont h. (1581a)

Art . 1688. When t he lessor of a house, or part t hereof,

used as a dwelling for a family, or when t he lessor of a
store, or indust rial est ablishment , also leases t he
furnit ure, t he lease of t he lat t er shall be deemed to be
for t he durat ion of t he lease of t he premises. (1582)

CHAPT ER 3

WORK AND LABOR

SECT ION 1. - Household Service (n)

Art . 1689. Household service shall always be reasonably

compensat ed. Any st ipulat ion t hat household service is
wit hout compensat ion shall be void. Such
compensat ion shall be in addit ion to t he house helper's
lodging, food, and medical at t endance.

Art . 1690. T he head of t he family shall furnish, free of

charge, to t he house helper, suit able and sanit ary
quart ers as well as adequat e food and medical
at t endance.

Art . 1691. If t he house helper is under t he age of

eight een years, t he head of t he family shall give an
opport unit y to t he house helper for at least element ary
educat ion. T he cost of such educat ion shall be a part of
t he house helper's compensat ion, unless t here is a
st ipulat ion to t he cont rary.

Art . 1692. No cont ract for household service shall last

for more t han t wo years. However, such cont ract may
be renewed from year to year.

Art . 1693. T he house helper's clot hes shall be subject to

st ipulat ion. However, any cont ract for household service
shall be void if t hereby t he house helper cannot afford
to acquire suit able clot hing.

Art . 1694. T he head of t he family shall t reat t he house

helper in a just and humane manner. In no case shall
physical violence be used upon t he house helper.

Art . 1695. House helper shall not be required to work

more t han t en hours a day. Every house helper shall be
allowed four days' vacat ion each mont h, wit h pay.

Art . 1696. In case of deat h of t he house helper, t he head

of t he family shall bear t he funeral expenses if t he
house helper has no relat ives in t he place where t he
head of t he family lives, wit h sufficient means t herefor.

Art . 1697. If t he period for household service is fixed

neit her t he head of t he family nor t he house helper may
t erminat e t he cont ract before t he expirat ion of t he
t erm, except for a just cause. If t he house helper is
unjust ly dismissed, he shall be paid t he compensat ion
already earned plus t hat for fift een days by way of
indemnit y. If t he house helper leaves wit hout just ifiable
reason, he shall forfeit any salary due him and unpaid,
for not exceeding fift een days.

Art . 1698. If t he durat ion of t he household service is not

det ermined eit her by st ipulat ion or by t he nat ure of t he
service, t he head of t he family or t he house helper may
give not ice to put an end to t he service relat ion,
according to t he following rules:

(1) If t he compensat ion is paid by t he day, not ice

may be given on any day t hat t he service shall end
at t he close of t he following day;

(2) If t he compensat ion is paid by t he week,

not ice may be given, at t he lat est on t he first
business day of t he week, t hat t he service shall
be t erminat ed at t he end of t he sevent h day from
t he beginning of t he week;

(3) If t he compensat ion is paid by t he mont h,

not ice may be given, at t he lat est , on t he fift h day
of t he mont h, t hat t he service shall cease at t he
end of t he mont h.
Art . 1699. Upon t he ext inguishment of t he service
relat ion, t he house helper may demand from t he head of
t he family a writ t en st at ement on t he nat ure and
durat ion of t he service and t he efficiency and conduct
of t he house helper.

SECT ION 2. - Contract of Labor (n)

Art . 1700. T he relat ions bet ween capit al and labor are
not merely cont ract ual. T hey are so impressed wit h
public int erest t hat labor cont ract s must yield to t he
common good. T herefore, such cont ract s are subject
to t he special laws on labor unions, collect ive bargaining,
st rikes and lockout s, closed shop, wages, working
condit ions, hours of labor and similar subject s.

Art . 1701. Neit her capit al nor labor shall act oppressively
against t he ot her, or impair t he int erest or convenience
of t he public.

Art . 1702. In case of doubt , all labor legislat ion and all
labor cont ract s shall be const rued in favor of t he safet y
and decent living for t he laborer.

Art . 1703. No cont ract which pract ically amount s to

involunt ary servit ude, under any guise what soever, shall
be valid.

Art . 1704. In collect ive bargaining, t he labor union or

members of t he board or commit t ee signing t he
cont ract shall be liable for non-fulfillment t hereof.

Art . 1705. T he laborer's wages shall be paid in legal

currency.

Art . 1706. Wit hholding of t he wages, except for a debt

due, shall not be made by t he employer.

Art . 1707. T he laborer's wages shall be a lien on t he

goods manufact ured or t he work done.
Art . 1708. T he laborer's wages shall not be subject to
execut ion or at t achment , except for debt s incurred for
food, shelt er, clot hing and medical at t endance.

Art . 1709. T he employer shall neit her seize nor ret ain
any tool or ot her art icles belonging to t he laborer.

Art . 1710. Dismissal of laborers shall be subject to t he

supervision of t he Government , under special laws.

Art . 1711. Owners of ent erprises and ot her employers

are obliged to pay compensat ion for t he deat h of or
injuries to t heir laborers, workmen, mechanics or ot her
employees, even t hough t he event may have been
purely accident al or ent irely due to a fort uitous cause, if
t he deat h or personal injury arose out of and in t he
course of t he employment . T he employer is also liable
for compensat ion if t he employee cont ract s any illness
or disease caused by such employment or as t he result
of t he nat ure of t he employment . If t he mishap was due
to t he employee's own notorious negligence, or
volunt ary act , or drunkenness, t he employer shall not be
liable for compensat ion. When t he employee's lack of
due care cont ribut ed to his deat h or injury, t he
compensat ion shall be equit ably reduced.

Art . 1712. If t he deat h or injury is due to t he negligence

of a fellow worker, t he lat t er and t he employer shall be
solidarily liable for compensat ion. If a fellow worker's
int ent ional malicious act is t he only cause of t he deat h
or injury, t he employer shall not be answerable, unless it
should be shown t hat t he lat t er did not exercise due
diligence in t he select ion or supervision of t he plaint iff's
fellow worker.

SECT ION 3. - Contract for a Piece of Work

Art . 1713. By t he cont ract for a piece of work t he

cont ractor binds himself to execut e a piece of work for
t he employer, in considerat ion of a cert ain price or
compensat ion. T he cont ractor may eit her employ only
his labor or skill, or also furnish t he mat erial. (1588a)

Art . 1714. If t he cont ractor agrees to produce t he work

from mat erial furnished by him, he shall deliver t he t hing
produced to t he employer and t ransfer dominion over
t he t hing. T his cont ract shall be governed by t he
following art icles as well as by t he pert inent provisions
on warrant y of t it le and against hidden defect s and t he
payment of price in a cont ract of sale. (n)

Art . 1715. T he cont ract shall execut e t he work in such a

manner t hat it has t he qualit ies agreed upon and has no
defect s which dest roy or lessen it s value or fit ness for
it s ordinary or st ipulat ed use. Should t he work be not of
such qualit y, t he employer may require t hat t he
cont ractor remove t he defect or execut e anot her work.
If t he cont ract fails or refuses to comply wit h t his
obligat ion, t he employer may have t he defect removed
or anot her work execut ed, at t he cont ractor's cost . (n)

Art . 1716. An agreement waiving or limit ing t he

cont ractor's liabilit y for any defect in t he work is void if
t he cont ractor act ed fraudulent ly. (n)

Art . 1717. If t he cont ractor bound himself to furnish t he

mat erial, he shall suffer t he loss if t he work should be
dest royed before it s delivery, save when t here has been
delay in receiving it . (1589)

Art . 1718. T he cont ractor who has undert aken to put

only his work or skill, cannot claim any compensat ion if
t he work should be dest royed before it s delivery, unless
t here has been delay in receiving it , or if t he dest ruct ion
was caused by t he poor qualit y of t he mat erial, provided
t his fact was communicat ed in due t ime to t he owner. If
t he mat erial is lost t hrough a fort uitous event , t he
cont ract is ext inguished. (1590a)

Art . 1719. Accept ance of t he work by t he employer

relieves t he cont ractor of liabilit y for any defect in t he
work, unless:

(1) T he defect is hidden and t he employer is not ,

by his special knowledge, expect ed to recognize
t he same; or

(2) T he employer expressly reserves his right s

against t he cont ractor by reason of t he defect .
(n)

Art . 1720. T he price or compensat ion shall be paid at t he

t ime and place of delivery of t he work, unless t here is a
st ipulat ion to t he cont rary. If t he work is to be delivered
part ially, t he price or compensat ion for each part having
been fixed, t he sum shall be paid at t he t ime and place
of delivery, in t he absence if st ipulat ion. (n)

Art . 1721. If, in t he execut ion of t he work, an act of t he

employer is required, and he incurs in delay or fails to
perform t he act , t he cont ractor is ent it led to a
reasonable compensat ion.

T he amount of t he compensat ion is comput ed, on t he

one hand, by t he durat ion of t he delay and t he amount
of t he compensat ion st ipulat ed, and on t he ot her hand,
by what t he cont ractor has saved in expenses by
reason of t he delay or is able to earn by a different
employment of his t ime and indust ry. (n)

Art . 1722. If t he work cannot be complet ed on account

of a defect in t he mat erial furnished by t he employer, or
because of orders from t he employer, wit hout any fault
on t he part of t he cont ractor, t he lat t er has a right to an
equit able part of t he compensat ion proport ionally to
t he work done, and reimbursement for proper expenses
made. (n)

Art . 1723. T he engineer or archit ect who drew up t he

plans and specificat ions for a building is liable for
damages if wit hin fift een years from t he complet ion of
t he st ruct ure, t he same should collapse by reason of a
defect in t hose plans and specificat ions, or due to t he
defect s in t he ground. T he cont ractor is likewise
responsible for t he damages if t he edifice falls, wit hin
t he same period, on account of defect s in t he
const ruct ion or t he use of mat erials of inferior qualit y
furnished by him, or due to any violat ion of t he t erms of
t he cont ract . If t he engineer or archit ect supervises t he
const ruct ion, he shall be solidarily liable wit h t he
cont ractor.

Accept ance of t he building, aft er complet ion, does not

imply waiver of any of t he cause of act ion by reason of
any defect ment ioned in t he preceding paragraph.

T he act ion must be brought wit hin t en years following

t he collapse of t he building. (n)

Art . 1724. T he cont ractor who undert akes to build a

st ruct ure or any ot her work for a st ipulat ed price, in
conformit y wit h plans and specificat ions agreed upon
wit h t he land-owner, can neit her wit hdraw from t he
cont ract nor demand an increase in t he price on
account of t he higher cost of labor or mat erials, save
when t here has been a change in t he plans and
specificat ions, provided:

(1) Such change has been aut horized by t he

proprietor in writ ing; and

(2) T he addit ional price to be paid to t he

cont ractor has been det ermined in writ ing by bot h
part ies. (1593a)

Art . 1725. T he owner may wit hdraw at will from t he

const ruct ion of t he work, alt hough it may have been
commenced, indemnifying t he cont ractor for all t he
lat t er's expenses, work, and t he usefulness which t he
owner may obt ain t herefrom, and damages. (1594a)

Art . 1726. When a piece of work has been ent rust ed to a

person by reason of his personal qualificat ions, t he
cont ract is rescinded upon his deat h.
In t his case t he proprietor shall pay t he heirs of t he
cont ractor in proport ion to t he price agreed upon, t he
value of t he part of t he work done, and of t he mat erials
prepared, provided t he lat t er yield him some benefit .

T he same rule shall apply if t he cont ractor cannot finish

t he work due to circumst ances beyond his cont rol.
(1595)

Art . 1727. T he cont ractor is responsible for t he work

done by persons employed by him. (1596)

Art . 1728. T he cont ractor is liable for all t he claims of

laborers and ot hers employed by him, and of t hird
persons for deat h or physical injuries during t he
const ruct ion. (n)

Art . 1729. T hose who put t heir labor upon or furnish

mat erials for a piece of work undert aken by t he
cont ractor have an act ion against t he owner up to t he
amount owing from t he lat t er to t he cont ractor at t he
t ime t he claim is made. However, t he following shall not
prejudice t he laborers, employees and furnishers of
mat erials:

(1) Payment s made by t he owner to t he

cont ractor before t hey are due;

(2) Renunciat ion by t he cont ractor of any amount

due him from t he owner.

T his art icle is subject to t he provisions of special laws.

(1597a)

Art . 1730. If it is agreed t hat t he work shall be

accomplished to t he sat isfact ion of t he proprietor, it is
understood t hat in case of disagreement t he quest ion
shall be subject to expert judgment .

If t he work is subject to t he approval of a t hird person,

his decision shall be final, except in case of fraud or
manifest error. (1598a)
Art . 1731. He who has execut ed work upon a movable
has a right to ret ain it by way of pledge unt il he is paid.
(1600)

SECT ION 4. - Common Carriers (n)

SUBSECT ION 1. - General Provisions

Art . 1732. Common carriers are persons, corporat ions,

firms or associat ions engaged in t he business of
carrying or t ransport ing passengers or goods or bot h, by
land, wat er, or air, for compensat ion, offering t heir
services to t he public.

Art . 1733. Common carriers, from t he nat ure of t heir

business and for reasons of public policy, are bound to
observe ext raordinary diligence in t he vigilance over t he
goods and for t he safet y of t he passengers
t ransport ed by t hem, according to all t he
circumst ances of each case.

Such ext raordinary diligence in t he vigilance over t he

goods is furt her expressed in Art icles 1734, 1735, and
1745, Nos. 5, 6, and 7, while t he ext raordinary diligence
for t he safet y of t he passengers is furt her set fort h in
Art icles 1755 and 1756.

SUBSECT ION 2. - Vigilance Over Goods

Art . 1734. Common carriers are responsible for t he loss,

dest ruct ion, or det eriorat ion of t he goods, unless t he
same is due to any of t he following causes only:

(1) Flood, storm, eart hquake, light ning, or ot her

nat ural disast er or calamit y;

(2) Act of t he public enemy in war, whet her

int ernat ional or civil;

(3) Act of omission of t he shipper or owner of t he

goods;
 (4) T he charact er of t he goods or defect s in t he
packing or in t he cont ainers;

(5) Order or act of compet ent public aut horit y.

Art . 1735. In all cases ot her t han t hose ment ioned in

Nos. 1, 2, 3, 4, and 5 of t he preceding art icle, if t he goods
are lost , dest royed or det eriorat ed, common carriers are
presumed to have been at fault or to have act ed
negligent ly, unless t hey prove t hat t hey observed
ext raordinary diligence as required in Art icle 1733.

Art . 1736. T he ext raordinary responsibilit y of t he

common carrier last s from t he t ime t he goods are
uncondit ionally placed in t he possession of, and
received by t he carrier for t ransport at ion unt il t he same
are delivered, act ually or const ruct ively, by t he carrier to
t he consignee, or to t he person who has a right to
receive t hem, wit hout prejudice to t he provisions of
Art icle 1738.

Art . 1737. T he common carrier's dut y to observe

ext raordinary diligence over t he goods remains in full
force and effect even when t hey are t emporarily
unloaded or stored in t ransit , unless t he shipper or
owner has made use of t he right of stoppage in transitu.

Art . 1738. T he ext raordinary liabilit y of t he common

carrier cont inues to be operat ive even during t he t ime
t he goods are stored in a warehouse of t he carrier at
t he place of dest inat ion, unt il t he consignee has been
advised of t he arrival of t he goods and has had
reasonable opport unit y t hereaft er to remove t hem or
ot herwise dispose of t hem.

Art . 1739. In order t hat t he common carrier may be

exempt ed from responsibilit y, t he nat ural disast er must
have been t he proximat e and only cause of t he loss.
However, t he common carrier must exercise due
diligence to prevent or minimize loss before, during and
aft er t he occurrence of flood, storm or ot her nat ural
disast er in order t hat t he common carrier may be
exempt ed from liabilit y for t he loss, dest ruct ion, or
det eriorat ion of t he goods. T he same dut y is incumbent
upon t he common carrier in case of an act of t he public
enemy referred to in Art icle 1734, No. 2.

Art . 1740. If t he common carrier negligent ly incurs in

delay in t ransport ing t he goods, a nat ural disast er shall
not free such carrier from responsibilit y.

Art . 1741. If t he shipper or owner merely cont ribut ed to

t he loss, dest ruct ion or det eriorat ion of t he goods, t he
proximat e cause t hereof being t he negligence of t he
common carrier, t he lat t er shall be liable in damages,
which however, shall be equit ably reduced.

Art . 1742. Even if t he loss, dest ruct ion, or det eriorat ion
of t he goods should be caused by t he charact er of t he
goods, or t he fault y nat ure of t he packing or of t he
cont ainers, t he common carrier must exercise due
diligence to forest all or lessen t he loss.

Art . 1743. If t hrough t he order of public aut horit y t he

goods are seized or dest royed, t he common carrier is
not responsible, provided said public aut horit y had
power to issue t he order.

Art . 1744. A st ipulat ion bet ween t he common carrier

and t he shipper or owner limit ing t he liabilit y of t he
former for t he loss, dest ruct ion, or det eriorat ion of t he
goods to a degree less t han ext raordinary diligence shall
be valid, provided it be:

(1) In writ ing, signed by t he shipper or owner;

(2) Support ed by a valuable considerat ion ot her

t han t he service rendered by t he common carrier;
and

(3) Reasonable, just and not cont rary to public

policy.
Art . 1745. Any of t he following or similar st ipulat ions
shall be considered unreasonable, unjust and cont rary
to public policy:

(1) T hat t he goods are t ransport ed at t he risk of

t he owner or shipper;

(2) T hat t he common carrier will not be liable for

any loss, dest ruct ion, or det eriorat ion of t he
goods;

(3) T hat t he common carrier need not observe

any diligence in t he custody of t he goods;

(4) T hat t he common carrier shall exercise a

degree of diligence less t han t hat of a good
fat her of a family, or of a man of ordinary
prudence in t he vigilance over t he movables
t ransport ed;

(5) T hat t he common carrier shall not be

responsible for t he act s or omission of his or it s
employees;

(6) T hat t he common carrier's liabilit y for act s

commit t ed by t hieves, or of robbers who do not
act wit h grave or irresist ible t hreat , violence or
force, is dispensed wit h or diminished;

(7) T hat t he common carrier is not responsible

for t he loss, dest ruct ion, or det eriorat ion of goods
on account of t he defect ive condit ion of t he car,
vehicle, ship, airplane or ot her equipment used in
t he cont ract of carriage.

Art . 1746. An agreement limit ing t he common carrier's

liabilit y may be annulled by t he shipper or owner if t he
common carrier refused to carry t he goods unless t he
former agreed to such st ipulat ion.

Art . 1747. If t he common carrier, wit hout just cause,

delays t he t ransport at ion of t he goods or changes t he
st ipulat ed or usual rout e, t he cont ract limit ing t he
common carrier's liabilit y cannot be availed of in case of
t he loss, dest ruct ion, or det eriorat ion of t he goods.

Art . 1748. An agreement limit ing t he common carrier's

liabilit y for delay on account of st rikes or riot s is valid.

Art . 1749. A st ipulat ion t hat t he common carrier's

liabilit y is limit ed to t he value of t he goods appearing in
t he bill of lading, unless t he shipper or owner declares a
great er value, is binding.

Art . 1750. A cont ract fixing t he sum t hat may be

recovered. by t he owner or shipper for t he loss,
dest ruct ion, or det eriorat ion of t he goods is valid, if it is
reasonable and just under t he circumst ances, and has
been fairly and freely agreed upon.

Art . 1751. T he fact t hat t he common carrier has no

compet itor along t he line or rout e, or a part t hereof, to
which t he cont ract refers shall be t aken into
considerat ion on t he quest ion of whet her or not a
st ipulat ion limit ing t he common carrier's liabilit y is
reasonable, just and in consonance wit h public policy.

Art . 1752. Even when t here is an agreement limit ing t he

liabilit y of t he common carrier in t he vigilance over t he
goods, t he common carrier is disput ably presumed to
have been negligent in case of t heir loss, dest ruct ion or
det eriorat ion.

Art . 1753. T he law of t he count ry to which t he goods are

to be t ransport ed shall govern t he liabilit y of t he
common carrier for t heir loss, dest ruct ion or
det eriorat ion.

Art . 1754. T he provisions of Art icles 1733 to 1753 shall

apply to t he passenger's baggage which is not in his
personal custody or in t hat of his employee. As to ot her
baggage, t he rules in Art icles 1998 and 2000 to 2003
concerning t he responsibilit y of hot el-keepers shall be
applicable.
 SUBSECT ION 3. - Safety of Passengers

Art . 1755. A common carrier is bound to carry t he

passengers safely as far as human care and foresight
can provide, using t he ut most diligence of very caut ious
persons, wit h a due regard for all t he circumst ances.

Art . 1756. In case of deat h of or injuries to passengers,

common carriers are presumed to have been at fault or
to have act ed negligent ly, unless t hey prove t hat t hey
observed ext raordinary diligence as prescribed in
Art icles 1733 and 1755.

Art . 1757. T he responsibilit y of a common carrier for t he

safet y of passengers as required in Art icles 1733 and
1755 cannot be dispensed wit h or lessened by
st ipulat ion, by t he post ing of not ices, by st at ement s on
t icket s, or ot herwise.

Art . 1758. When a passenger is carried grat uitously, a

st ipulat ion limit ing t he common carrier's liabilit y for
negligence is valid, but not for wilful act s or gross
negligence.

T he reduct ion of fare does not just ify any limit at ion of
t he common carrier's liabilit y.

Art . 1759. Common carriers are liable for t he deat h of or

injuries to passengers t hrough t he negligence or wilful
act s of t he former's employees, alt hough such
employees may have act ed beyond t he scope of t heir
aut horit y or in violat ion of t he orders of t he common
carriers.

T his liabilit y of t he common carriers does not cease

upon proof t hat t hey exercised all t he diligence of a
good fat her of a family in t he select ion and supervision
of t heir employees.

Art . 1760. T he common carrier's responsibilit y

prescribed in t he preceding art icle cannot be eliminat ed
or limit ed by st ipulat ion, by t he post ing of not ices, by
st at ement s on t he t icket s or ot herwise.

Art . 1761. T he passenger must observe t he diligence of

a good fat her of a family to avoid injury to himself.

Art . 1762. T he cont ributory negligence of t he passenger

does not bar recovery of damages for his deat h or
injuries, if t he proximat e cause t hereof is t he negligence
of t he common carrier, but t he amount of damages
shall be equit ably reduced.

Art . 1763. A common carrier is responsible for injuries

suffered by a passenger on account of t he wilful act s or
negligence of ot her passengers or of st rangers, if t he
common carrier's employees t hrough t he exercise of
t he diligence of a good fat her of a family could have
prevent ed or stopped t he act or omission.

SUBSECT ION 4. - Common Provisions

Art . 1764. Damages in cases comprised in t his Sect ion

shall be awarded in accordance wit h T it le XVIII of t his
Book, concerning Damages. Art icle 2206 shall also apply
to t he deat h of a passenger caused by t he breach of
cont ract by a common carrier.

Art . 1765. T he Public Service Commission may, on it s

own mot ion or on pet it ion of any int erest ed part y, aft er
due hearing, cancel t he cert ificat e of public
convenience grant ed to any common carrier t hat
repeat edly fails to comply wit h his or it s dut y to observe
ext raordinary diligence as prescribed in t his Sect ion.

Art . 1766. In all mat t ers not regulat ed by t his Code, t he

right s and obligat ions of common carriers shall be
governed by t he Code of Commerce and by special laws.

T itle IX. - PART NERSHIP

CHAPT ER 1
 GENERAL PROVISIONS

Art . 1767. By t he cont ract of part nership t wo or more

persons bind t hemselves to cont ribut e money, propert y,
or indust ry to a common fund, wit h t he int ent ion of
dividing t he profit s among t hemselves.

Two or more persons may also form a part nership for

t he exercise of a profession. (1665a)

Art . 1768. T he part nership has a judicial personalit y

separat e and dist inct from t hat of each of t he part ners,
even in case of failure to comply wit h t he requirement s
of Art icle 1772, first paragraph. (n)

Art . 1769. In det ermining whet her a part nership exist s,

t hese rules shall apply:

(1) Except as provided by Art icle 1825, persons

who are not part ners as to each ot her are not
part ners as to t hird persons;

(2) Co-ownership or co-possession does not of

it self est ablish a part nership, whet her such-co-
owners or co-possessors do or do not share any
profit s made by t he use of t he propert y;

(3) T he sharing of gross ret urns does not of it self

est ablish a part nership, whet her or not t he
persons sharing t hem have a joint or common
right or int erest in any propert y from which t he
ret urns are derived;

(4) T he receipt by a person of a share of t he

profit s of a business is prima facie evidence t hat
he is a part ner in t he business, but no such
inference shall be drawn if such profit s were
received in payment :

(a) As a debt by inst allment s or ot herwise;

 (b) As wages of an employee or rent to a
landlord;

(c) As an annuit y to a widow or

represent at ive of a deceased part ner;

(d) As int erest on a loan, t hough t he

amount of payment vary wit h t he profit s of
t he business;

(e) As t he considerat ion for t he sale of a

goodwill of a business or ot her propert y by
inst allment s or ot herwise. (n)

Art . 1770. A part nership must have a lawful object or

purpose, and must be est ablished for t he common
benefit or int erest of t he part ners.

When an unlawful part nership is dissolved by a judicial

decree, t he profit s shall be confiscat ed in favor of t he
St at e, wit hout prejudice to t he provisions of t he Penal
Code governing t he confiscat ion of t he inst rument s and
effect s of a crime. (1666a)

Art . 1771. A part nership may be const it ut ed in any form,

except where immovable propert y or real right s are
cont ribut ed t hereto, in which case a public inst rument
shall be necessary. (1667a)

Art . 1772. Every cont ract of part nership having a capit al

of t hree t housand pesos or more, in money or propert y,
shall appear in a public inst rument , which must be
recorded in t he Office of t he Securit ies and Exchange
Commission.

Failure to comply wit h t he requirement s of t he

preceding paragraph shall not affect t he liabilit y of t he
part nership and t he members t hereof to t hird persons.
(n)

Art . 1773. A cont ract of part nership is void, whenever

immovable propert y is cont ribut ed t hereto, if an
inventory of said propert y is not made, signed by t he
part ies, and at t ached to t he public inst rument . (1668a)

Art . 1774. Any immovable propert y or an int erest t herein

may be acquired in t he part nership name. T it le so
acquired can be conveyed only in t he part nership name.
(n)

Art . 1775. Associat ions and societ ies, whose art icles
are kept secret among t he members, and wherein any
one of t he members may cont ract in his own name wit h
t hird persons, shall have no juridical personalit y, and
shall be governed by t he provisions relat ing to co-
ownership. (1669)

Art . 1776. As to it s object , a part nership is eit her

universal or part icular. As regards t he liabilit y of t he
part ners, a part nership may be general or limit ed.
(1671a)

Art . 1777. A universal part nership may refer to all t he

present propert y or to all t he profit s. (1672)

Art . 1778. A part nership of all present propert y is t hat in

which t he part ners cont ribut e all t he propert y which
act ually belongs to t hem to a common fund, wit h t he
int ent ion of dividing t he same among t hemselves, as
well as all t he profit s which t hey may acquire t herewit h.
(1673)

Art . 1779. In a universal part nership of all present

propert y, t he propert y which belongs to each of t he
part ners at t he t ime of t he const it ut ion of t he
part nership, becomes t he common propert y of all t he
part ners, as well as all t he profit s which t hey may
acquire t herewit h.

A st ipulat ion for t he common enjoyment of any ot her

profit s may also be made; but t he propert y which t he
part ners may acquire subsequent ly by inherit ance,
legacy, or donat ion cannot be included in such
st ipulat ion, except t he fruit s t hereof. (1674a)
Art . 1780. A universal part nership of profit s comprises
all t hat t he part ners may acquire by t heir indust ry or
work during t he exist ence of t he part nership.

Movable or immovable propert y which each of t he

part ners may possess at t he t ime of t he celebrat ion of
t he cont ract shall cont inue to pert ain exclusively to
each, only t he usufruct passing to t he part nership.
(1675)

Art . 1781. Art icles of universal part nership, ent ered into
wit hout specificat ion of it s nat ure, only const it ut e a
universal part nership of profit s. (1676)

Art . 1782. Persons who are prohibit ed from giving each

ot her any donat ion or advant age cannot ent er into
universal part nership. (1677)

Art . 1783. A part icular part nership has for it s object

det erminat e t hings, t heir use or fruit s, or specific
undert aking, or t he exercise of a profession or vocat ion.
(1678)

CHAPT ER 2

OBLIGAT IONS OF T HE PART NERS

SECT ION 1. - Obligations of the PartnersAmong

T hemselves

Art . 1784. A part nership begins from t he moment of t he

execut ion of t he cont ract , unless it is ot herwise
st ipulat ed. (1679)

Art . 1785. When a part nership for a fixed t erm or

part icular undert aking is cont inued aft er t he
t erminat ion of such t erm or part icular undert aking
wit hout any express agreement , t he right s and dut ies
of t he part ners remain t he same as t hey were at such
t erminat ion, so far as is consist ent wit h a part nership
at will.

A cont inuat ion of t he business by t he part ners or such

of t hem as habit ually act ed t herein during t he t erm,
wit hout any set t lement or liquidat ion of t he part nership
affairs, is prima facie evidence of a cont inuat ion of t he
part nership. (n)

Art . 1786. Every part ner is a debtor of t he part nership

for what ever he may have promised to cont ribut e
t hereto.

He shall also be bound for warrant y in case of evict ion

wit h regard to specific and det erminat e t hings which he
may have cont ribut ed to t he part nership, in t he same
cases and in t he same manner as t he vendor is bound
wit h respect to t he vendee. He shall also be liable for t he
fruit s t hereof from t he t ime t hey should have been
delivered, wit hout t he need of any demand. (1681a)

Art . 1787. When t he capit al or a part t hereof which a

part ner is bound to cont ribut e consist s of goods, t heir
appraisal must be made in t he manner prescribed in t he
cont ract of part nership, and in t he absence of
st ipulat ion, it shall be made by expert s chosen by t he
part ners, and according to current prices, t he
subsequent changes t hereof being for account of t he
part nership. (n)

Art . 1788. A part ner who has undert aken to cont ribut e a
sum of money and fails to do so becomes a debtor for
t he int erest and damages from t he t ime he should have
complied wit h his obligat ion.

T he same rule applies to any amount he may have

t aken from t he part nership coffers, and his liabilit y shall
begin from t he t ime he convert ed t he amount to his
own use. (1682)

Art . 1789. An indust rial part ner cannot engage in

business for himself, unless t he part nership expressly
permit s him to do so; and if he should do so, t he
capit alist part ners may eit her exclude him from t he firm
or avail t hemselves of t he benefit s which he may have
obt ained in violat ion of t his provision, wit h a right to
damages in eit her case. (n)

Art . 1790. Unless t here is a st ipulat ion to t he cont rary,

t he part ners shall cont ribut e equal shares to t he capit al
of t he part nership. (n)

Art . 1791. If t here is no agreement to t he cont rary, in

case of an imminent loss of t he business of t he
part nership, any part ner who refuses to cont ribut e an
addit ional share to t he capit al, except an indust rial
part ner, to save t he vent ure, shall he obliged to sell his
int erest to t he ot her part ners. (n)

Art . 1792. If a part ner aut horized to manage collect s a

demandable sum which was owed to him in his own
name, from a person who owed t he part nership anot her
sum also demandable, t he sum t hus collect ed shall be
applied to t he t wo credit s in proport ion to t heir
amount s, even t hough he may have given a receipt for
his own credit only; but should he have given it for t he
account of t he part nership credit , t he amount shall be
fully applied to t he lat t er.

T he provisions of t his art icle are understood to be

wit hout prejudice to t he right grant ed to t he ot her
debtor by Art icle 1252, but only if t he personal credit of
t he part ner should be more onerous to him. (1684)

Art . 1793. A part ner who has received, in whole or in part ,

his share of a part nership credit , when t he ot her
part ners have not collect ed t heirs, shall be obliged, if
t he debtor should t hereaft er become insolvent , to bring
to t he part nership capit al what he received even t hough
he may have given receipt for his share only. (1685a)

Art . 1794. Every part ner is responsible to t he

part nership for damages suffered by it t hrough his
fault , and he cannot compensat e t hem wit h t he profit s
and benefit s which he may have earned for t he
part nership by his indust ry. However, t he court s may
equit ably lessen t his responsibilit y if t hrough t he
part ner's ext raordinary effort s in ot her act ivit ies of t he
part nership, unusual profit s have been realized. (1686a)

Art . 1795. T he risk of specific and det erminat e t hings,

which are not fungible, cont ribut ed to t he part nership
so t hat only t heir use and fruit s may be for t he common
benefit , shall be borne by t he part ner who owns t hem.

If t he t hings cont ribut e are fungible, or cannot be kept

wit hout det eriorat ing, or if t hey were cont ribut ed to be
sold, t he risk shall be borne by t he part nership. In t he
absence of st ipulat ion, t he risk of t he t hings brought
and appraised in t he inventory, shall also be borne by t he
part nership, and in such case t he claim shall be limit ed
to t he value at which t hey were appraised. (1687)

Art . 1796. T he part nership shall be responsible to every

part ner for t he amount s he may have disbursed on
behalf of t he part nership and for t he corresponding
int erest , from t he t ime t he expense are made; it shall
also answer to each part ner for t he obligat ions he may
have cont ract ed in good fait h in t he int erest of t he
part nership business, and for risks in consequence of
it s management . (1688a)

Art . 1797. T he losses and profit s shall be dist ribut ed in

conformit y wit h t he agreement . If only t he share of
each part ner in t he profit s has been agreed upon, t he
share of each in t he losses shall be in t he same
proport ion.

In t he absence of st ipulat ion, t he share of each part ner

in t he profit s and losses shall be in proport ion to what
he may have cont ribut ed, but t he indust rial part ner shall
not be liable for t he losses. As for t he profit s, t he
indust rial part ner shall receive such share as may be
just and equit able under t he circumst ances. If besides
his services he has cont ribut ed capit al, he shall also
receive a share in t he profit s in proport ion to his capit al.
(1689a)
Art . 1798. If t he part ners have agreed to int rust to a
t hird person t he designat ion of t he share of each one in
t he profit s and losses, such designat ion may be
impugned only when it is manifest ly inequit able. In no
case may a part ner who has begun to execut e t he
decision of t he t hird person, or who has not impugned
t he same wit hin a period of t hree mont hs from t he t ime
he had knowledge t hereof, complain of such decision.

T he designat ion of losses and profit s cannot be

int rust ed to one of t he part ners. (1690)

Art . 1799. A st ipulat ion which excludes one or more

part ners from any share in t he profit s or losses is void.
(1691)

Art . 1800. T he part ner who has been appoint ed

manager in t he art icles of part nership may execut e all
act s of administ rat ion despit e t he opposit ion of his
part ners, unless he should act in bad fait h; and his
power is irrevocable wit hout just or lawful cause. T he
vot e of t he part ners represent ing t he cont rolling
int erest shall be necessary for such revocat ion of
power.

A power grant ed aft er t he part nership has been

const it ut ed may be revoked at any t ime. (1692a)

Art . 1801. If t wo or more part ners have been int rust ed

wit h t he management of t he part nership wit hout
specificat ion of t heir respect ive dut ies, or wit hout a
st ipulat ion t hat one of t hem shall not act wit hout t he
consent of all t he ot hers, each one may separat ely
execut e all act s of administ rat ion, but if any of t hem
should oppose t he act s of t he ot hers, t he decision of
t he majorit y shall prevail. In case of a t ie, t he mat t er
shall be decided by t he part ners owning t he cont rolling
int erest . (1693a)

Art . 1802. In case it should have been st ipulat ed t hat

none of t he managing part ners shall act wit hout t he
consent of t he ot hers, t he concurrence of all shall be
necessary for t he validit y of t he act s, and t he absence
or disabilit y of any one of t hem cannot be alleged,
unless t here is imminent danger of grave or irreparable
injury to t he part nership. (1694)

Art . 1803. When t he manner of management has not

been agreed upon, t he following rules shall be observed:

(1) All t he part ners shall be considered agent s

and what ever any one of t hem may do alone shall
bind t he part nership, wit hout prejudice to t he
provisions of Art icle 1801.

(2) None of t he part ners may, wit hout t he

consent of t he ot hers, make any import ant
alt erat ion in t he immovable propert y of t he
part nership, even if it may be useful to t he
part nership. But if t he refusal of consent by t he
ot her part ners is manifest ly prejudicial to t he
int erest of t he part nership, t he court 's
int ervent ion may be sought . (1695a)

Art . 1804. Every part ner may associat e anot her person
wit h him in his share, but t he associat e shall not be
admit t ed into t he part nership wit hout t he consent of all
t he ot her part ners, even if t he part ner having an
associat e should be a manager. (1696)

Art . 1805. T he part nership books shall be kept , subject

to any agreement bet ween t he part ners, at t he principal
place of business of t he part nership, and every part ner
shall at any reasonable hour have access to and may
inspect and copy any of t hem. (n)

Art . 1806. Part ners shall render on demand t rue and full
informat ion of all t hings affect ing t he part nership to
any part ner or t he legal represent at ive of any deceased
part ner or of any part ner under legal disabilit y. (n)

Art . 1807. Every part ner must account to t he

part nership for any benefit , and hold as t rust ee for it
any profit s derived by him wit hout t he consent of t he
ot her part ners from any t ransact ion connect ed wit h
t he format ion, conduct , or liquidat ion of t he part nership
or from any use by him of it s propert y. (n)

Art . 1808. T he capit alist part ners cannot engage for

t heir own account in any operat ion which is of t he kind
of business in which t he part nership is engaged, unless
t here is a st ipulat ion to t he cont rary.

Any capit alist part ner violat ing t his prohibit ion shall
bring to t he common funds any profit s accruing to him
from his t ransact ions, and shall personally bear all t he
losses. (n)

Art . 1809. Any part ner shall have t he right to a formal

account as to part nership affairs:

(1) If he is wrongfully excluded from t he

part nership business or possession of it s
propert y by his co-part ners;

(2) If t he right exist s under t he t erms of any

agreement ;

(3) As provided by art icle 1807;

(4) Whenever ot her circumst ances render it just

and reasonable. (n)

SECT ION 2. - Property Rights of a Partner

Art . 1810. T he propert y right s of a part ner are:

(1) His right s in specific part nership propert y;

(2) His int erest in t he part nership; and

(3) His right to part icipat e in t he management . (n)

Art . 1811. A part ner is co-owner wit h his part ners of

specific part nership propert y.

T he incident s of t his co-ownership are such t hat :

 (1) A part ner, subject to t he provisions of t his
T it le and to any agreement bet ween t he part ners,
has an equal right wit h his part ners to possess
specific part nership propert y for part nership
purposes; but he has no right to possess such
propert y for any ot her purpose wit hout t he
consent of his part ners;

(2) A part ner's right in specific part nership

propert y is not assignable except in connect ion
wit h t he assignment of right s of all t he part ners
in t he same propert y;

(3) A part ner's right in specific part nership

propert y is not subject to at t achment or
execut ion, except on a claim against t he
part nership. When part nership propert y is
at t ached for a part nership debt t he part ners, or
any of t hem, or t he represent at ives of a
deceased part ner, cannot claim any right under
t he homest ead or exempt ion laws;

(4) A part ner's right in specific part nership

propert y is not subject to legal support under
Art icle 291. (n)

Art . 1812. A part ner's int erest in t he part nership is his

share of t he profit s and surplus. (n)

Art . 1813. A conveyance by a part ner of his whole

int erest in t he part nership does not of it self dissolve
t he part nership, or, as against t he ot her part ners in t he
absence of agreement , ent it le t he assignee, during t he
cont inuance of t he part nership, to int erfere in t he
management or administ rat ion of t he part nership
business or affairs, or to require any informat ion or
account of part nership t ransact ions, or to inspect t he
part nership books; but it merely ent it les t he assignee to
receive in accordance wit h his cont ract t he profit s to
which t he assigning part ner would ot herwise be
ent it led. However, in case of fraud in t he management
of t he part nership, t he assignee may avail himself of
t he usual remedies.

In case of a dissolut ion of t he part nership, t he assignee

is ent it led to receive his assignor's int erest and may
require an account from t he dat e only of t he last
account agreed to by all t he part ners. (n)

Art . 1814. Wit hout prejudice to t he preferred right s of

part nership creditors under Art icle 1827, on due
applicat ion to a compet ent court by any judgment
creditor of a part ner, t he court which ent ered t he
judgment , or any ot her court , may charge t he int erest of
t he debtor part ner wit h payment of t he unsat isfied
amount of such judgment debt wit h int erest t hereon;
and may t hen or lat er appoint a receiver of his share of
t he profit s, and of any ot her money due or to fall due to
him in respect of t he part nership, and make all ot her
orders, direct ions, account s and inquiries which t he
debtor part ner might have made, or which t he
circumst ances of t he case may require.

T he int erest charged may be redeemed at any t ime

before foreclosure, or in case of a sale being direct ed by
t he court , may be purchased wit hout t hereby causing a
dissolut ion:

(1) Wit h separat e propert y, by any one or more of

t he part ners; or

(2) Wit h part nership propert y, by any one or more

of t he part ners wit h t he consent of all t he
part ners whose int erest s are not so charged or
sold.

Not hing in t his T it le shall be held to deprive a part ner of

his right , if any, under t he exempt ion laws, as regards his
int erest in t he part nership. (n)

SECT ION 3. - Obligations of the Partners

WithRegard to T hird Persons

Art . 1815. Every part nership shall operat e under a firm
name, which may or may not include t he name of one or
more of t he part ners.

T hose who, not being members of t he part nership,

include t heir names in t he firm name, shall be subject to
t he liabilit y of a part ner. (n)

Art . 1816. All part ners, including indust rial ones, shall be
liable pro rat a wit h all t heir propert y and aft er all t he
part nership asset s have been exhaust ed, for t he
cont ract s which may be ent ered into in t he name and
for t he account of t he part nership, under it s signat ure
and by a person aut horized to act for t he part nership.
However, any part ner may ent er into a separat e
obligat ion to perform a part nership cont ract . (n)

Art . 1817. Any st ipulat ion against t he liabilit y laid down in

t he preceding art icle shall be void, except as among t he
part ners. (n)

Art . 1818. Every part ner is an agent of t he part nership

for t he purpose of it s business, and t he act of every
part ner, including t he execut ion in t he part nership name
of any inst rument , for apparent ly carrying on in t he
usual way t he business of t he part nership of which he
is a member binds t he part nership, unless t he part ner
so act ing has in fact no aut horit y to act for t he
part nership in t he part icular mat t er, and t he person wit h
whom he is dealing has knowledge of t he fact t hat he
has no such aut horit y.

An act of a part ner which is not apparent ly for t he

carrying on of business of t he part nership in t he usual
way does not bind t he part nership unless aut horized by
t he ot her part ners.

Except when aut horized by t he ot her part ners or unless

t hey have abandoned t he business, one or more but
less t han all t he part ners have no aut horit y to:
 (1) Assign t he part nership propert y in t rust for
creditors or on t he assignee's promise to pay t he
debt s of t he part nership;

(2) Dispose of t he good-will of t he business;

(3) Do any ot her act which would make it

impossible to carry on t he ordinary business of a
part nership;

(4) Confess a judgment ;

(5) Ent er into a compromise concerning a

part nership claim or liabilit y;

(6) Submit a part nership claim or liabilit y to

arbit rat ion;

(7) Renounce a claim of t he part nership.

No act of a part ner in cont ravent ion of a rest rict ion on

aut horit y shall bind t he part nership to persons having
knowledge of t he rest rict ion. (n)

Art . 1819. Where t it le to real propert y is in t he

part nership name, any part ner may convey t it le to such
propert y by a conveyance execut ed in t he part nership
name; but t he part nership may recover such propert y
unless t he part ner's act binds t he part nership under t he
provisions of t he first paragraph of art icle 1818, or
unless such propert y has been conveyed by t he grant ee
or a person claiming t hrough such grant ee to a holder
for value wit hout knowledge t hat t he part ner, in making
t he conveyance, has exceeded his aut horit y.

Where t it le to real propert y is in t he name of t he

part nership, a conveyance execut ed by a part ner, in his
own name, passes t he equit able int erest of t he
part nership, provided t he act is one wit hin t he aut horit y
of t he part ner under t he provisions of t he first
paragraph of Art icle 1818.
Where t it le to real propert y is in t he name of one or more
but not all t he part ners, and t he record does not
disclose t he right of t he part nership, t he part ners in
whose name t he t it le st ands may convey t it le to such
propert y, but t he part nership may recover such propert y
if t he part ners' act does not bind t he part nership under
t he provisions of t he first paragraph of Art icle 1818,
unless t he purchaser or his assignee, is a holder for
value, wit hout knowledge.

Where t he t it le to real propert y is in t he name of one or

more or all t he part ners, or in a t hird person in t rust for
t he part nership, a conveyance execut ed by a part ner in
t he part nership name, or in his own name, passes t he
equit able int erest of t he part nership, provided t he act is
one wit hin t he aut horit y of t he part ner under t he
provisions of t he first paragraph of Art icle 1818.

Where t he t it le to real propert y is in t he name of all t he

part ners a conveyance execut ed by all t he part ners
passes all t heir right s in such propert y. (n)

Art . 1820. An admission or represent at ion made by any

part ner concerning part nership affairs wit hin t he scope
of his aut horit y in accordance wit h t his T it le is evidence
against t he part nership. (n)

Art . 1821. Not ice to any part ner of any mat t er relat ing to
part nership affairs, and t he knowledge of t he part ner
act ing in t he part icular mat t er, acquired while a part ner
or t hen present to his mind, and t he knowledge of any
ot her part ner who reasonably could and should have
communicat ed it to t he act ing part ner, operat e as
not ice to or knowledge of t he part nership, except in t he
case of fraud on t he part nership, commit t ed by or wit h
t he consent of t hat part ner. (n)

Art . 1822. Where, by any wrongful act or omission of any

part ner act ing in t he ordinary course of t he business of
t he part nership or wit h t he aut horit y of co-part ners,
loss or injury is caused to any person, not being a
part ner in t he part nership, or any penalt y is incurred, t he
part nership is liable t herefor to t he same ext ent as t he
part ner so act ing or omit t ing to act . (n)

Art . 1823. T he part nership is bound to make good t he

loss:

(1) Where one part ner act ing wit hin t he scope of
his apparent aut horit y receives money or propert y
of a t hird person and misapplies it ; and

(2) Where t he part nership in t he course of it s

business receives money or propert y of a t hird
person and t he money or propert y so received is
misapplied by any part ner while it is in t he custody
of t he part nership. (n)

Art . 1824. All part ners are liable solidarily wit h t he

part nership for everyt hing chargeable to t he
part nership under Art icles 1822 and 1823. (n)

Art . 1825. When a person, by words spoken or writ t en or

by conduct , represent s himself, or consent s to anot her
represent ing him to anyone, as a part ner in an exist ing
part nership or wit h one or more persons not act ual
part ners, he is liable to any such persons to whom such
represent at ion has been made, who has, on t he fait h of
such represent at ion, given credit to t he act ual or
apparent part nership, and if he has made such
represent at ion or consent ed to it s being made in a
public manner he is liable to such person, whet her t he
represent at ion has or has not been made or
communicat ed to such person so giving credit by or
wit h t he knowledge of t he apparent part ner making t he
represent at ion or consent ing to it s being made:

(1) When a part nership liabilit y result s, he is liable

as t hough he were an act ual member of t he
part nership;

(2) When no part nership liabilit y result s, he is liable

pro rat a wit h t he ot her persons, if any, so
 consent ing to t he cont ract or represent at ion as
to incur liabilit y, ot herwise separat ely.

When a person has been t hus represent ed to be a

part ner in an exist ing part nership, or wit h one or more
persons not act ual part ners, he is an agent of t he
persons consent ing to such represent at ion to bind
t hem to t he same ext ent and in t he same manner as
t hough he were a part ner in fact , wit h respect to
persons who rely upon t he represent at ion. When all t he
members of t he exist ing part nership consent to t he
represent at ion, a part nership act or obligat ion result s;
but in all ot her cases it is t he joint act or obligat ion of
t he person act ing and t he persons consent ing to t he
represent at ion. (n)

Art . 1826. A person admit t ed as a part ner into an

exist ing part nership is liable for all t he obligat ions of t he
part nership arising before his admission as t hough he
had been a part ner when such obligat ions were incurred,
except t hat t his liabilit y shall be sat isfied only out of
part nership propert y, unless t here is a st ipulat ion to t he
cont rary. (n)

Art . 1827. T he creditors of t he part nership shall be

preferred to t hose of each part ner as regards t he
part nership propert y. Wit hout prejudice to t his right , t he
privat e creditors of each part ner may ask t he
at t achment and public sale of t he share of t he lat t er in
t he part nership asset s. (n)

CHAPT ER 3

DISSOLUT ION AND WINDING UP

Art . 1828. T he dissolut ion of a part nership is t he change

in t he relat ion of t he part ners caused by any part ner
ceasing to be associat ed in t he carrying on as
dist inguished from t he winding up of t he business. (n)

Art . 1829. On dissolut ion t he part nership is not

t erminat ed, but cont inues unt il t he winding up of
part nership affairs is complet ed. (n)

Art . 1830. Dissolut ion is caused:

(1) Wit hout violat ion of t he agreement bet ween

t he part ners:

(a) By t he t erminat ion of t he definit e t erm or

part icular undert aking specified in t he agreement ;

(b) By t he express will of any part ner, who must

act in good fait h, when no definit e t erm or
part icular is specified;

(c) By t he express will of all t he part ners who have

not assigned t heir int erest s or suffered t hem to
be charged for t heir separat e debt s, eit her before
or aft er t he t erminat ion of any specified t erm or
part icular undert aking;

(d) By t he expulsion of any part ner from t he

business bona fide in accordance wit h such a
power conferred by t he agreement bet ween t he
part ners;

(2) In cont ravent ion of t he agreement bet ween

t he part ners, where t he circumst ances do not
permit a dissolut ion under any ot her provision of
t his art icle, by t he express will of any part ner at
any t ime;

(3) By any event which makes it unlawful for t he

business of t he part nership to be carried on or for
t he members to carry it on in part nership;

(4) When a specific t hing which a part ner had

promised to cont ribut e to t he part nership,
perishes before t he delivery; in any case by t he
loss of t he t hing, when t he part ner who
cont ribut ed it having reserved t he ownership
t hereof, has only t ransferred to t he part nership
t he use or enjoyment of t he same; but t he
 part nership shall not be dissolved by t he loss of
t he t hing when it occurs aft er t he part nership
has acquired t he ownership t hereof;

(5) By t he deat h of any part ner;

(6) By t he insolvency of any part ner or of t he

part nership;

(7) By t he civil int erdict ion of any part ner;

(8) By decree of court under t he following art icle.

(1700a and 1701a)

Art . 1831. On applicat ion by or for a part ner t he court

shall decree a dissolut ion whenever:

(1) A part ner has been declared insane in any

judicial proceeding or is shown to be of unsound
mind;

(2) A part ner becomes in any ot her way incapable

of performing his part of t he part nership
cont ract ;

(3) A part ner has been guilt y of such conduct as

t ends to affect prejudicially t he carrying on of t he
business;

(4) A part ner wilfully or persist ent ly commit s a

breach of t he part nership agreement , or
ot herwise so conduct s himself in mat t ers
relat ing to t he part nership business t hat it is not
reasonably pract icable to carry on t he business in
part nership wit h him;

(5) T he business of t he part nership can only be

carried on at a loss;

(6) Ot her circumst ances render a dissolut ion

equit able.

On t he applicat ion of t he purchaser of a part ner's

int erest under Art icle 1813 or 1814:
 (1) Aft er t he t erminat ion of t he specified t erm or
part icular undert aking;

(2) At any t ime if t he part nership was a

part nership at will when t he int erest was
assigned or when t he charging order was issued.
(n)

Art . 1832. Except so far as may be necessary to wind up

part nership affairs or to complet e t ransact ions begun
but not t hen finished, dissolut ion t erminat es all
aut horit y of any part ner to act for t he part nership:

(1) Wit h respect to t he part ners:

(a) When t he dissolut ion is not by t he act ,

insolvency or deat h of a part ner; or

(b) When t he dissolut ion is by such act , insolvency

or deat h of a part ner, in cases where art icle 1833
so requires;

(2) Wit h respect to persons not part ners, as

declared in art icle 1834. (n)

Art . 1833. Where t he dissolut ion is caused by t he act ,

deat h or insolvency of a part ner, each part ner is liable to
his co-part ners for his share of any liabilit y creat ed by
any part ner act ing for t he part nership as if t he
part nership had not been dissolved unless:

(1) T he dissolut ion being by act of any part ner,

t he part ner act ing for t he part nership had
knowledge of t he dissolut ion; or

(2) T he dissolut ion being by t he deat h or

insolvency of a part ner, t he part ner act ing for t he
part nership had knowledge or not ice of t he deat h
or insolvency.

Art . 1834. Aft er dissolut ion, a part ner can bind t he

part nership, except as provided in t he t hird paragraph of
t his art icle:
 (1) By any act appropriat e for winding up
part nership affairs or complet ing t ransact ions
unfinished at dissolut ion;

(2) By any t ransact ion which would bind t he

part nership if dissolut ion had not t aken place,
provided t he ot her part y to t he t ransact ion:

(a) Had ext ended credit to t he part nership prior to

dissolut ion and had no knowledge or not ice of t he
dissolut ion; or

(b) T hough he had not so ext ended credit , had

nevert heless known of t he part nership prior to
dissolut ion, and, having no knowledge or not ice of
dissolut ion, t he fact of dissolut ion had not been
advert ised in a newspaper of general circulat ion in
t he place (or in each place if more t han one) at
which t he part nership business was regularly
carried on.

T he liabilit y of a part ner under t he first paragraph, No. 2,

shall be sat isfied out of part nership asset s alone when
such part ner had been prior to dissolut ion:

(1) Unknown as a part ner to t he person wit h

whom t he cont ract is made; and

(2) So far unknown and inact ive in part nership

affairs t hat t he business reput at ion of t he
part nership could not be said to have been in any
degree due to his connect ion wit h it .

T he part nership is in no case bound by any act of a

part ner aft er dissolut ion:

(1) Where t he part nership is dissolved because it

is unlawful to carry on t he business, unless t he
act is appropriat e for winding up part nership
affairs; or

(2) Where t he part ner has become insolvent ; or

 (3) Where t he part ner has no aut horit y to wind up
part nership affairs; except by a t ransact ion wit h
one who:

(a) Had ext ended credit to t he part nership prior to

dissolut ion and had no knowledge or not ice of his
want of aut horit y; or

(b) Had not ext ended credit to t he part nership

prior to dissolut ion, and, having no knowledge or
not ice of his want of aut horit y, t he fact of his
want of aut horit y has not been advert ised in t he
manner provided for advert ising t he fact of
dissolut ion in t he first paragraph, No. 2 (b).

Not hing in t his art icle shall affect t he liabilit y under

Art icle 1825 of any person who, aft er dissolut ion,
represent s himself or consent s to anot her represent ing
him as a part ner in a part nership engaged in carrying
business. (n)

Art . 1835. T he dissolut ion of t he part nership does not of

it self discharge t he exist ing liabilit y of any part ner.

A part ner is discharged from any exist ing liabilit y upon

dissolut ion of t he part nership by an agreement to t hat
effect bet ween himself, t he part nership creditor and
t he person or part nership cont inuing t he business; and
such agreement may be inferred from t he course of
dealing bet ween t he creditor having knowledge of t he
dissolut ion and t he person or part nership cont inuing t he
business.

T he individual propert y of a deceased part ner shall be

liable for all obligat ions of t he part nership incurred while
he was a part ner, but subject to t he prior payment of his
separat e debt s. (n)

Art . 1836. Unless ot herwise agreed, t he part ners who

have not wrongfully dissolved t he part nership or t he
legal represent at ive of t he last surviving part ner, not
insolvent , has t he right to wind up t he part nership
affairs, provided, however, t hat any part ner, his legal
represent at ive or his assignee, upon cause shown, may
obt ain winding up by t he court . (n)

Art . 1837. When dissolut ion is caused in any way, except

in cont ravent ion of t he part nership agreement , each
part ner, as against his co-part ners and all persons
claiming t hrough t hem in respect of t heir int erest s in
t he part nership, unless ot herwise agreed, may have t he
part nership propert y applied to discharge it s liabilit ies,
and t he surplus applied to pay in cash t he net amount
owing to t he respect ive part ners. But if dissolut ion is
caused by expulsion of a part ner, bona fide under t he
part nership agreement and if t he expelled part ner is
discharged from all part nership liabilit ies, eit her by
payment or agreement under t he second paragraph of
Art icle 1835, he shall receive in cash only t he net
amount due him from t he part nership.

When dissolut ion is caused in cont ravent ion of t he

part nership agreement t he right s of t he part ners shall
be as follows:

(1) Each part ner who has not caused dissolut ion
wrongfully shall have:

(a) All t he right s specified in t he first

paragraph of t his art icle, and

(b) T he right , as against each part ner who

has caused t he dissolut ion wrongfully, to
damages breach of t he agreement .

(2) T he part ners who have not caused t he

dissolut ion wrongfully, if t hey all desire to
cont inue t he business in t he same name eit her by
t hemselves or joint ly wit h ot hers, may do so,
during t he agreed t erm for t he part nership and for
t hat purpose may possess t he part nership
propert y, provided t hey secure t he payment by
bond approved by t he court , or pay any part ner
 who has caused t he dissolut ion wrongfully, t he
value of his int erest in t he part nership at t he
dissolut ion, less any damages recoverable under
t he second paragraph, No. 1 (b) of t his art icle, and
in like manner indemnify him against all present or
fut ure part nership liabilit ies.

(3) A part ner who has caused t he dissolut ion

wrongfully shall have:

(a) If t he business is not cont inued under

t he provisions of t he second paragraph, No.
2, all t he right s of a part ner under t he first
paragraph, subject to liabilit y for damages
in t he second paragraph, No. 1 (b), of t his
art icle.

(b) If t he business is cont inued under t he

second paragraph, No. 2, of t his art icle, t he
right as against his co-part ners and all
claiming t hrough t hem in respect of t heir
int erest s in t he part nership, to have t he
value of his int erest in t he part nership, less
any damage caused to his co-part ners by
t he dissolut ion, ascert ained and paid to him
in cash, or t he payment secured by a bond
approved by t he court , and to be released
from all exist ing liabilit ies of t he
part nership; but in ascert aining t he value of
t he part ner's int erest t he value of t he
good-will of t he business shall not be
considered. (n)

Art . 1838. Where a part nership cont ract is rescinded on

t he ground of t he fraud or misrepresent at ion of one of
t he part ies t hereto, t he part y ent it led to rescind is,
wit hout prejudice to any ot her right , ent it led:

(1) To a lien on, or right of ret ent ion of, t he surplus

of t he part nership propert y aft er sat isfying t he
part nership liabilit ies to t hird persons for any sum
 of money paid by him for t he purchase of an
int erest in t he part nership and for any capit al or
advances cont ribut ed by him;

(2) To st and, aft er all liabilit ies to t hird persons

have been sat isfied, in t he place of t he creditors
of t he part nership for any payment s made by him
in respect of t he part nership liabilit ies; and

(3) To be indemnified by t he person guilt y of t he

fraud or making t he represent at ion against all
debt s and liabilit ies of t he part nership. (n)

Art . 1839. In set t ling account s bet ween t he part ners

aft er dissolut ion, t he following rules shall be observed,
subject to any agreement to t he cont rary:

(1) T he asset s of t he part nership are:

(a) T he part nership propert y,

(b) T he cont ribut ions of t he part ners

necessary for t he payment of all t he
liabilit ies specified in No. 2.

(2) T he liabilit ies of t he part nership shall rank in

order of payment , as follows:

(a) T hose owing to creditors ot her t han

part ners,

(b) T hose owing to part ners ot her t han for

capit al and profit s,

(c) T hose owing to part ners in respect of

capit al,

(d) T hose owing to part ners in respect of

profit s.

(3) T he asset s shall be applied in t he order of

t heir declarat ion in No. 1 of t his art icle to t he
sat isfact ion of t he liabilit ies.
 (4) T he part ners shall cont ribut e, as provided by
art icle 1797, t he amount necessary to sat isfy t he
liabilit ies.

(5) An assignee for t he benefit of creditors or any

person appoint ed by t he court shall have t he right
to enforce t he cont ribut ions specified in t he
preceding number.

(6) Any part ner or his legal represent at ive shall

have t he right to enforce t he cont ribut ions
specified in No. 4, to t he ext ent of t he amount
which he has paid in excess of his share of t he
liabilit y.

(7) T he individual propert y of a deceased part ner

shall be liable for t he cont ribut ions specified in No.
4.

(8) When part nership propert y and t he individual

propert ies of t he part ners are in possession of a
court for dist ribut ion, part nership creditors shall
have priorit y on part nership propert y and
separat e creditors on individual propert y, saving
t he right s of lien or secured creditors.

(9) Where a part ner has become insolvent or his

est at e is insolvent , t he claims against his
separat e propert y shall rank in t he following order:

(a) T hose owing to separat e creditors;

(b) T hose owing to part nership creditors;

(c) T hose owing to part ners by way of

cont ribut ion. (n)

Art . 1840. In t he following cases creditors of t he

dissolved part nership are also creditors of t he person or
part nership cont inuing t he business:

(1) When any new part ner is admit t ed into an

exist ing part nership, or when any part ner ret ires
and assigns (or t he represent at ive of t he
deceased part ner assigns) his right s in
part nership propert y to t wo or more of t he
part ners, or to one or more of t he part ners and
one or more t hird persons, if t he business is
cont inued wit hout liquidat ion of t he part nership
affairs;

(2) When all but one part ner ret ire and assign (or
t he represent at ive of a deceased part ner
assigns) t heir right s in part nership propert y to
t he remaining part ner, who cont inues t he
business wit hout liquidat ion of part nership
affairs, eit her alone or wit h ot hers;

(3) When any part ner ret ires or dies and t he

business of t he dissolved part nership is
cont inued as set fort h in Nos. 1 and 2 of t his
art icle, wit h t he consent of t he ret ired part ners or
t he represent at ive of t he deceased part ner, but
wit hout any assignment of his right in part nership
propert y;

(4) When all t he part ners or t heir represent at ives

assign t heir right s in part nership propert y to one
or more t hird persons who promise to pay t he
debt s and who cont inue t he business of t he
dissolved part nership;

(5) When any part ner wrongfully causes a

dissolut ion and t he remaining part ners cont inue
t he business under t he provisions of art icle 1837,
second paragraph, No. 2, eit her alone or wit h
ot hers, and wit hout liquidat ion of t he part nership
affairs;

(6) When a part ner is expelled and t he remaining

part ners cont inue t he business eit her alone or
wit h ot hers wit hout liquidat ion of t he part nership
affairs.
T he liabilit y of a t hird person becoming a part ner in t he
part nership cont inuing t he business, under t his art icle,
to t he creditors of t he dissolved part nership shall be
sat isfied out of t he part nership propert y only, unless
t here is a st ipulat ion to t he cont rary.

When t he business of a part nership aft er dissolut ion is

cont inued under any condit ions set fort h in t his art icle
t he creditors of t he dissolved part nership, as against
t he separat e creditors of t he ret iring or deceased
part ner or t he represent at ive of t he deceased part ner,
have a prior right to any claim of t he ret ired part ner or
t he represent at ive of t he deceased part ner against t he
person or part nership cont inuing t he business, on
account of t he ret ired or deceased part ner's int erest in
t he dissolved part nership or on account of any
considerat ion promised for such int erest or for his right
in part nership propert y.

Not hing in t his art icle shall be held to modify any right of
creditors to set aside any assignment on t he ground of
fraud.

T he use by t he person or part nership cont inuing t he

business of t he part nership name, or t he name of a
deceased part ner as part t hereof, shall not of it self
make t he individual propert y of t he deceased part ner
liable for any debt s cont ract ed by such person or
part nership. (n)

Art . 1841. When any part ner ret ires or dies, and t he
business is cont inued under any of t he condit ions set
fort h in t he preceding art icle, or in Art icle 1837, second
paragraph, No. 2, wit hout any set t lement of account s
as bet ween him or his est at e and t he person or
part nership cont inuing t he business, unless ot herwise
agreed, he or his legal represent at ive as against such
person or part nership may have t he value of his int erest
at t he dat e of dissolut ion ascert ained, and shall receive
as an ordinary creditor an amount equal to t he value of
his int erest in t he dissolved part nership wit h int erest , or,
at his opt ion or at t he opt ion of his legal represent at ive,
in lieu of int erest , t he profit s at t ribut able to t he use of
his right in t he propert y of t he dissolved part nership;
provided t hat t he creditors of t he dissolved part nership
as against t he separat e creditors, or t he represent at ive
of t he ret ired or deceased part ner, shall have priorit y on
any claim arising under t his art icle, as provided Art icle
1840, t hird paragraph. (n)

Art . 1842. T he right to an account of his int erest shall

accrue to any part ner, or his legal represent at ive as
against t he winding up part ners or t he surviving
part ners or t he person or part nership cont inuing t he
business, at t he dat e of dissolut ion, in t he absence of
any agreement to t he cont rary. (n)

CHAPT ER 4

LIMIT ED PART NERSHIP (n)

Art . 1843. A limit ed part nership is one formed by t wo or

more persons under t he provisions of t he following
art icle, having as members one or more general
part ners and one or more limit ed part ners. T he limit ed
part ners as such shall not be bound by t he obligat ions
of t he part nership.

Art . 1844. Two or more persons desiring to form a

limit ed part nership shall:

(1) Sign and swear to a cert ificat e, which shall

st at e -

(a) T he name of t he part nership, adding

t hereto t he word "Limited";

(b) T he charact er of t he business;

(c) T he locat ion of t he principal place of

business;

(d) T he name and place of residence of

each member, general and limit ed part ners
being respect ively designat ed;

(e) T he t erm for which t he part nership is to

exist ;

(f) T he amount of cash and a descript ion of

and t he agreed value of t he ot her propert y
cont ribut ed by each limit ed part ner;

(g) T he addit ional cont ribut ions, if any, to be

made by each limit ed part ner and t he t imes
at which or event s on t he happening of
which t hey shall be made;

(h) T he t ime, if agreed upon, when t he

cont ribut ion of each limit ed part ner is to be
ret urned;

(i) T he share of t he profit s or t he ot her

compensat ion by way of income which
each limit ed part ner shall receive by reason
of his cont ribut ion;

(j) T he right , if given, of a limit ed part ner to

subst it ut e an assignee as cont ributor in his
place, and t he t erms and condit ions of t he
subst it ut ion;

(k) T he right , if given, of t he part ners to

admit addit ional limit ed part ners;

(l) T he right , if given, of one or more of t he

limit ed part ners to priorit y over ot her
limit ed part ners, as to cont ribut ions or as
to compensat ion by way of income, and t he
nat ure of such priorit y;

(m) T he right , if given, of t he remaining

general part ner or part ners to cont inue t he
business on t he deat h, ret irement , civil
int erdict ion, insanit y or insolvency of a
general part ner; and
 (n) T he right , if given, of a limit ed part ner to
demand and receive propert y ot her t han
cash in ret urn for his cont ribut ion.

(2) File for record t he cert ificat e in t he Office of

t he Securit ies and Exchange Commission.

A limit ed part nership is formed if t here has been

subst ant ial compliance in good fait h wit h t he foregoing
requirement s.

Art . 1845. T he cont ribut ions of a limit ed part ner may be

cash or propert y, but not services.

Art . 1846. T he surname of a limit ed part ner shall not

appear in t he part nership name unless:

(1) It is also t he surname of a general part ner, or

(2) Prior to t he t ime when t he limit ed part ner

became such, t he business has been carried on
under a name in which his surname appeared.

A limit ed part ner whose surname appears in a

part nership name cont rary to t he provisions of t he first
paragraph is liable as a general part ner to part nership
creditors who ext end credit to t he part nership wit hout
act ual knowledge t hat he is not a general part ner.

Art . 1847. If t he cert ificat e cont ains a false st at ement ,

one who suffers loss by reliance on such st at ement
may hold liable any part y to t he cert ificat e who knew
t he st at ement to be false:

(1) At t he t ime he signed t he cert ificat e, or

(2) Subsequent ly, but wit hin a sufficient t ime

before t he st at ement was relied upon to enable
him to cancel or amend t he cert ificat e, or to file a
pet it ion for it s cancellat ion or amendment as
provided in Art icle 1865.

Art . 1848. A limit ed part ner shall not become liable as a

general part ner unless, in addit ion to t he exercise of his
right s and powers as a limit ed part ner, he t akes part in
t he cont rol of t he business.

Art . 1849. Aft er t he format ion of a lift ed part nership,

addit ional limit ed part ners may be admit t ed upon filing
an amendment to t he original cert ificat e in accordance
wit h t he requirement s of Art icle 1865.

Art . 1850. A general part ner shall have all t he right s and
powers and be subject to all t he rest rict ions and
liabilit ies of a part ner in a part nership wit hout limit ed
part ners. However, wit hout t he writ t en consent or
rat ificat ion of t he specific act by all t he limit ed part ners,
a general part ner or all of t he general part ners have no
aut horit y to:

(1) Do any act in cont ravent ion of t he cert ificat e;

(2) Do any act which would make it impossible to

carry on t he ordinary business of t he part nership;

(3) Confess a judgment against t he part nership;

(4) Possess part nership propert y, or assign t heir

right s in specific part nership propert y, for ot her
t han a part nership purpose;

(5) Admit a person as a general part ner;

(6) Admit a person as a limit ed part ner, unless t he

right so to do is given in t he cert ificat e;

(7) Cont inue t he business wit h part nership

propert y on t he deat h, ret irement , insanit y, civil
int erdict ion or insolvency of a general part ner,
unless t he right so to do is given in t he cert ificat e.

Art . 1851. A limit ed part ner shall have t he same right s

as a general part ner to:

(1) Have t he part nership books kept at t he

principal place of business of t he part nership, and
at a reasonable hour to inspect and copy any of
t hem;
 (2) Have on demand t rue and full informat ion of all
t hings affect ing t he part nership, and a formal
account of part nership affairs whenever
circumst ances render it just and reasonable; and

(3) Have dissolut ion and winding up by decree of

court .

A limit ed part ner shall have t he right to receive a share

of t he profit s or ot her compensat ion by way of income,
and to t he ret urn of his cont ribut ion as provided in
Art icles 1856 and 1857.

Art . 1852. Wit hout prejudice to t he provisions of Art icle

1848, a person who has cont ribut ed to t he capit al of a
business conduct ed by a person or part nership
erroneously believing t hat he has become a limit ed
part ner in a limit ed part nership, is not , by reason of his
exercise of t he right s of a limit ed part ner, a general
part ner wit h t he person or in t he part nership carrying on
t he business, or bound by t he obligat ions of such
person or part nership, provided t hat on ascert aining t he
mist ake he prompt ly renounces his int erest in t he
profit s of t he business, or ot her compensat ion by way
of income.

Art . 1853. A person may be a general part ner and a

limit ed part ner in t he same part nership at t he same
t ime, provided t hat t his fact shall be st at ed in t he
cert ificat e provided for in Art icle 1844.

A person who is a general, and also at t he same t ime a

limit ed part ner, shall have all t he right s and powers and
be subject to all t he rest rict ions of a general part ner;
except t hat , in respect to his cont ribut ion, he shall have
t he right s against t he ot her members which he would
have had if he were not also a general part ner.

Art . 1854. A limit ed part ner also may loan money to and
t ransact ot her business wit h t he part nership, and,
unless he is also a general part ner, receive on account
of result ing claims against t he part nership, wit h general
creditors, a pro rat a share of t he asset s. No limit ed
part ner shall in respect to any such claim:

(1) Receive or hold as collat eral securit y and

part nership propert y, or

(2) Receive from a general part ner or t he

part nership any payment , conveyance, or release
from liabilit y if at t he t ime t he asset s of t he
part nership are not sufficient to discharge
part nership liabilit ies to persons not claiming as
general or limit ed part ners.

T he receiving of collat eral securit y, or payment ,

conveyance, or release in violat ion of t he foregoing
provisions is a fraud on t he creditors of t he part nership.

Art . 1855. Where t here are several limit ed part ners t he

members may agree t hat one or more of t he limit ed
part ners shall have a priorit y over ot her limit ed part ners
as to t he ret urn of t heir cont ribut ions, as to t heir
compensat ion by way of income, or as to any ot her
mat t er. If such an agreement is made it shall be st at ed
in t he cert ificat e, and in t he absence of such a
st at ement all t he limit ed part ners shall st and upon
equal foot ing.

Art . 1856. A limit ed part ner may receive from t he

part nership t he share of t he profit s or t he
compensat ion by way of income st ipulat ed for in t he
cert ificat e; provided t hat aft er such payment is made,
whet her from propert y of t he part nership or t hat of a
general part ner, t he part nership asset s are in excess of
all liabilit ies of t he part nership except liabilit ies to
limit ed part ners on account of t heir cont ribut ions and
to general part ners.

Art . 1857. A limit ed part ner shall not receive from a

general part ner or out of part nership propert y any part
of his cont ribut ions unt il:
 (1) All liabilit ies of t he part nership, except
liabilit ies to general part ners and to limit ed
part ners on account of t heir cont ribut ions, have
been paid or t here remains propert y of t he
part nership sufficient to pay t hem;

(2) T he consent of all members is had, unless t he

ret urn of t he cont ribut ion may be right fully
demanded under t he provisions of t he second
paragraph; and

(3) T he cert ificat e is cancelled or so amended as

to set fort h t he wit hdrawal or reduct ion.

Subject to t he provisions of t he first paragraph, a limit ed

part ner may right fully demand t he ret urn of his
cont ribut ion:

(1) On t he dissolut ion of a part nership; or

(2) When t he dat e specified in t he cert ificat e for

it s ret urn has arrived, or

(3) Aft er he has six mont hs' not ice in writ ing to all
ot her members, if no t ime is specified in t he
cert ificat e, eit her for t he ret urn of t he
cont ribut ion or for t he dissolut ion of t he
part nership.

In t he absence of any st at ement in t he cert ificat e to

t he cont rary or t he consent of all members, a limit ed
part ner, irrespect ive of t he nat ure of his cont ribut ion,
has only t he right to demand and receive cash in ret urn
for his cont ribut ion.

A limit ed part ner may have t he part nership dissolved

and it s affairs wound up when:

(1) He right fully but unsuccessfully demands t he

ret urn of his cont ribut ion, or

(2) T he ot her liabilit ies of t he part nership have

not been paid, or t he part nership propert y is
 insufficient for t heir payment as required by t he
first paragraph, No. 1, and t he limit ed part ner
would ot herwise be ent it led to t he ret urn of his
cont ribut ion.

Art . 1858. A limit ed part ner is liable to t he part nership:

(1) For t he difference bet ween his cont ribut ion as

act ually made and t hat st at ed in t he cert ificat e
as having been made; and

(2) For any unpaid cont ribut ion which he agreed in

t he cert ificat e to make in t he fut ure at t he t ime
and on t he condit ions st at ed in t he cert ificat e.

A limit ed part ner holds as t rust ee for t he part nership:

(1) Specific propert y st at ed in t he cert ificat e as

cont ribut ed by him, but which was not
cont ribut ed or which has been wrongfully
ret urned, and

(2) Money or ot her propert y wrongfully paid or

conveyed to him on account of his cont ribut ion.

T he liabilit ies of a limit ed part ner as set fort h in t his

art icle can be waived or compromised only by t he
consent of all members; but a waiver or compromise
shall not affect t he right of a creditor of a part nership
who ext ended credit or whose claim arose aft er t he
filing and before a cancellat ion or amendment of t he
cert ificat e, to enforce such liabilit ies.

When a cont ributor has right fully received t he ret urn in

whole or in part of t he capit al of his cont ribut ion, he is
nevert heless liable to t he part nership for any sum, not
in excess of such ret urn wit h int erest , necessary to
discharge it s liabilit ies to all creditors who ext ended
credit or whose claims arose before such ret urn.

Art . 1859. A limit ed part ner's int erest is assignable.

A subst it ut ed limit ed part ner is a person admit t ed to all
t he right s of a limit ed part ner who has died or has
assigned his int erest in a part nership.

An assignee, who does not become a subst it ut ed

limit ed part ner, has no right to require any informat ion or
account of t he part nership t ransact ions or to inspect
t he part nership books; he is only ent it led to receive t he
share of t he profit s or ot her compensat ion by way of
income, or t he ret urn of his cont ribut ion, to which his
assignor would ot herwise be ent it led.

An assignee shall have t he right to become a

subst it ut ed limit ed part ner if all t he members consent
t hereto or if t he assignor, being t hereunto empowered
by t he cert ificat e, gives t he assignee t hat right .

An assignee becomes a subst it ut ed limit ed part ner

when t he cert ificat e is appropriat ely amended in
accordance wit h Art icle 1865.

T he subst it ut ed limit ed part ner has all t he right s and

powers, and is subject to all t he rest rict ions and
liabilit ies of his assignor, except t hose liabilit ies of which
he was ignorant at t he t ime he became a limit ed part ner
and which could not be ascert ained from t he
cert ificat e.

T he subst it ut ion of t he assignee as a limit ed part ner

does not release t he assignor from liabilit y to t he
part nership under Art icles 1847 and 1848.

Art . 1860. T he ret irement , deat h, insolvency, insanit y or

civil int erdict ion of a general part ner dissolves t he
part nership, unless t he business is cont inued by t he
remaining general part ners:

(1) Under a right so to do st at ed in t he cert ificat e,

or

(2) Wit h t he consent of all members.

Art . 1861. On t he deat h of a limit ed part ner his executor
or administ rator shall have all t he right s of a limit ed
part ner for t he purpose of set t ing his est at e, and such
power as t he deceased had to const it ut e his assignee a
subst it ut ed limit ed part ner.

T he est at e of a deceased limit ed part ner shall be liable

for all his liabilit ies as a limit ed part ner.

Art . 1862. On due applicat ion to a court of compet ent

jurisdict ion by any creditor of a limit ed part ner, t he court
may charge t he int erest of t he indebt ed limit ed part ner
wit h payment of t he unsat isfied amount of such claim,
and may appoint a receiver, and make all ot her orders,
direct ions and inquiries which t he circumst ances of t he
case may require.

T he int erest may be redeemed wit h t he separat e

propert y of any general part ner, but may not be
redeemed wit h part nership propert y.

T he remedies conferred by t he first paragraph shall not

be deemed exclusive of ot hers which may exist .

Not hing in t his Chapt er shall be held to deprive a limit ed

part ner of his st at utory exempt ion.

Art . 1863. In set t ing account s aft er dissolut ion t he

liabilit ies of t he part nership shall be ent it led to payment
in t he following order:

(1) T hose to creditors, in t he order of priorit y as

provided by law, except t hose to limit ed part ners
on account of t heir cont ribut ions, and to general
part ners;

(2) T hose to limit ed part ners in respect to t heir

share of t he profit s and ot her compensat ion by
way of income on t heir cont ribut ions;

(3) T hose to limit ed part ners in respect to t he

capit al of t heir cont ribut ions;
 (4) T hose to general part ners ot her t han for
capit al and profit s;

(5) T hose to general part ners in respect to

profit s;

(6) T hose to general part ners in respect to

capit al.

Subject to any st at ement in t he cert ificat e or to

subsequent agreement , limit ed part ners share in t he
part nership asset s in respect to t heir claims for capit al,
and in respect to t heir claims for profit s or for
compensat ion by way of income on t heir cont ribut ion
respect ively, in proport ion to t he respect ive amount s of
such claims.

Art . 1864. T he cert ificat e shall be cancelled when t he

part nership is dissolved or all limit ed part ners cease to
be such.

A cert ificat e shall be amended when:

(1) T here is a change in t he name of t he

part nership or in t he amount or charact er of t he
cont ribut ion of any limit ed part ner;

(2) A person is subst it ut ed as a limit ed part ner;

(3) An addit ional limit ed part ner is admit t ed;

(4) A person is admit t ed as a general part ner;

(5) A general part ner ret ires, dies, becomes

insolvent or insane, or is sent enced to civil
int erdict ion and t he business is cont inued under
Art icle 1860;

(6) T here is a change in t he charact er of t he

business of t he part nership;

(7) T here is a false or erroneous st at ement in t he

cert ificat e;
 (8) T here is a change in t he t ime as st at ed in t he
cert ificat e for t he dissolut ion of t he part nership
or for t he ret urn of a cont ribut ion;

(9) A t ime is fixed for t he dissolut ion of t he

part nership, or t he ret urn of a cont ribut ion, no
t ime having been specified in t he cert ificat e, or

(10) T he members desire to make a change in any

ot her st at ement in t he cert ificat e in order t hat it
shall accurat ely represent t he agreement among
t hem.

Art . 1865. T he writ ing to amend a cert ificat e shall:

(1) Conform to t he requirement s of Art icle 1844

as far as necessary to set fort h clearly t he
change in t he cert ificat e which it is desired to
make; and

(2) Be signed and sworn to by all members, and an

amendment subst it ut ing a limit ed part ner or
adding a limit ed or general part ner shall be signed
also by t he member to be subst it ut ed or added,
and when a limit ed part ner is to be subst it ut ed,
t he amendment shall also be signed by t he
assigning limit ed part ner.

T he writ ing to cancel a cert ificat e shall be signed by all

members.

A person desiring t he cancellat ion or amendment of a

cert ificat e, if any person designat ed in t he first and
second paragraphs as a person who must execut e t he
writ ing refuses to do so, may pet it ion t he court to order
a cancellat ion or amendment t hereof.

If t he court finds t hat t he pet it ioner has a right to have

t he writ ing execut ed by a person who refuses to do so,
it shall order t he Office of t he Securit ies and Exchange
Commission where t he cert ificat e is recorded, to record
t he cancellat ion or amendment of t he cert ificat e; and
when t he cert ificat e is to be amended, t he court shall
also cause to be filed for record in said office a cert ified
copy of it s decree set t ing fort h t he amendment .

A cert ificat e is amended or cancelled when t here is filed

for record in t he Office of t he Securit ies and Exchange
Commission, where t he cert ificat e is recorded:

(1) A writ ing in accordance wit h t he provisions of

t he first or second paragraph, or

(2) A cert ified copy of t he order of t he court in

accordance wit h t he provisions of t he fourt h
paragraph;

(3) Aft er t he cert ificat e is duly amended in

accordance wit h t his art icle, t he amended
cert ified shall t hereaft er be for all purposes t he
cert ificat e provided for in t his Chapt er.

Art . 1866. A cont ributor, unless he is a general part ner, is

not a proper part y to proceedings by or against a
part nership, except where t he object is to enforce a
limit ed part ner's right against or liabilit y to t he
part nership.

Art . 1867. A limit ed part nership formed under t he law

prior to t he effect ivit y of t his Code, may become a
limit ed part nership under t his Chapt er by complying
wit h t he provisions of Art icle 1844, provided t he
cert ificat e set s fort h:

(1) T he amount of t he original cont ribut ion of

each limit ed part ner, and t he t ime when t he
cont ribut ion was made; and

(2) T hat t he propert y of t he part nership exceeds

t he amount sufficient to discharge it s liabilit ies to
persons not claiming as general or limit ed
part ners by an amount great er t han t he sum of
t he cont ribut ions of it s limit ed part ners.
A limit ed part nership formed under t he law prior to t he
effect ivit y of t his Code, unt il or unless it becomes a
limit ed part nership under t his Chapt er, shall cont inue to
be governed by t he provisions of t he old law.

T itle X. - AGENCY

CHAPT ER 1

NAT URE, FORM AND KINDS OF AGENCY

Art . 1868. By t he cont ract of agency a person binds

himself to render some service or to do somet hing in
represent at ion or on behalf of anot her, wit h t he consent
or aut horit y of t he lat t er. (1709a)

Art . 1869. Agency may be express, or implied from t he

act s of t he principal, from his silence or lack of act ion,
or his failure to repudiat e t he agency, knowing t hat
anot her person is act ing on his behalf wit hout aut horit y.

Agency may be oral, unless t he law requires a specific

form. (1710a)

Art . 1870. Accept ance by t he agent may also be

express, or implied from his act s which carry out t he
agency, or from his silence or inact ion according to t he
circumst ances. (n)

Art . 1871. Bet ween persons who are present , t he

accept ance of t he agency may also be implied if t he
principal delivers his power of at torney to t he agent and
t he lat t er receives it wit hout any object ion. (n)

Art . 1872. Bet ween persons who are absent , t he

accept ance of t he agency cannot be implied from t he
silence of t he agent , except :

(1) When t he principal t ransmit s his power of

at torney to t he agent , who receives it wit hout any
object ion;
 (2) When t he principal ent rust s to him by let t er or
t elegram a power of at torney wit h respect to t he
business in which he is habit ually engaged as an
agent , and he did not reply to t he let t er or
t elegram. (n)

Art . 1873. If a person specially informs anot her or

st at es by public advert isement t hat he has given a
power of at torney to a t hird person, t he lat t er t hereby
becomes a duly aut horized agent , in t he former case
wit h respect to t he person who received t he special
informat ion, and in t he lat t er case wit h regard to any
person.

T he power shall cont inue to be in full force unt il t he

not ice is rescinded in t he same manner in which it was
given. (n)

Art . 1874. When a sale of a piece of land or any int erest

t herein is t hrough an agent , t he aut horit y of t he lat t er
shall be in writ ing; ot herwise, t he sale shall be void. (n)

Art . 1875. Agency is presumed to be for a

compensat ion, unless t here is proof to t he cont rary. (n)

Art . 1876. An agency is eit her general or special.

T he former comprises all t he business of t he principal.

T he lat t er, one or more specific t ransact ions. (1712)

Art . 1877. An agency couched in general t erms

comprises only act s of administ rat ion, even if t he
principal should st at e t hat he wit hholds no power or
t hat t he agent may execut e such act s as he may
consider appropriat e, or even t hough t he agency should
aut horize a general and unlimit ed management . (n)

Art . 1878. Special powers of at torney are necessary in

t he following cases:

(1) To make such payment s as are not usually

considered as act s of administ rat ion;
(2) To effect novat ions which put an end to
obligat ions already in exist ence at t he t ime t he
agency was const it ut ed;

(3) To compromise, to submit quest ions to

arbit rat ion, to renounce t he right to appeal from a
judgment , to waive object ions to t he venue of an
act ion or to abandon a prescript ion already
acquired;

(4) To waive any obligat ion grat uitously;

(5) To ent er into any cont ract by which t he

ownership of an immovable is t ransmit t ed or
acquired eit her grat uitously or for a valuable
considerat ion;

(6) To make gift s, except customary ones for

charit y or t hose made to employees in t he
business managed by t he agent ;

(7) To loan or borrow money, unless t he lat t er act

be urgent and indispensable for t he preservat ion
of t he t hings which are under administ rat ion;

(8) To lease any real propert y to anot her person

for more t han one year;

(9) To bind t he principal to render some service

wit hout compensat ion;

(10) To bind t he principal in a cont ract of

part nership;

(11) To obligat e t he principal as a guarantor or

suret y;

(12) To creat e or convey real right s over

immovable propert y;

(13) To accept or repudiat e an inherit ance;

(14) To rat ify or recognize obligat ions cont ract ed

before t he agency;
 (15) Any ot her act of st rict dominion. (n)

Art . 1879. A special power to sell excludes t he power to

mort gage; and a special power to mort gage does not
include t he power to sell. (n)

Art . 1880. A special power to compromise does not

aut horize submission to arbit rat ion. (1713a)

Art . 1881. T he agent must act wit hin t he scope of his

aut horit y. He may do such act s as may be conducive to
t he accomplishment of t he purpose of t he agency.
(1714a)

Art . 1882. T he limit s of t he agent 's aut horit y shall not be

considered exceeded should it have been performed in a
manner more advant ageous to t he principal t han t hat
specified by him. (1715)

Art . 1883. If an agent act s in his own name, t he principal

has no right of act ion against t he persons wit h whom
t he agent has cont ract ed; neit her have such persons
against t he principal.

In such case t he agent is t he one direct ly bound in favor

of t he person wit h whom he has cont ract ed, as if t he
t ransact ion were his own, except when t he cont ract
involves t hings belonging to t he principal.

T he provisions of t his art icle shall be understood to be

wit hout prejudice to t he act ions bet ween t he principal
and agent . (1717)

CHAPT ER 2

OBLIGAT IONS OF T HE AGENT

Art . 1884. T he agent is bound by his accept ance to carry

out t he agency, and is liable for t he damages which,
t hrough his non-performance, t he principal may suffer.

He must also finish t he business already begun on t he

deat h of t he principal, should delay ent ail any danger.
(1718)

Art . 1885. In case a person declines an agency, he is

bound to observe t he diligence of a good fat her of a
family in t he custody and preservat ion of t he goods
forwarded to him by t he owner unt il t he lat t er should
appoint an agent or t ake charge of t he goods. (n)

Art . 1886. Should t here be a st ipulat ion t hat t he agent

shall advance t he necessary funds, he shall be bound to
do so except when t he principal is insolvent . (n)

Art . 1887. In t he execut ion of t he agency, t he agent shall

act in accordance wit h t he inst ruct ions of t he principal.

In default t hereof, he shall do all t hat a good fat her of a

family would do, as required by t he nat ure of t he
business. (1719)

Art . 1888. An agent shall not carry out an agency if it s

execut ion would manifest ly result in loss or damage to
t he principal. (n)

Art . 1889. T he agent shall be liable for damages if, t here

being a conflict bet ween his int erest s and t hose of t he
principal, he should prefer his own. (n)

Art . 1890. If t he agent has been empowered to borrow

money, he may himself be t he lender at t he current rat e
of int erest . If he has been aut horized to lend money at
int erest , he cannot borrow it wit hout t he consent of t he
principal. (n)

Art . 1891. Every agent is bound to render an account of

his t ransact ions and to deliver to t he principal what ever
he may have received by virt ue of t he agency, even
t hough it may not be owing to t he principal.

Every st ipulat ion exempt ing t he agent from t he

obligat ion to render an account shall be void. (1720a)

Art . 1892. T he agent may appoint a subst it ut e if t he

principal has not prohibit ed him from doing so; but he
shall be responsible for t he act s of t he subst it ut e:

(1) When he was not given t he power to appoint

one;

(2) When he was given such power, but wit hout

designat ing t he person, and t he person appoint ed
was notoriously incompet ent or insolvent .

All act s of t he subst it ut e appoint ed against t he

prohibit ion of t he principal shall be void. (1721)

Art . 1893. In t he cases ment ioned in Nos. 1 and 2 of t he

preceding art icle, t he principal may furt hermore bring an
act ion against t he subst it ut e wit h respect to t he
obligat ions which t he lat t er has cont ract ed under t he
subst it ut ion. (1722a)

Art . 1894. T he responsibilit y of t wo or more agent s,

even t hough t hey have been appoint ed simult aneously,
is not solidary, if solidarit y has not been expressly
st ipulat ed. (1723)

Art . 1895. If solidarit y has been agreed upon, each of t he

agent s is responsible for t he non-fulfillment of agency,
and for t he fault or negligence of his fellows agent s,
except in t he lat t er case when t he fellow agent s act ed
beyond t he scope of t heir aut horit y. (n)

Art . 1896. T he agent owes int erest on t he sums he has

applied to his own use from t he day on which he did so,
and on t hose which he st ill owes aft er t he
ext inguishment of t he agency. (1724a)

Art . 1897. T he agent who act s as such is not personally

liable to t he part y wit h whom he cont ract s, unless he
expressly binds himself or exceeds t he limit s of his
aut horit y wit hout giving such part y sufficient not ice of
his powers. (1725)

Art . 1898. If t he agent cont ract s in t he name of t he

principal, exceeding t he scope of his aut horit y, and t he
principal does not rat ify t he cont ract , it shall be void if
t he part y wit h whom t he agent cont ract ed is aware of
t he limit s of t he powers grant ed by t he principal. In t his
case, however, t he agent is liable if he undertook to
secure t he principal's rat ificat ion. (n)

Art . 1899. If a duly aut horized agent act s in accordance

wit h t he orders of t he principal, t he lat t er cannot set up
t he ignorance of t he agent as to circumst ances
whereof he himself was, or ought to have been, aware.
(n)

Art . 1900. So far as t hird persons are concerned, an act

is deemed to have been performed wit hin t he scope of
t he agent 's aut horit y, if such act is wit hin t he t erms of
t he power of at torney, as writ t en, even if t he agent has
in fact exceeded t he limit s of his aut horit y according to
an underst anding bet ween t he principal and t he agent .
(n)

Art . 1901. A t hird person cannot set up t he fact t hat t he

agent has exceeded his powers, if t he principal has
rat ified, or has signified his willingness to rat ify t he
agent 's act s. (n)

Art . 1902. A t hird person wit h whom t he agent wishes to

cont ract on behalf of t he principal may require t he
present at ion of t he power of at torney, or t he
inst ruct ions as regards t he agency. Privat e or secret
orders and inst ruct ions of t he principal do not prejudice
t hird persons who have relied upon t he power of
at torney or inst ruct ions shown t hem. (n)

Art . 1903. T he commission agent shall be responsible

for t he goods received by him in t he t erms and
condit ions and as described in t he consignment , unless
upon receiving t hem he should make a writ t en
st at ement of t he damage and det eriorat ion suffered by
t he same. (n)

Art . 1904. T he commission agent who handles goods of

t he same kind and mark, which belong to different
owners, shall dist inguish t hem by count ermarks, and
designat e t he merchandise respect ively belonging to
each principal. (n)

Art . 1905. T he commission agent cannot , wit hout t he

express or implied consent of t he principal, sell on
credit . Should he do so, t he principal may demand from
him payment in cash, but t he commission agent shall
be ent it led to any int erest or benefit , which may result
from such sale. (n)

Art . 1906. Should t he commission agent , wit h aut horit y

of t he principal, sell on credit , he shall so inform t he
principal, wit h a st at ement of t he names of t he buyers.
Should he fail to do so, t he sale shall be deemed to have
been made for cash insofar as t he principal is
concerned. (n)

Art . 1907. Should t he commission agent receive on a

sale, in addit ion to t he ordinary commission, anot her
called a guarant ee commission, he shall bear t he risk of
collect ion and shall pay t he principal t he proceeds of t he
sale on t he same t erms agreed upon wit h t he
purchaser. (n)

Art . 1908. T he commission agent who does not collect

t he credit s of his principal at t he t ime when t hey
become due and demandable shall be liable for
damages, unless he proves t hat he exercised due
diligence for t hat purpose. (n)

Art . 1909. T he agent is responsible not only for fraud,

but also for negligence, which shall be judged wit h more
or less rigor by t he court s, according to whet her t he
agency was or was not for a compensat ion. (1726)

CHAPT ER 3

OBLIGAT IONS OF T HE PRINCIPAL

Art . 1910. T he principal must comply wit h all t he

obligat ions which t he agent may have cont ract ed wit hin
t he scope of his aut horit y.

As for any obligat ion wherein t he agent has exceeded

his power, t he principal is not bound except when he
rat ifies it expressly or t acit ly. (1727)

Art . 1911. Even when t he agent has exceeded his

aut horit y, t he principal is solidarily liable wit h t he agent if
t he former allowed t he lat t er to act as t hough he had
full powers. (n)

Art . 1912. T he principal must advance to t he agent ,

should t he lat t er so request , t he sums necessary for
t he execut ion of t he agency.

Should t he agent have advanced t hem, t he principal

must reimburse him t herefor, even if t he business or
undert aking was not successful, provided t he agent is
free from all fault .

T he reimbursement shall include int erest on t he sums

advanced, from t he day on which t he advance was
made. (1728)

Art . 1913. T he principal must also indemnify t he agent

for all t he damages which t he execut ion of t he agency
may have caused t he lat t er, wit hout fault or negligence
on his part . (1729)

Art . 1914. T he agent may ret ain in pledge t he t hings

which are t he object of t he agency unt il t he principal
effect s t he reimbursement and pays t he indemnit y set
fort h in t he t wo preceding art icles. (1730)

Art . 1915. If t wo or more persons have appoint ed an

agent for a common t ransact ion or undert aking, t hey
shall be solidarily liable to t he agent for all t he
consequences of t he agency. (1731)

Art . 1916. When t wo persons cont ract wit h regard to t he

same t hing, one of t hem wit h t he agent and t he ot her
wit h t he principal, and t he t wo cont ract s are
incompat ible wit h each ot her, t hat of prior dat e shall be
preferred, wit hout prejudice to t he provisions of Art icle
1544. (n)

Art . 1917. In t he case referred to in t he preceding art icle,

if t he agent has act ed in good fait h, t he principal shall
be liable in damages to t he t hird person whose cont ract
must be reject ed. If t he agent act ed in bad fait h, he
alone shall be responsible. (n)

Art . 1918. T he principal is not liable for t he expenses

incurred by t he agent in t he following cases:

(1) If t he agent act ed in cont ravent ion of t he

principal's inst ruct ions, unless t he lat t er should
wish to avail himself of t he benefit s derived from
t he cont ract ;

(2) When t he expenses were due to t he fault of

t he agent ;

(3) When t he agent incurred t hem wit h knowledge

t hat an unfavorable result would ensue, if t he
principal was not aware t hereof;

(4) When it was st ipulat ed t hat t he expenses

would be borne by t he agent , or t hat t he lat t er
would be allowed only a cert ain sum. (n)

CHAPT ER 4

MODES OF EXT INGUISHMENT OF AGENCY

Art . 1919. Agency is ext inguished:

(1) By it s revocat ion;

(2) By t he wit hdrawal of t he agent ;

(3) By t he deat h, civil int erdict ion, insanit y or

insolvency of t he principal or of t he agent ;
 (4) By t he dissolut ion of t he firm or corporat ion
which ent rust ed or accept ed t he agency;

(5) By t he accomplishment of t he object or

purpose of t he agency;

(6) By t he expirat ion of t he period for which t he

agency was const it ut ed. (1732a)

Art . 1920. T he principal may revoke t he agency at will,

and compel t he agent to ret urn t he document
evidencing t he agency. Such revocat ion may be express
or implied. (1733a)

Art . 1921. If t he agency has been ent rust ed for t he

purpose of cont ract ing wit h specified persons, it s
revocat ion shall not prejudice t he lat t er if t hey were not
given not ice t hereof. (1734)

Art . 1922. If t he agent had general powers, revocat ion of

t he agency does not prejudice t hird persons who act ed
in good fait h and wit hout knowledge of t he revocat ion.
Not ice of t he revocat ion in a newspaper of general
circulat ion is a sufficient warning to t hird persons. (n)

Art . 1923. T he appoint ment of a new agent for t he

same business or t ransact ion revokes t he previous
agency from t he day on which not ice t hereof was given
to t he former agent , wit hout prejudice to t he provisions
of t he t wo preceding art icles. (1735a)

Art . 1924. T he agency is revoked if t he principal direct ly

manages t he business ent rust ed to t he agent , dealing
direct ly wit h t hird persons. (n)

Art . 1925. When t wo or more principals have grant ed a

power of at torney for a common t ransact ion, any one of
t hem may revoke t he same wit hout t he consent of t he
ot hers. (n)

Art . 1926. A general power of at torney is revoked by a

special one grant ed to anot her agent , as regards t he
special mat t er involved in t he lat t er. (n)
Art . 1927. An agency cannot be revoked if a bilat eral
cont ract depends upon it , or if it is t he means of
fulfilling an obligat ion already cont ract ed, or if a part ner
is appoint ed manager of a part nership in t he cont ract of
part nership and his removal from t he management is
unjust ifiable. (n)

Art . 1928. T he agent may wit hdraw from t he agency by

giving due not ice to t he principal. If t he lat t er should
suffer any damage by reason of t he wit hdrawal, t he
agent must indemnify him t herefor, unless t he agent
should base his wit hdrawal upon t he impossibilit y of
cont inuing t he performance of t he agency wit hout
grave det riment to himself. (1736a)

Art . 1929. T he agent , even if he should wit hdraw from

t he agency for a valid reason, must cont inue to act unt il
t he principal has had reasonable opport unit y to t ake t he
necessary st eps to meet t he sit uat ion. (1737a)

Art . 1930. T he agency shall remain in full force and

effect even aft er t he deat h of t he principal, if it has
been const it ut ed in t he common int erest of t he lat t er
and of t he agent , or in t he int erest of a t hird person who
has accept ed t he st ipulat ion in his favor. (n)

Art . 1931. Anyt hing done by t he agent , wit hout

knowledge of t he deat h of t he principal or of any ot her
cause which ext inguishes t he agency, is valid and shall
be fully effect ive wit h respect to t hird persons who may
have cont ract ed wit h him in good fait h. (1738)

Art . 1932. If t he agent dies, his heirs must not ify t he

principal t hereof, and in t he meant ime adopt such
measures as t he circumst ances may demand in t he
int erest of t he lat t er. (1739)

T itle XI. - LOAN

GENERAL PROVISIONS
Art . 1933. By t he cont ract of loan, one of t he part ies
delivers to anot her, eit her somet hing not consumable
so t hat t he lat t er may use t he same for a cert ain t ime
and ret urn it , in which case t he cont ract is called a
commodat um; or money or ot her consumable t hing,
upon t he condit ion t hat t he same amount of t he same
kind and qualit y shall be paid, in which case t he cont ract
is simply called a loan or mutuum.

Commodatum is essent ially grat uitous.

Simple loan may be grat uitous or wit h a st ipulat ion to

pay int erest .

In commodatum t he bailor ret ains t he ownership of t he

t hing loaned, while in simple loan, ownership passes to
t he borrower. (1740a)

Art . 1934. An accept ed promise to deliver somet hing by

way of commodatum or simple loan is binding upon
part ies, but t he commodatum or simple loan it self shall
not be perfect ed unt il t he delivery of t he object of t he
cont ract . (n)

CHAPT ER 1

COMMODAT UM

SECT ION 1 - Nature of Commodatum

Art . 1935. T he bailee in commodatum acquires t he used

of t he t hing loaned but not it s fruit s; if any
compensat ion is to be paid by him who acquires t he
use, t he cont ract ceases to be a commodatum. (1941a)

Art . 1936. Consumable goods may be t he subject of

commodatum if t he purpose of t he cont ract is not t he
consumpt ion of t he object , as when it is merely for
exhibit ion. (n)

Art . 1937. Movable or immovable propert y may be t he

object of commodatum. (n)
Art . 1938. T he bailor in commodatum need not be t he
owner of t he t hing loaned. (n)

Art . 1939. Commodatum is purely personal in charact er.

Consequent ly:

(1) T he deat h of eit her t he bailor or t he bailee

ext inguishes t he cont ract ;

(2) T he bailee can neit her lend nor lease t he

object of t he cont ract to a t hird person. However,
t he members of t he bailee's household may make
use of t he t hing loaned, unless t here is a
st ipulat ion to t he cont rary, or unless t he nat ure of
t he t hing forbids such use. (n)

Art . 1940. A st ipulat ion t hat t he bailee may make use of

t he fruit s of t he t hing loaned is valid. (n)

SECT ION 2. - Obligations of the Bailee

Art . 1941. T he bailee is obliged to pay for t he ordinary

expenses for t he use and preservat ion of t he t hing
loaned. (1743a)

Art . 1942. T he bailee is liable for t he loss of t he t hing,

even if it should be t hrough a fort uitous event :

(1) If he devot es t he t hing to any purpose

different from t hat for which it has been loaned;

(2) If he keeps it longer t han t he period st ipulat ed,

or aft er t he accomplishment of t he use for which
t he commodatum has been const it ut ed;

(3) If t he t hing loaned has been delivered wit h

appraisal of it s value, unless t here is a st ipulat ion
exempt ion t he bailee from responsibilit y in case
of a fort uitous event ;

(4) If he lends or leases t he t hing to a t hird person,

who is not a member of his household;
 (5) If, being able to save eit her t he t hing borrowed
or his own t hing, he chose to save t he lat t er.
(1744a and 1745)

Art . 1943. T he bailee does not answer for t he

det eriorat ion of t he t hing loaned due only to t he use
t hereof and wit hout his fault . (1746)

Art . 1944. T he bailee cannot ret ain t he t hing loaned on

t he ground t hat t he bailor owes him somet hing, even
t hough it may be by reason of expenses. However, t he
bailee has a right of ret ent ion for damages ment ioned in
Art icle 1951. (1747a)

Art . 1945. When t here are t wo or more bailees to whom

a t hing is loaned in t he same cont ract , t hey are liable
solidarily. (1748a)

SECT ION 3. - Obligations of the Bailor

Art . 1946. T he bailor cannot demand t he ret urn of t he

t hing loaned t ill aft er t he expirat ion of t he period
st ipulat ed, or aft er t he accomplishment of t he use for
which t he commodatum has been const it ut ed. However,
if in t he meant ime, he should have urgent need of t he
t hing, he may demand it s ret urn or t emporary use.

In case of t emporary use by t he bailor, t he cont ract of

commodatum is suspended while t he t hing is in t he
possession of t he bailor. (1749a)

Art . 1947. T he bailor may demand t he t hing at will, and

t he cont ract ual relat ion is called a precarium, in t he
following cases:

(1) If neit her t he durat ion of t he cont ract nor t he

use to which t he t hing loaned should be devot ed,
has been st ipulat ed; or

(2) If t he use of t he t hing is merely tolerat ed by

t he owner. (1750a)
Art . 1948. T he bailor may demand t he immediat e ret urn
of t he t hing if t he bailee commit s any act of ingrat it ude
specified in Art icle 765. (n)

Art . 1949. T he bailor shall refund t he ext raordinary

expenses during t he cont ract for t he preservat ion of
t he t hing loaned, provided t he bailee brings t he same to
t he knowledge of t he bailor before incurring t hem,
except when t hey are so urgent t hat t he reply to t he
not ificat ion cannot be await ed wit hout danger.

If t he ext raordinary expenses arise on t he occasion of

t he act ual use of t he t hing by t he bailee, even t hough he
act ed wit hout fault , t hey shall be borne equally by bot h
t he bailor and t he bailee, unless t here is a st ipulat ion to
t he cont rary. (1751a)

Art . 1950. If, for t he purpose of making use of t he t hing,

t he bailee incurs expenses ot her t han t hose referred to
in Art icles 1941 and 1949, he is not ent it led to
reimbursement . (n)

Art . 1951. T he bailor who, knowing t he flaws of t he t hing

loaned, does not advise t he bailee of t he same, shall be
liable to t he lat t er for t he damages which he may suffer
by reason t hereof. (1752)

Art . 1952. T he bailor cannot exempt himself from t he

payment of expenses or damages by abandoning t he
t hing to t he bailee. (n)

CHAPT ER 2

SIMPLE LOAN OR MUTUUM

Art . 1953. A person who receives a loan of money or any

ot her fungible t hing acquires t he ownership t hereof, and
is bound to pay to t he creditor an equal amount of t he
same kind and qualit y. (1753a)

Art . 1954. A cont ract whereby one person t ransfers t he

ownership of non-fungible t hings to anot her wit h t he
obligat ion on t he part of t he lat t er to give t hings of t he
same kind, quant it y, and qualit y shall be considered a
bart er. (n)

Art . 1955. T he obligat ion of a person who borrows

money shall be governed by t he provisions of Art icles
1249 and 1250 of t his Code.

If what was loaned is a fungible t hing ot her t han money,

t he debtor owes anot her t hing of t he same kind,
quant it y and qualit y, even if it should change in value. In
case it is impossible to deliver t he same kind, it s value
at t he t ime of t he perfect ion of t he loan shall be paid.
(1754a)

Art . 1956. No int erest shall be due unless it has been

expressly st ipulat ed in writ ing. (1755a)

Art . 1957. Cont ract s and st ipulat ions, under any cloak or
device what ever, int ended to circumvent t he laws
against usury shall be void. T he borrower may recover in
accordance wit h t he laws on usury. (n)

Art . 1958. In t he det erminat ion of t he int erest , if it is

payable in kind, it s value shall be appraised at t he
current price of t he product s or goods at t he t ime and
place of payment . (n)

Art . 1959. Wit hout prejudice to t he provisions of Art icle

2212, int erest due and unpaid shall not earn int erest .
However, t he cont ract ing part ies may by st ipulat ion
capit alize t he int erest due and unpaid, which as added
principal, shall earn new int erest . (n)

Art . 1960. If t he borrower pays int erest when t here has

been no st ipulat ion t herefor, t he provisions of t his Code
concerning solutio indebiti, or nat ural obligat ions, shall be
applied, as t he case may be. (n)

Art . 1961. Usurious cont ract s shall be governed by t he

Usury Law and ot her special laws, so far as t hey are not
inconsist ent wit h t his Code. (n)

T itle XII. - DEPOSIT

CHAPT ER 1

DEPOSIT IN GENERAL AND ITS DIFFERENT KINDS

Art . 1962. A deposit is const it ut ed from t he moment a

person receives a t hing belonging to anot her, wit h t he
obligat ion of safely keeping it and of ret urning t he same.
If t he safekeeping of t he t hing delivered is not t he
principal purpose of t he cont ract , t here is no deposit
but some ot her cont ract . (1758a)

Art . 1963. An agreement to const it ut e a deposit is

binding, but t he deposit it self is not perfect ed unt il t he
delivery of t he t hing. (n)

Art . 1964. A deposit may be const it ut ed judicially or

ext rajudicially. (1759)

Art . 1965. A deposit is a grat uitous cont ract , except

when t here is an agreement to t he cont rary, or unless
t he deposit ary is engaged in t he business of storing
goods. (1760a)

Art . 1966. Only movable t hings may be t he object of a

deposit . (1761)

Art . 1967. An ext rajudicial deposit is eit her volunt ary or

necessary. (1762)

CHAPT ER 2

VOLUNTARY DEPOSIT

SECT ION 1. - General Provisions

Art . 1968. A volunt ary deposit is t hat wherein t he

delivery is made by t he will of t he depositor. A deposit
may also be made by t wo or more persons each of
whom believes himself ent it led to t he t hing deposit ed
wit h a t hird person, who shall deliver it in a proper case
to t he one to whom it belongs. (1763)

Art . 1969. A cont ract of deposit may be ent ered into

orally or in writ ing. (n)

Art . 1970. If a person having capacit y to cont ract

accept s a deposit made by one who is incapacit at ed,
t he former shall be subject to all t he obligat ions of a
deposit ary, and may be compelled to ret urn t he t hing by
t he guardian, or administ rator, of t he person who made
t he deposit , or by t he lat t er himself if he should acquire
capacit y. (1764)

Art . 1971. If t he deposit has been made by a

capacit at ed person wit h anot her who is not , t he
depositor shall only have an act ion to recover t he t hing
deposit ed while it is st ill in t he possession of t he
deposit ary, or to compel t he lat t er to pay him t he
amount by which he may have enriched or benefit ed
himself wit h t he t hing or it s price. However, if a t hird
person who acquired t he t hing act ed in bad fait h, t he
depositor may bring an act ion against him for it s
recovery. (1765a)

SECT ION 2. - Obligations of the Depositary

Art . 1972. T he deposit ary is obliged to keep t he t hing

safely and to ret urn it , when required, to t he depositor,
or to his heirs and successors, or to t he person who
may have been designat ed in t he cont ract . His
responsibilit y, wit h regard to t he safekeeping and t he
loss of t he t hing, shall be governed by t he provisions of
T it le I of t his Book.

If t he deposit is grat uitous, t his fact shall be t aken into

account in det ermining t he degree of care t hat t he
deposit ary must observe. (1766a)

Art . 1973. Unless t here is a st ipulat ion to t he cont rary,

t he deposit ary cannot deposit t he t hing wit h a t hird
person. If deposit wit h a t hird person is allowed, t he
deposit ary is liable for t he loss if he deposit ed t he t hing
wit h a person who is manifest ly careless or unfit . T he
deposit ary is responsible for t he negligence of his
employees. (n)

Art . 1974. T he deposit ary may change t he way of t he

deposit if under t he circumst ances he may reasonably
presume t hat t he depositor would consent to t he
change if he knew of t he fact s of t he sit uat ion.
However, before t he deposit ary may make such change,
he shall not ify t he depositor t hereof and wait for his
decision, unless delay would cause danger. (n)

Art . 1975. T he deposit ary holding cert ificat es, bonds,

securit ies or inst rument s which earn int erest shall be
bound to collect t he lat t er when it becomes due, and to
t ake such st eps as may be necessary in order t hat t he
securit ies may preserve t heir value and t he right s
corresponding to t hem according to law.

T he above provision shall not apply to cont ract s for t he

rent of safet y deposit boxes. (n)

Art . 1976. Unless t here is a st ipulat ion to t he cont rary,

t he deposit ary may commingle grain or ot her art icles of
t he same kind and qualit y, in which case t he various
depositors shall own or have a proport ionat e int erest in
t he mass. (n)

Art . 1977. T he deposit ary cannot make use of t he t hing

deposit ed wit hout t he express permission of t he
depositor.

Ot herwise, he shall be liable for damages.

However, when t he preservat ion of t he t hing deposit ed

requires it s use, it must be used but only for t hat
purpose. (1767a)

Art . 1978. When t he deposit ary has permission to use

t he t hing deposit ed, t he cont ract loses t he concept of a
deposit and becomes a loan or commodat um, except
where safekeeping is st ill t he principal purpose of t he
cont ract .

T he permission shall not be presumed, and it s

exist ence must be proved. (1768a)

Art . 1979. T he deposit ary is liable for t he loss of t he

t hing t hrough a fort uitous event :

(1) If it is so st ipulat ed;

(2) If he uses t he t hing wit hout t he depositor's

permission;

(3) If he delays it s ret urn;

(4) If he allows ot hers to use it , even t hough he

himself may have been aut horized to use t he
same. (n)

Art . 1980. Fixed, savings, and current deposit s of money

in banks and similar inst it ut ions shall be governed by t he
provisions concerning simple loan. (n)

Art . 1981. When t he t hing deposit ed is delivered closed

and sealed, t he deposit ary must ret urn it in t he same
condit ion, and he shall be liable for damages should t he
seal or lock be broken t hrough his fault .

Fault on t he part of t he deposit ary is presumed, unless

t here is proof to t he cont rary.

As regards t he value of t he t hing deposit ed, t he

st at ement of t he depositor shall be accept ed, when t he
forcible opening is imput able to t he deposit ary, should
t here be no proof to t he cont rary. However, t he court s
may pass upon t he credibilit y of t he depositor wit h
respect to t he value claimed by him.

When t he seal or lock is broken, wit h or wit hout t he

deposit ary's fault , he shall keep t he secret of t he
deposit . (1769a)
Art . 1982. When it becomes necessary to open a locked
box or recept acle, t he deposit ary is presumed
aut horized to do so, if t he key has been delivered to him;
or when t he inst ruct ions of t he depositor as regards t he
deposit cannot be execut ed wit hout opening t he box or
recept acle. (n)

Art . 1983. T he t hing deposit ed shall be ret urned wit h all

it s product s, accessories and accessions.

Should t he deposit consist of money, t he provisions

relat ive to agent s in art icle 1896 shall be applied to t he
deposit ary. (1770)

Art . 1984. T he deposit ary cannot demand t hat t he

depositor prove his ownership of t he t hing deposit ed.

Nevert heless, should he discover t hat t he t hing has

been stolen and who it s t rue owner is, he must advise
t he lat t er of t he deposit .

If t he owner, in spit e of such informat ion, does not claim

it wit hin t he period of one mont h, t he deposit ary shall be
relieved of all responsibilit y by ret urning t he t hing
deposit ed to t he depositor.

If t he deposit ary has reasonable grounds to believe t hat

t he t hing has not been lawfully acquired by t he
depositor, t he former may ret urn t he same. (1771a)

Art . 1985. When t here are t wo or more depositors, if

t hey are not solidary, and t he t hing admit s of division,
each one cannot demand more t han his share.

When t here is solidarit y or t he t hing does not admit of

division, t he provisions of Art icles 1212 and 1214 shall
govern. However, if t here is a st ipulat ion t hat t he t hing
should be ret urned to one of t he depositors, t he
deposit ary shall ret urn it only to t he person designat ed.
(1772a)

Art . 1986. If t he depositor should lose his capacit y to

cont ract aft er having made t he deposit , t he t hing
cannot be ret urned except to t he persons who may
have t he administ rat ion of his propert y and right s.
(1773)

Art . 1987. If at t he t ime t he deposit was made a place

was designat ed for t he ret urn of t he t hing, t he
deposit ary must t ake t he t hing deposit ed to such place;
but t he expenses for t ransport at ion shall be borne by
t he depositor.

If no place has been designat ed for t he ret urn, it shall be

made where t he t hing deposit ed may be, even if it
should not be t he same place where t he deposit was
made, provided t hat t here was no malice on t he part of
t he deposit ary. (1774)

Art . 1988. T he t hing deposit ed must be ret urned to t he

depositor upon demand, even t hough a specified period
or t ime for such ret urn may have been fixed.

T his provision shall not apply when t he t hing is judicially

at t ached while in t he deposit ary's possession, or should
he have been not ified of t he opposit ion of a t hird person
to t he ret urn or t he removal of t he t hing deposit ed. In
t hese cases, t he deposit ary must immediat ely inform
t he depositor of t he at t achment or opposit ion. (1775)

Art . 1989. Unless t he deposit is for a valuable

considerat ion, t he deposit ary who may have just ifiable
reasons for not keeping t he t hing deposit ed may, even
before t he t ime designat ed, ret urn it to t he depositor;
and if t he lat t er should refuse to receive it , t he
deposit ary may secure it s consignat ion from t he court .
(1776a)

Art . 1990. If t he deposit ary by force majeure or

government order loses t he t hing and receives money
or anot her t hing in it s place, he shall deliver t he sum or
ot her t hing to t he depositor. (1777a)

Art . 1991. T he depositor's heir who in good fait h may

have sold t he t hing which he did not know was
deposit ed, shall only be bound to ret urn t he price he may
have received or to assign his right of act ion against t he
buyer in case t he price has not been paid him. (1778)

SECT ION 3. - Obligations of the Depositor

Art . 1992. If t he deposit is grat uitous, t he depositor is

obliged to reimburse t he deposit ary for t he expenses he
may have incurred for t he preservat ion of t he t hing
deposit ed. (1779a)

Art . 1993. T he depositor shall reimburse t he deposit ary

for any loss arising from t he charact er of t he t hing
deposit ed, unless at t he t ime of t he const it ut ion of t he
deposit t he former was not aware of, or was not
expect ed to know t he dangerous charact er of t he t hing,
or unless he not ified t he deposit ary of t he same, or t he
lat t er was aware of it wit hout advice from t he
depositor. (n)

Art . 1994. T he deposit ary may ret ain t he t hing in pledge

unt il t he full payment of what may be due him by reason
of t he deposit . (1780)

Art . 1995. A deposit it s ext inguished:

(1) Upon t he loss or dest ruct ion of t he t hing

deposit ed;

(2) In case of a grat uitous deposit , upon t he deat h

of eit her t he depositor or t he deposit ary. (n)

CHAPT ER 3

NECESSARY DEPOSIT

Art . 1996. A deposit is necessary:

(1) When it is made in compliance wit h a legal

obligat ion;

(2) When it t akes place on t he occasion of any

calamit y, such as fire, storm, flood, pillage,
 shipwreck, or ot her similar event s. (1781a)

Art . 1997. T he deposit referred to in No. 1 of t he

preceding art icle shall be governed by t he provisions of
t he law est ablishing it , and in case of it s deficiency, by
t he rules on volunt ary deposit .

T he deposit ment ioned in No. 2 of t he preceding art icle

shall be regulat ed by t he provisions concerning
volunt ary deposit and by Art icle 2168. (1782)

Art . 1998. T he deposit of effect s made by t he t ravellers

in hot els or inns shall also be regarded as necessary.
T he keepers of hot els or inns shall be responsible for
t hem as deposit aries, provided t hat not ice was given to
t hem, or to t heir employees, of t he effect s brought by
t he guest s and t hat , on t he part of t he lat t er, t hey t ake
t he precaut ions which said hot el-keepers or t heir
subst it ut es advised relat ive to t he care and vigilance of
t heir effect s. (1783)

Art . 1999. T he hot el-keeper is liable for t he vehicles,

animals and art icles which have been int roduced or
placed in t he annexes of t he hot el. (n)

Art . 2000. T he responsibilit y referred to in t he t wo

preceding art icles shall include t he loss of, or injury to
t he personal propert y of t he guest s caused by t he
servant s or employees of t he keepers of hot els or inns
as well as st rangers; but not t hat which may proceed
from any force majeure. T he fact t hat t ravellers are
const rained to rely on t he vigilance of t he keeper of t he
hot els or inns shall be considered in det ermining t he
degree of care required of him. (1784a)

Art . 2001. T he act of a t hief or robber, who has ent ered

t he hot el is not deemed force majeure, unless it is done
wit h t he use of arms or t hrough an irresist ible force. (n)

Art . 2002. T he hot el-keeper is not liable for

compensat ion if t he loss is due to t he act s of t he
guest , his family, servant s or visitors, or if t he loss
arises from t he charact er of t he t hings brought into t he
hot el. (n)

Art . 2003. T he hot el-keeper cannot free himself from

responsibilit y by post ing not ices to t he effect t hat he is
not liable for t he art icles brought by t he guest . Any
st ipulat ion bet ween t he hot el-keeper and t he guest
whereby t he responsibilit y of t he former as set fort h in
art icles 1998 to 2001 is suppressed or diminished shall
be void. (n)

Art . 2004. T he hot el-keeper has a right to ret ain t he

t hings brought into t he hot el by t he guest , as a securit y
for credit s on account of lodging, and supplies usually
furnished to hot el guest s. (n)

CHAPT ER 4

SEQUEST RAT ION OR JUDICIAL DEPOSIT

Art . 2005. A judicial deposit or sequest rat ion t akes place

when an at t achment or seizure of propert y in lit igat ion
is ordered. (1785)

Art . 2006. Movable as well as immovable propert y may

be t he object of sequest rat ion. (1786)

Art . 2007. T he deposit ary of propert y or object s

sequest rat ed cannot be relieved of his responsibilit y
unt il t he cont roversy which gave rise t hereto has come
to an end, unless t he court so orders. (1787a)

Art . 2008. T he deposit ary of propert y sequest rat ed is

bound to comply, wit h respect to t he same, wit h all t he
obligat ions of a good fat her of a family. (1788)

Art . 2009. As to mat t ers not provided for in t his Code,

judicial sequest rat ion shall be governed by t he Rules of
Court . (1789)

T itle XIII. - ALEATORY CONT RACTS

GENERAL PROVISIONS
Art . 2010. By an aleatory cont ract , one of t he part ies or
bot h reciprocally bind t hemselves to give or to do
somet hing in considerat ion of what t he ot her shall give
or do upon t he happening of an event which is uncert ain,
or which is to occur at an indet erminat e t ime. (1790)

CHAPT ER 1

INSURANCE

Art . 2011. T he cont ract of insurance is governed by

special laws. Mat t ers not expressly provided for in such
special laws shall be regulat ed by t his Code. (n)

Art . 2012. Any person who is forbidden from receiving

any donat ion under Art icle 739 cannot be named
beneficiary of a life insurance policy by t he person who
cannot make any donat ion to him, according to said
art icle. (n)

CHAPT ER 2

GAMBLING

Art . 2013. A game of chance is t hat which depends

more on chance or hazard t han or skill or abilit y. For t he
purposes of t he following art icles, in case of doubt a
game is deemed to be one of chance. (n)

Art . 2014. No act ion can be maint ained by t he winner for

t he collect ion of what he has won in a game of chance.
But any loser in a game of chance may recover his loss
from t he winner, wit h legal int erest from t he t ime he
paid t he amount lost , and subsidiarily from t he operator
or manager of t he gambling house. (1799a)

Art . 2015. If cheat ing or deceit is commit t ed by t he

winner, he, and subsidiarily t he operator or manager of
t he gambling house, shall pay by way of exemplary
damages, not less t han t he equivalent of t he sum lost ,
in addit ion to t he lat t er amount . If bot h t he winner and
t he loser have perpet rat ed fraud, no act ion for recovery
can be brought by eit her. (n)

Art . 2016. If t he loser refuses or neglect s to bring an

act ion to recover what has been lost , his or her
creditors, spouse, descendant s or ot her persons
ent it led to be support ed by t he loser may inst it ut e t he
act ion. T he sum t hereby obt ained shall be applied to t he
creditors' claims, or to t he support of t he spouse or
relat ives, as t he case may be. (n)

Art . 2017. T he provisions of Art icle 2014 and 2016 apply

when t wo or more persons bet in a game of chance,
alt hough t hey t ake no act ive part in t he game it self.
(1799a)

Art . 2018. If a cont ract which purport s to be for t he

delivery of goods, securit ies or shares of stock is
ent ered into wit h t he int ent ion t hat t he difference
bet ween t he price st ipulat ed and t he exchange or
market price at t he t ime of t he pret ended delivery shall
be paid by t he loser to t he winner, t he t ransact ion is null
and void. T he loser may recover what he has paid. (n)

Art . 2019. Bet t ing on t he result of sport s, at hlet ic

compet it ions, or games of skill may be prohibit ed by
local ordinances. (n)

Art . 2020. T he loser in any game which is not one of

chance, when t here is no local ordinance which prohibit s
bet t ing t herein, is under obligat ion to pay his loss,
unless t he amount t hereof is excessive under t he
circumst ances. In t he lat t er case, t he court shall reduce
t he loss to t he proper sum. (1801a)

CHAPT ER 3

LIFE ANNUIT Y
Art . 2021. T he aleatory cont ract of life annuit y binds t he
debtor to pay an annual pension or income during t he
life of one or more det erminat e persons in
considerat ion of a capit al consist ing of money or ot her
propert y, whose ownership is t ransferred to him at once
wit h t he burden of t he income. (1802a)

Art . 2022. T he annuit y may be const it ut ed upon t he life

of t he person who gives t he capit al, upon t hat of a t hird
person, or upon t he lives of various persons, all of whom
must be living at t he t ime t he annuit y is est ablished.

It may also be const it ut ed in favor of t he person or

persons upon whose life or lives t he cont ract is ent ered
into, or in favor of anot her or ot her persons. (1803)

Art . 2023. Life annuit y shall be void if const it ut ed upon

t he life of a person who was already dead at t he t ime
t he cont ract was ent ered into, or who was at t hat t ime
suffering from an illness which caused his deat h wit hin
t went y days following said dat e. (1804)

Art . 2024. T he lack of payment of t he income due does

not aut horize t he recipient of t he life annuit y to demand
t he reimbursement of t he capit al or to ret ake
possession of t he propert y alienat ed, unless t here is a
st ipulat ion to t he cont rary; he shall have only a right
judicially to claim t he payment of t he income in arrears
and to require a securit y for t he fut ure income, unless
t here is a st ipulat ion to t he cont rary. (1805a)

Art . 2025. T he income corresponding to t he year in

which t he person enjoying it dies shall be paid in
proport ion to t he days during which he lived; if t he
income should be paid by inst allment s in advance, t he
whole amount of t he inst allment which began to run
during his life shall be paid. (1806)

Art . 2026. He who const it ut es an annuit y by grat uitous

t it le upon his propert y, may provide at t he t ime t he
annuit y is est ablished t hat t he same shall not be
subject to execut ion or at t achment on account of t he
obligat ions of t he recipient of t he annuit y. If t he annuit y
was const it ut ed in fraud of creditors, t he lat t er may ask
for t he execut ion or at t achment of t he propert y.
(1807a)

Art . 2027. No annuit y shall be claimed wit hout first

proving t he exist ence of t he person upon whose life t he
annuit y is const it ut ed. (1808)

T itle XIV. - COMPROMISES AND ARBIT RAT IONS

CHAPT ER 1

COMPROMISES

Art . 2028. A compromise is a cont ract whereby t he

part ies, by making reciprocal concessions, avoid a
lit igat ion or put an end to one already commenced.
(1809a)

Art . 2029. T he court shall endeavor to persuade t he

lit igant s in a civil case to agree upon some fair
compromise. (n)

Art . 2030. Every civil act ion or proceeding shall be

suspended:

(1) If willingness to discuss a possible

compromise is expressed by one or bot h part ies;
or

(2) If it appears t hat one of t he part ies, before t he

commencement of t he act ion or proceeding,
offered to discuss a possible compromise but
t he ot her part y refused t he offer.

T he durat ion and t erms of t he suspension of t he civil

act ion or proceeding and similar mat t ers shall be
governed by such provisions of t he rules of court as t he
Supreme Court shall promulgat e. Said rules of court
shall likewise provide for t he appoint ment and dut ies of
amicable compounders. (n)

Art . 2031. T he court s may mit igat e t he damages to be

paid by t he losing part y who has shown a sincere desire
for a compromise. (n)

Art . 2032. T he court 's approval is necessary in

compromises ent ered into by guardians, parent s,
absent ee's represent at ives, and administ rators or
executors of decedent 's est at es. (1810a)

Art . 2033. Juridical persons may compromise only in t he

form and wit h t he requisit es which may be necessary to
alienat e t heir propert y. (1812a)

Art . 2034. T here may be a compromise upon t he civil

liabilit y arising from an offense; but such compromise
shall not ext inguish t he public act ion for t he imposit ion
of t he legal penalt y. (1813)

Art . 2035. No compromise upon t he following quest ions

shall be valid:

(1) T he civil st at us of persons;

(2) T he validit y of a marriage or a legal separat ion;

(3) Any ground for legal separat ion;

(4) Fut ure support ;

(5) T he jurisdict ion of court s;

(6) Fut ure legit ime. (1814a)

Art . 2036. A compromise comprises only t hose object s

which are definit ely st at ed t herein, or which by
necessary implicat ion from it s t erms should be deemed
to have been included in t he same.

A general renunciat ion of right s is understood to refer

only to t hose t hat are connect ed wit h t he disput e which
was t he subject of t he compromise. (1815)
Art . 2037. A compromise has upon t he part ies t he
effect and aut horit y of res judicat a; but t here shall be
no execut ion except in compliance wit h a judicial
compromise. (1816)

Art . 2038. A compromise in which t here is mist ake,

fraud, violence, int imidat ion, undue influence, or falsit y
of document s, is subject to t he provisions of Art icle
1330 of t his Code.

However, one of part ies cannot set up a mist ake of fact

as against t he ot her if t he lat t er, by virt ue of t he
compromise, has wit hdrawn from a lit igat ion already
commenced. (1817a)

Art . 2039. When t he part ies compromise generally on all

differences which t hey might have wit h each ot her, t he
discovery of document s referring to one or more but
not to all of t he quest ions set t led shall not it self be a
cause for annulment or rescission of t he compromise,
unless said document s have been concealed by one of
t he part ies.

But t he compromise may be annulled or rescinded if it

refers only to one t hing to which one of t he part ies has
no right , as shown by t he newly-discovered document s.
(n)

Art . 2040. If aft er a lit igat ion has been decided by a final
judgment , a compromise should be agreed upon, eit her
or bot h part ies being unaware of t he exist ence of t he
final judgment , t he compromise may be rescinded.

Ignorance of a judgment which may be revoked or set

aside is not a valid ground for at t acking a compromise.
(1819a)

Art . 2041. If one of t he part ies fails or refuses to abide

by t he compromise, t he ot her part y may eit her enforce
t he compromise or regard it as rescinded and insist
upon his original demand. (n)
 CHAPT ER 2

ARBIT RAT IONS

Art . 2042. T he same persons who may ent er into a

compromise may submit t heir cont roversies to one or
more arbit rators for decision. (1820a)

Art . 2043. T he provisions of t he preceding Chapt er upon

compromises shall also be applicable to arbit rat ions.
(1821a)

Art . 2044. Any st ipulat ion t hat t he arbit rators' award or

decision shall be final, is valid, wit hout prejudice to
Art icles 2038, 2039, and 2040. (n)

Art . 2045. Any clause giving one of t he part ies power to

choose more arbit rators t han t he ot her is void and of no
effect . (n)

Art . 2046. T he appoint ment of arbit rators and t he

procedure for arbit rat ion shall be governed by t he
provisions of such rules of court as t he Supreme Court
shall promulgat e. (n)

T itle XV. - GUARANT Y

CHAPT ER 1

NAT URE AND EXT ENT OF GUARANT Y

Art . 2047. By guarant y a person, called t he guarantor,

binds himself to t he creditor to fulfill t he obligat ion of
t he principal debtor in case t he lat t er should fail to do
so.

If a person binds himself solidarily wit h t he principal

debtor, t he provisions of Sect ion 4, Chapt er 3, T it le I of
t his Book shall be observed. In such case t he cont ract is
called a suret yship. (1822a)

Art . 2048. A guarant y is grat uitous, unless t here is a

st ipulat ion to t he cont rary. (n)
Art . 2049. A married woman may guarant ee an
obligat ion wit hout t he husband's consent , but shall not
t hereby bind t he conjugal part nership, except in cases
provided by law. (n)

Art . 2050. If a guarant y is ent ered into wit hout t he

knowledge or consent , or against t he will of t he principal
debtor, t he provisions of Art icles 1236 and 1237 shall
apply. (n)

Art . 2051. A guarant y may be convent ional, legal or

judicial, grat uitous, or by onerous t it le.

It may also be const it ut ed, not only in favor of t he

principal debtor, but also in favor of t he ot her guarantor,
wit h t he lat t er's consent , or wit hout his knowledge, or
even over his object ion. (1823)

Art . 2052. A guarant y cannot exist wit hout a valid

obligat ion.

Nevert heless, a guarant y may be const it ut ed to

guarant ee t he performance of a voidable or an
unenforceable cont ract . It may also guarant ee a nat ural
obligat ion. (1824a)

Art . 2053. A guarant y may also be given as securit y for

fut ure debt s, t he amount of which is not yet known;
t here can be no claim against t he guarantor unt il t he
debt is liquidat ed. A condit ional obligat ion may also be
secured. (1825a)

Art . 2054. A guarantor may bind himself for less, but not
for more t han t he principal debtor, bot h as regards t he
amount and t he onerous nat ure of t he condit ions.

Should he have bound himself for more, his obligat ions

shall be reduced to t he limit s of t hat of t he debtor.
(1826)

Art . 2055. A guarant y is not presumed; it must be

express and cannot ext end to more t han what is
st ipulat ed t herein.
If it be simple or indefinit e, it shall compromise not only
t he principal obligat ion, but also all it s accessories,
including t he judicial cost s, provided wit h respect to t he
lat t er, t hat t he guarantor shall only be liable for t hose
cost s incurred aft er he has been judicially required to
pay. (1827a)

Art . 2056. One who is obliged to furnish a guarantor shall

present a person who possesses int egrit y, capacit y to
bind himself, and sufficient propert y to answer for t he
obligat ion which he guarant ees. T he guarantor shall be
subject to t he jurisdict ion of t he court of t he place
where t his obligat ion is to be complied wit h. (1828a)

Art . 2057. If t he guarantor should be convict ed in first

inst ance of a crime involving dishonest y or should
become insolvent , t he creditor may demand anot her
who has all t he qualificat ions required in t he preceding
art icle. T he case is except ed where t he creditor has
required and st ipulat ed t hat a specified person should
be t he guarantor. (1829a)

CHAPT ER 2

EFFECTS OF GUARANT Y

SECT ION 1. - Effects of Guaranty

Between the Guarantor and the Creditor

Art . 2058. T he guarantor cannot be compelled to pay

t he creditor unless t he lat t er has exhaust ed all t he
propert y of t he debtor, and has resort ed to all t he legal
remedies against t he debtor. (1830a)

Art . 2059. T he excussion shall not t ake place:

(1) If t he guarantor has expressly renounced it ;

(2) If he has bound himself solidarily wit h t he

debtor;

(3) In case of insolvency of t he debtor;

 (4) When he has absconded, or cannot be sued
wit hin t he Philippines unless he has left a
manager or represent at ive;

(5) If it may be presumed t hat an execut ion on t he

propert y of t he principal debtor would not result in
t he sat isfact ion of t he obligat ion. (1831a)

Art . 2060. In order t hat t he guarantor may make use of

t he benefit of exclusion, he must set it up against t he
creditor upon t he lat t er's demand for payment from
him, and point out to t he creditor available propert y of
t he debtor wit hin Philippine t erritory, sufficient to cover
t he amount of t he debt . (1832)

Art . 2061. T he guarantor having fulfilled all t he

condit ions required in t he preceding art icle, t he creditor
who is negligent in exhaust ing t he propert y point ed out
shall suffer t he loss, to t he ext ent of said propert y, for
t he insolvency of t he debtor result ing from such
negligence. (1833a)

Art . 2062. In every act ion by t he creditor, which must be

against t he principal debtor alone, except in t he cases
ment ioned in Art icle 2059, t he former shall ask t he
court to not ify t he guarantor of t he act ion. T he
guarantor may appear so t hat he may, if he so desire,
set up such defenses as are grant ed him by law. T he
benefit of excussion ment ioned in Art icle 2058 shall
always be unimpaired, even if judgment should be
rendered against t he principal debtor and t he guarantor
in case of appearance by t he lat t er. (1834a)

Art . 2063. A compromise bet ween t he creditor and t he

principal debtor benefit s t he guarantor but does not
prejudice him. T hat which is ent ered into bet ween t he
guarantor and t he creditor benefit s but does not
prejudice t he principal debtor. (1835a)

Art . 2064. T he guarantor of a guarantor shall enjoy t he

benefit of excussion, bot h wit h respect to t he guarantor
and to t he principal debtor. (1836)

Art . 2065. Should t here be several guarantors of only

one debtor and for t he same debt , t he obligat ion to
answer for t he same is divided among all. T he creditor
cannot claim from t he guarantors except t he shares
which t hey are respect ively bound to pay, unless
solidarit y has been expressly st ipulat ed.

T he benefit of division against t he co-guarantors

ceases in t he same cases and for t he same reasons as
t he benefit of excussion against t he principal debtor.
(1837)

SECT ION 2. - Effects of Guaranty

Between the Debtor and the Guarantor

Art . 2066. T he guarantor who pays for a debtor must be

indemnified by t he lat t er.

T he indemnit y comprises:

(1) T he tot al amount of t he debt ;

(2) T he legal int erest s t hereon from t he t ime t he

payment was made known to t he debtor, even
t hough it did not earn int erest for t he creditor;

(3) T he expenses incurred by t he guarantor aft er

having not ified t he debtor t hat payment had been
demanded of him;

(4) Damages, if t hey are due. (1838a)

Art . 2067. T he guarantor who pays is subrogat ed by

virt ue t hereof to all t he right s which t he creditor had
against t he debtor.

If t he guarantor has compromised wit h t he creditor, he

cannot demand of t he debtor more t han what he has
really paid. (1839)
Art . 2068. If t he guarantor should pay wit hout not ifying
t he debtor, t he lat t er may enforce against him all t he
defenses which he could have set up against t he
creditor at t he t ime t he payment was made. (1840)

Art . 2069. If t he debt was for a period and t he guarantor

paid it before it became due, he cannot demand
reimbursement of t he debtor unt il t he expirat ion of t he
period unless t he payment has been rat ified by t he
debtor. (1841a)

Art . 2070. If t he guarantor has paid wit hout not ifying t he

debtor, and t he lat t er not being aware of t he payment ,
repeat s t he payment , t he former has no remedy
what ever against t he debtor, but only against t he
creditor. Nevert heless, in case of a grat uitous guarant y,
if t he guarantor was prevent ed by a fort uitous event
from advising t he debtor of t he payment , and t he
creditor becomes insolvent , t he debtor shall reimburse
t he guarantor for t he amount paid. (1842a)

Art . 2071. T he guarantor, even before having paid, may

proceed against t he principal debtor:

(1) When he is sued for t he payment ;

(2) In case of insolvency of t he principal debtor;

(3) When t he debtor has bound himself to relieve

him from t he guarant y wit hin a specified period,
and t his period has expired;

(4) When t he debt has become demandable, by

reason of t he expirat ion of t he period for
payment ;

(5) Aft er t he lapse of t en years, when t he principal

obligat ion has no fixed period for it s mat urit y,
unless it be of such nat ure t hat it cannot be
ext inguished except wit hin a period longer t han
t en years;
 (6) If t here are reasonable grounds to fear t hat
t he principal debtor int ends to abscond;

(7) If t he principal debtor is in imminent danger of

becoming insolvent .

In all t hese cases, t he act ion of t he guarantor is to

obt ain release from t he guarant y, or to demand a
securit y t hat shall prot ect him from any proceedings by
t he creditor and from t he danger of insolvency of t he
debtor. (1834a)

Art . 2072. If one, at t he request of anot her, becomes a

guarantor for t he debt of a t hird person who is not
present , t he guarantor who sat isfies t he debt may sue
eit her t he person so request ing or t he debtor for
reimbursement . (n)

SECT ION 3. - Effects of Guaranty as Between Co-

Guarantors

Art . 2073. When t here are t wo or more guarantors of t he

same debtor and for t he same debt , t he one among
t hem who has paid may demand of each of t he ot hers
t he share which is proport ionally owing from him.

If any of t he guarantors should be insolvent , his share

shall be borne by t he ot hers, including t he payer, in t he
same proport ion.

T he provisions of t his art icle shall not be applicable,

unless t he payment has been made by virt ue of a
judicial demand or unless t he principal debtor is
insolvent . (1844a)

Art . 2074. In t he case of t he preceding art icle, t he co-

guarantors may set up against t he one who paid, t he
same defenses which would have pert ained to t he
principal debtor against t he creditor, and which are not
purely personal to t he debtor. (1845)
Art . 2075. A sub-guarantor, in case of t he insolvency of
t he guarantor for whom he bound himself, is
responsible to t he co-guarantors in t he same t erms as
t he guarantor. (1846)

CHAPT ER 3

EXT INGUISHMENT OF GUARANT Y

Art . 2076. T he obligat ion of t he guarantor is

ext inguished at t he same t ime as t hat of t he debtor,
and for t he same causes as all ot her obligat ions. (1847)

Art . 2077. If t he creditor volunt arily accept s immovable

or ot her propert y in payment of t he debt , even if he
should aft erwards lose t he same t hrough evict ion, t he
guarantor is released. (1849)

Art . 2078. A release made by t he creditor in favor of one

of t he guarantors, wit hout t he consent of t he ot hers,
benefit s all to t he ext ent of t he share of t he guarantor
to whom it has been grant ed. (1850)

Art . 2079. An ext ension grant ed to t he debtor by t he

creditor wit hout t he consent of t he guarantor
ext inguishes t he guarant y. T he mere failure on t he part
of t he creditor to demand payment aft er t he debt has
become due does not of it self const it ut e any ext ent ion
of t ime referred to herein. (1851a)

Art . 2080. T he guarantors, even t hough t hey be solidary,

are released from t heir obligat ion whenever by some
act of t he creditor t hey cannot be subrogat ed to t he
right s, mort gages, and preference of t he lat t er. (1852)

Art . 2081. T he guarantor may set up against t he

creditor all t he defenses which pert ain to t he principal
debtor and are inherent in t he debt ; but not t hose t hat
are personal to t he debtor. (1853)

CHAPT ER 4

LEGAL AND JUDICIAL BONDS

Art . 2082. T he bondsman who is to be offered in virt ue
of a provision of law or of a judicial order shall have t he
qualificat ions prescribed in Art icle 2056 and in special
laws. (1854a)

Art . 2083. If t he person bound to give a bond in t he

cases of t he preceding art icle, should not be able to do
so, a pledge or mort gage considered sufficient to cover
his obligat ion shall be admit t ed in lieu t hereof. (1855)

Art . 2084. A judicial bondsman cannot demand t he

exhaust ion of t he propert y of t he principal debtor.

A sub-suret y in t he same case, cannot demand t he

exhaust ion of t he propert y of t he debtor of t he suret y.

T itle XVI. - PLEDGE, MORTGAGE AND ANT ICHRESIS

CHAPT ER 1

PROVISIONS COMMON TO PLEDGE AND MORTGAGE

Art . 2085. T he following requisit es are essent ial to t he

cont ract s of pledge and mort gage:

(1) T hat t hey be const it ut ed to secure t he

fulfillment of a principal obligat ion;

(2) T hat t he pledgor or mort gagor be t he absolut e

owner of t he t hing pledged or mort gaged;

(3) T hat t he persons const it ut ing t he pledge or

mort gage have t he free disposal of t heir propert y,
and in t he absence t hereof, t hat t hey be legally
aut horized for t he purpose.

T hird persons who are not part ies to t he principal

obligat ion may secure t he lat t er by pledging or
mort gaging t heir own propert y. (1857)

Art . 2086. T he provisions of Art icle 2052 are applicable

to a pledge or mort gage. (n)
Art . 2087. It is also of t he essence of t hese cont ract s
t hat when t he principal obligat ion becomes due, t he
t hings in which t he pledge or mort gage consist s may be
alienat ed for t he payment to t he creditor. (1858)

Art . 2088. T he creditor cannot appropriat e t he t hings

given by way of pledge or mort gage, or dispose of t hem.
Any st ipulat ion to t he cont rary is null and void. (1859a)

Art . 2089. A pledge or mort gage is indivisible, even

t hough t he debt may be divided among t he successors
in int erest of t he debtor or of t he creditor.

T herefore, t he debtor's heir who has paid a part of t he

debt cannot ask for t he proport ionat e ext inguishment
of t he pledge or mort gage as long as t he debt is not
complet ely sat isfied.

Neit her can t he creditor's heir who received his share of

t he debt ret urn t he pledge or cancel t he mort gage, to
t he prejudice of t he ot her heirs who have not been paid.

From t hese provisions is expect ed t he case in which,

t here being several t hings given in mort gage or pledge,
each one of t hem guarant ees only a det erminat e
port ion of t he credit .

T he debtor, in t his case, shall have a right to t he

ext inguishment of t he pledge or mort gage as t he
port ion of t he debt for which each t hing is specially
answerable is sat isfied. (1860)

Art . 2090. T he indivisibilit y of a pledge or mort gage is

not affect ed by t he fact t hat t he debtors are not
solidarily liable. (n)

Art . 2091. T he cont ract of pledge or mort gage may

secure all kinds of obligat ions, be t hey pure or subject to
a suspensive or resolutory condit ion. (1861)

Art . 2092. A promise to const it ut e a pledge or mort gage

gives rise only to a personal act ion bet ween t he
cont ract ing part ies, wit hout prejudice to t he criminal
responsibilit y incurred by him who defrauds anot her, by
offering in pledge or mort gage as unencumbered, t hings
which he knew were subject to some burden, or by
misrepresent ing himself to be t he owner of t he same.
(1862)

CHAPT ER 2

PLEDGE

Art . 2093. In addit ion to t he requisit es prescribed in

Art icle 2085, it is necessary, in order to const it ut e t he
cont ract of pledge, t hat t he t hing pledged be placed in
t he possession of t he creditor, or of a t hird person by
common agreement . (1863)

Art . 2094. All movables which are wit hin commerce may
be pledged, provided t hey are suscept ible of
possession. (1864)

Art . 2095. Incorporeal right s, evidenced by negot iable

inst rument s, bills of lading, shares of stock, bonds,
warehouse receipt s and similar document s may also be
pledged. T he inst rument proving t he right pledged shall
be delivered to t he creditor, and if negot iable, must be
indorsed. (n)

Art . 2096. A pledge shall not t ake effect against t hird

persons if a descript ion of t he t hing pledged and t he
dat e of t he pledge do not appear in a public inst rument .
(1865a)

Art . 2097. Wit h t he consent of t he pledgee, t he t hing

pledged may be alienat ed by t he pledgor or owner,
subject to t he pledge. T he ownership of t he t hing
pledged is t ransmit t ed to t he vendee or t ransferee as
soon as t he pledgee consent s to t he alienat ion, but t he
lat t er shall cont inue in possession. (n)

Art . 2098. T he cont ract of pledge gives a right to t he

creditor to ret ain t he t hing in his possession or in t hat of
a t hird person to whom it has been delivered, unt il t he
debt is paid. (1866a)

Art . 2099. T he creditor shall t ake care of t he t hing

pledged wit h t he diligence of a good fat her of a family;
he has a right to t he reimbursement of t he expenses
made for it s preservat ion, and is liable for it s loss or
det eriorat ion, in conformit y wit h t he provisions of t his
Code. (1867)

Art . 2100. T he pledgee cannot deposit t he t hing pledged

wit h a t hird person, unless t here is a st ipulat ion
aut horizing him to do so.

T he pledgee is responsible for t he act s of his agent s or

employees wit h respect to t he t hing pledged. (n)

Art . 2101. T he pledgor has t he same responsibilit y as a

bailor in commodat um in t he case under Art icle 1951.
(n)

Art . 2102. If t he pledge earns or produces fruit s, income,

dividends, or int erest s, t he creditor shall compensat e
what he receives wit h t hose which are owing him; but if
none are owing him, or insofar as t he amount may
exceed t hat which is due, he shall apply it to t he
principal. Unless t here is a st ipulat ion to t he cont rary,
t he pledge shall ext end to t he int erest and earnings of
t he right pledged.

In case of a pledge of animals, t heir offspring shall

pert ain to t he pledgor or owner of animals pledged, but
shall be subject to t he pledge, if t here is no st ipulat ion
to t he cont rary. (1868a)

Art . 2103. Unless t he t hing pledged is expropriat ed, t he

debtor cont inues to be t he owner t hereof.

Nevert heless, t he creditor may bring t he act ions which

pert ain to t he owner of t he t hing pledged in order to
recover it from, or defend it against a t hird person.
(1869)
Art . 2104. T he creditor cannot use t he t hing pledged,
wit hout t he aut horit y of t he owner, and if he should do
so, or should misuse t he t hing in any ot her way, t he
owner may ask t hat it be judicially or ext rajudicially
deposit ed. When t he preservat ion of t he t hing pledged
requires it s use, it must be used by t he creditor but only
for t hat purpose. (1870a)

Art . 2105. T he debtor cannot ask for t he ret urn of t he

t hing pledged against t he will of t he creditor, unless and
unt il he has paid t he debt and it s int erest , wit h
expenses in a proper case. (1871)

Art . 2106. If t hrough t he negligence or wilful act of t he

pledgee, t he t hing pledged is in danger of being lost or
impaired, t he pledgor may require t hat it be deposit ed
wit h a t hird person. (n)

Art . 2107. If t here are reasonable grounds to fear t he

dest ruct ion or impairment of t he t hing pledged, wit hout
t he fault of t he pledgee, t he pledgor may demand t he
ret urn of t he t hing, upon offering anot her t hing in
pledge, provided t he lat t er is of t he same kind as t he
former and not of inferior qualit y, and wit hout prejudice
to t he right of t he pledgee under t he provisions of t he
following art icle.

T he pledgee is bound to advise t he pledgor, wit hout

delay, of any danger to t he t hing pledged. (n)

Art . 2108. If, wit hout t he fault of t he pledgee, t here is

danger of dest ruct ion, impairment , or diminut ion in
value of t he t hing pledged, he may cause t he same to
be sold at a public sale. T he proceeds of t he auct ion
shall be a securit y for t he principal obligat ion in t he
same manner as t he t hing originally pledged. (n)

Art . 2109. If t he creditor is deceived on t he subst ance or

qualit y of t he t hing pledged, he may eit her claim anot her
t hing in it s st ead, or demand immediat e payment of t he
principal obligat ion. (n)
Art . 2110. If t he t hing pledged is ret urned by t he pledgee
to t he pledgor or owner, t he pledge is ext inguished. Any
st ipulat ion to t he cont rary shall be void.

If subsequent to t he perfect ion of t he pledge, t he t hing

is in t he possession of t he pledgor or owner, t here is a
prima facie presumpt ion t hat t he same has been
ret urned by t he pledgee. T his same presumpt ion exist s
if t he t hing pledged is in t he possession of a t hird
person who has received it from t he pledgor or owner
aft er t he const it ut ion of t he pledge. (n)

Art . 2111. A st at ement in writ ing by t he pledgee t hat he

renounces or abandons t he pledge is sufficient to
ext inguish t he pledge. For t his purpose, neit her t he
accept ance by t he pledgor or owner, nor t he ret urn of
t he t hing pledged is necessary, t he pledgee becoming a
deposit ary. (n)

Art . 2112. T he creditor to whom t he credit has not been

sat isfied in due t ime, may proceed before a Not ary
Public to t he sale of t he t hing pledged. T his sale shall be
made at a public auct ion, and wit h not ificat ion to t he
debtor and t he owner of t he t hing pledged in a proper
case, st at ing t he amount for which t he public sale is to
be held. If at t he first auct ion t he t hing is not sold, a
second one wit h t he same formalit ies shall be held; and
if at t he second auct ion t here is no sale eit her, t he
creditor may appropriat e t he t hing pledged. In t his case
he shall be obliged to give an acquit t ance for his ent ire
claim. (1872a)

Art . 2113. At t he public auct ion, t he pledgor or owner

may bid. He shall, moreover, have a bet t er right if he
should offer t he same t erms as t he highest bidder.

T he pledgee may also bid, but his offer shall not be valid
if he is t he only bidder. (n)

Art . 2114. All bids at t he public auct ion shall offer to pay
t he purchase price at once. If any ot her bid is accept ed,
t he pledgee is deemed to have been received t he
purchase price, as far as t he pledgor or owner is
concerned. (n)

Art . 2115. T he sale of t he t hing pledged shall ext inguish

t he principal obligat ion, whet her or not t he proceeds of
t he sale are equal to t he amount of t he principal
obligat ion, int erest and expenses in a proper case. If t he
price of t he sale is more t han said amount , t he debtor
shall not be ent it led to t he excess, unless it is ot herwise
agreed. If t he price of t he sale is less, neit her shall t he
creditor be ent it led to recover t he deficiency,
not wit hst anding any st ipulat ion to t he cont rary. (n)

Art . 2116. Aft er t he public auct ion, t he pledgee shall

prompt ly advise t he pledgor or owner of t he result
t hereof. (n)

Art . 2117. Any t hird person who has any right in or to t he

t hing pledged may sat isfy t he principal obligat ion as
soon as t he lat t er becomes due and demandable.(n)

Art . 2118. If a credit which has been pledged becomes

due before it is redeemed, t he pledgee may collect and
receive t he amount due. He shall apply t he same to t he
payment of his claim, and deliver t he surplus, should
t here be any, to t he pledgor. (n)

Art . 2119. If t wo or more t hings are pledged, t he pledgee

may choose which he will cause to be sold, unless t here
is a st ipulat ion to t he cont rary. He may demand t he sale
of only as many of t he t hings as are necessary for t he
payment of t he debt . (n)

Art . 2120. If a t hird part y secures an obligat ion by

pledging his own movable propert y under t he provisions
of Art icle 2085 he shall have t he same right s as a
guarantor under Art icles 2066 to 2070, and Art icles 2077
to 2081. He is not prejudiced by any waiver of defense by
t he principal obligor. (n)
Art . 2121. Pledges creat ed by operat ion of law, such as
t hose referred to in Art icles 546, 1731, and 1994, are
governed by t he foregoing art icles on t he possession,
care and sale of t he t hing as well as on t he t erminat ion
of t he pledge. However, aft er payment of t he debt and
expenses, t he remainder of t he price of t he sale shall be
delivered to t he obligor. (n)

Art . 2122. A t hing under a pledge by operat ion of law may

be sold only aft er demand of t he amount for which t he
t hing is ret ained. T he public auct ion shall t ake place
wit hin one mont h aft er such demand. If, wit hout just
grounds, t he creditor does not cause t he public sale to
be held wit hin such period, t he debtor may require t he
ret urn of t he t hing. (n)

Art . 2123. Wit h regard to pawnshops and ot her

est ablishment s, which are engaged in making loans
secured by pledges, t he special laws and regulat ions
concerning t hem shall be observed, and subsidiarily, t he
provisions of t his T it le. (1873a)

CHAPT ER 3

MORTGAGE

Art . 2124. Only t he following propert y may be t he object

of a cont ract of mort gage:

(1) Immovables;

(2) Alienable real right s in accordance wit h t he

laws, imposed upon immovables.

Nevert heless, movables may be t he object of a chat t el

mort gage. (1874a)

Art . 2125. In addit ion to t he requisit es st at ed in Art icle

2085, it is indispensable, in order t hat a mort gage may
be validly const it ut ed, t hat t he document in which it
appears be recorded in t he Regist ry of Propert y. If t he
inst rument is not recorded, t he mort gage is
nevert heless binding bet ween t he part ies.

T he persons in whose favor t he law est ablishes a

mort gage have no ot her right t han to demand t he
execut ion and t he recording of t he document in which
t he mort gage is formalized. (1875a)

Art . 2126. T he mort gage direct ly and immediat ely

subject s t he propert y upon which it is imposed, whoever
t he possessor may be, to t he fulfillment of t he
obligat ion for whose securit y it was const it ut ed. (1876)

Art . 2127. T he mort gage ext ends to t he nat ural

accessions, to t he improvement s, growing fruit s, and
t he rent s or income not yet received when t he
obligat ion becomes due, and to t he amount of t he
indemnit y grant ed or owing to t he proprietor from t he
insurers of t he propert y mort gaged, or in virt ue of
expropriat ion for public use, wit h t he declarat ions,
amplificat ions and limit at ions est ablished by law,
whet her t he est at e remains in t he possession of t he
mort gagor, or it passes into t he hands of a t hird person.
(1877)

Art . 2128. T he mort gage credit may be alienat ed or

assigned to a t hird person, in whole or in part , wit h t he
formalit ies required by law. (1878)

Art . 2129. T he creditor may claim from a t hird person in

possession of t he mort gaged propert y, t he payment of
t he part of t he credit secured by t he propert y which
said t hird person possesses, in t he t erms and wit h t he
formalit ies which t he law est ablishes. (1879)

Art . 2130. A st ipulat ion forbidding t he owner from

alienat ing t he immovable mort gaged shall be void. (n)

Art . 2131. T he form, ext ent and consequences of a

mort gage, bot h as to it s const it ut ion, modificat ion and
ext inguishment , and as to ot her mat t ers not included in
t his Chapt er, shall be governed by t he provisions of t he
Mort gage Law and of t he Land Regist rat ion Law. (1880a)

CHAPT ER 4

ANT ICHRESIS

Art . 2132. By t he cont ract of ant ichresis t he creditor

acquires t he right to receive t he fruit s of an immovable
of his debtor, wit h t he obligat ion to apply t hem to t he
payment of t he int erest , if owing, and t hereaft er to t he
principal of his credit . (1881)

Art . 2133. T he act ual market value of t he fruit s at t he

t ime of t he applicat ion t hereof to t he int erest and
principal shall be t he measure of such applicat ion. (n)

Art . 2134. T he amount of t he principal and of t he

int erest shall be specified in writ ing; ot herwise, t he
cont ract of ant ichresis shall be void. (n)

Art . 2135. T he creditor, unless t here is a st ipulat ion to

t he cont rary, is obliged to pay t he t axes and charges
upon t he est at e.

He is also bound to bear t he expenses necessary for it s

preservat ion and repair.

T he sums spent for t he purposes st at ed in t his art icle

shall be deduct ed from t he fruit s. (1882)

Art . 2136. T he debtor cannot reacquire t he enjoyment

of t he immovable wit hout first having tot ally paid what
he owes t he creditor.

But t he lat t er, in order to exempt himself from t he

obligat ions imposed upon him by t he preceding art icle,
may always compel t he debtor to ent er again upon t he
enjoyment of t he propert y, except when t here is a
st ipulat ion to t he cont rary. (1883)

Art . 2137. T he creditor does not acquire t he ownership

of t he real est at e for non-payment of t he debt wit hin
t he period agreed upon.

Every st ipulat ion to t he cont rary shall be void. But t he

creditor may pet it ion t he court for t he payment of t he
debt or t he sale of t he real propert y. In t his case, t he
Rules of Court on t he foreclosure of mort gages shall
apply. (1884a)

Art . 2138. T he cont ract ing part ies may st ipulat e t hat
t he int erest upon t he debt be compensat ed wit h t he
fruit s of t he propert y which is t he object of t he
ant ichresis, provided t hat if t he value of t he fruit s
should exceed t he amount of int erest allowed by t he
laws against usury, t he excess shall be applied to t he
principal. (1885a)

Art . 2139. T he last paragraph of Art icle 2085, and

Art icles 2089 to 2091 are applicable to t his cont ract .
(1886a)

CHAPT ER 5

CHAT T EL MORTGAGE

Art . 2140. By a chat t el mort gage, personal propert y is

recorded in t he Chat t el Mort gage Regist er as a securit y
for t he performance of an obligat ion. If t he movable,
inst ead of being recorded, is delivered to t he creditor or
a t hird person, t he cont ract is a pledge and not a chat t el
mort gage. (n)

Art . 2141. T he provisions of t his Code on pledge, insofar

as t hey are not in conflict wit h t he Chat t el Mort gage
Law shall be applicable to chat t el mort gages. (n)

T itle XVII. - EXT RA-CONT RACT UAL OBLIGAT IONS

CHAPT ER 1

QUASI-CONT RACTS
Art . 2142. Cert ain lawful, volunt ary and unilat eral act s
give rise to t he juridical relat ion of quasi-cont ract to t he
end t hat no one shall be unjust ly enriched or benefit ed
at t he expense of anot her. (n)

Art . 2143. T he provisions for quasi-cont ract s in t his

Chapt er do not exclude ot her quasi-cont ract s which
may come wit hin t he purview of t he preceding art icle.
(n)

SECT ION 1. - Negotiorum Gestio

Art . 2144. Whoever volunt arily t akes charge of t he

agency or management of t he business or propert y of
anot her, wit hout any power from t he lat t er, is obliged to
cont inue t he same unt il t he t erminat ion of t he affair
and it s incident s, or to require t he person concerned to
subst it ut e him, if t he owner is in a posit ion to do so.
T his juridical relat ion does not arise in eit her of t hese
inst ances:

(1) When t he propert y or business is not

neglect ed or abandoned;

(2) If in fact t he manager has been t acit ly

aut horized by t he owner.

In t he first case, t he provisions of Art icles 1317, 1403,

No. 1, and 1404 regarding unaut horized cont ract s shall
govern.

In t he second case, t he rules on agency in T it le X of t his

Book shall be applicable. (1888a)

Art . 2145. T he officious manager shall perform his

dut ies wit h all t he diligence of a good fat her of a family,
and pay t he damages which t hrough his fault or
negligence may be suffered by t he owner of t he
propert y or business under management .

T he court s may, however, increase or moderat e t he

indemnit y according to t he circumst ances of each
case. (1889a)

Art . 2146. If t he officious manager delegat es to anot her

person all or some of his dut ies, he shall be liable for t he
act s of t he delegat e, wit hout prejudice to t he direct
obligat ion of t he lat t er toward t he owner of t he
business.

T he responsibilit y of t wo or more officious managers

shall be solidary, unless t he management was assumed
to save t he t hing or business from imminent danger.
(1890a)

Art . 2147. T he officious manager shall be liable for any

fort uitous event :

(1) If he undert akes risky operat ions which t he

owner was not accustomed to embark upon;

(2) If he has preferred his own int erest to t hat of

t he owner;

(3) If he fails to ret urn t he propert y or business

aft er demand by t he owner;

(4) If he assumed t he management in bad fait h.

(1891a)

Art . 2148. Except when t he management was assumed

to save propert y or business from imminent danger, t he
officious manager shall be liable for fort uitous event s:

(1) If he is manifest ly unfit to carry on t he

management ;

(2) If by his int ervent ion he prevent ed a more

compet ent person from t aking up t he
management . (n)

Art . 2149. T he rat ificat ion of t he management by t he

owner of t he business produces t he effect s of an
express agency, even if t he business may not have been
successful. (1892a)
Art . 2150. Alt hough t he officious management may not
have been expressly rat ified, t he owner of t he propert y
or business who enjoys t he advant ages of t he same
shall be liable for obligat ions incurred in his int erest , and
shall reimburse t he officious manager for t he necessary
and useful expenses and for t he damages which t he
lat t er may have suffered in t he performance of his
dut ies.

T he same obligat ion shall be incumbent upon him when

t he management had for it s purpose t he prevent ion of
an imminent and manifest loss, alt hough no benefit
may have been derived. (1893)

Art . 2151. Even t hough t he owner did not derive any

benefit and t here has been no imminent and manifest
danger to t he propert y or business, t he owner is liable
as under t he first paragraph of t he preceding art icle,
provided:

(1) T he officious manager has act ed in good fait h,

and

(2) T he propert y or business is int act , ready to be

ret urned to t he owner. (n)

Art . 2152. T he officious manager is personally liable for

cont ract s which he has ent ered into wit h t hird persons,
even t hough he act ed in t he name of t he owner, and
t here shall be no right of act ion bet ween t he owner and
t hird persons. T hese provisions shall not apply:

(1) If t he owner has expressly or t acit ly rat ified

t he management , or

(2) When t he cont ract refers to t hings pert aining

to t he owner of t he business. (n)

Art . 2153. T he management is ext inguished:

(1) When t he owner repudiat es it or put s an end

t hereto;
 (2) When t he officious manager wit hdraws from
t he management , subject to t he provisions of
Art icle 2144;

(3) By t he deat h, civil int erdict ion, insanit y or

insolvency of t he owner or t he officious manager.
(n)

SECT ION 2. - Solutio Indebiti

Art . 2154. If somet hing is received when t here is no right

to demand it , and it was unduly delivered t hrough
mist ake, t he obligat ion to ret urn it arises. (1895)

Art . 2155. Payment by reason of a mist ake in t he

const ruct ion or applicat ion of a doubt ful or difficult
quest ion of law may come wit hin t he scope of t he
preceding art icle. (n)

Art . 2156. If t he payer was in doubt whet her t he debt

was due, he may recover if he proves t hat it was not
due. (n)

Art . 2157. T he responsibilit y of t wo or more payees,

when t here has been payment of what is not due, is
solidary. (n)

Art . 2158. When t he propert y delivered or money paid

belongs to a t hird person, t he payee shall comply wit h
t he provisions of art icle 1984. (n)

Art . 2159. Whoever in bad fait h accept s an undue

payment , shall pay legal int erest if a sum of money is
involved, or shall be liable for fruit s received or which
should have been received if t he t hing produces fruit s.

He shall furt hermore be answerable for any loss or

impairment of t he t hing from any cause, and for
damages to t he person who delivered t he t hing, unt il it
is recovered. (1896a)
Art . 2160. He who in good fait h accept s an undue
payment of a t hing cert ain and det erminat e shall only
be responsible for t he impairment or loss of t he same
or it s accessories and accessions insofar as he has
t hereby been benefit ed. If he has alienat ed it , he shall
ret urn t he price or assign t he act ion to collect t he sum.
(1897)

Art . 2161. As regards t he reimbursement for

improvement s and expenses incurred by him who
unduly received t he t hing, t he provisions of T it le V of
Book II shall govern. (1898)

Art . 2162. He shall be exempt from t he obligat ion to

restore who, believing in good fait h t hat t he payment
was being made of a legit imat e and subsist ing claim,
dest royed t he document , or allowed t he act ion to
prescribe, or gave up t he pledges, or cancelled t he
guarant ies for his right . He who paid unduly may proceed
only against t he t rue debtor or t he guarantors wit h
regard to whom t he act ion is st ill effect ive. (1899)

Art . 2163. It is presumed t hat t here was a mist ake in t he

payment if somet hing which had never been due or had
already been paid was delivered; but he from whom t he
ret urn is claimed may prove t hat t he delivery was made
out of liberalit y or for any ot her just cause. (1901)

SECT ION 3. - Other Quasi-Contracts

Art . 2164. When, wit hout t he knowledge of t he person

obliged to give support , it is given by a st ranger, t he
lat t er shall have a right to claim t he same from t he
former, unless it appears t hat he gave it out of piet y and
wit hout int ent ion of being repaid. (1894a)

Art . 2165. When funeral expenses are borne by a t hird

person, wit hout t he knowledge of t hose relat ives who
were obliged to give support to t he deceased, said
relat ives shall reimburse t he t hird person, should t he
lat t er claim reimbursement . (1894a)

Art . 2166. When t he person obliged to support an

orphan, or an insane or ot her indigent person unjust ly
refuses to give support to t he lat t er, any t hird person
may furnish support to t he needy individual, wit h right of
reimbursement from t he person obliged to give support .
T he provisions of t his art icle apply when t he fat her or
mot her of a child under eight een years of age unjust ly
refuses to support him.

Art . 2167. When t hrough an accident or ot her cause a

person is injured or becomes seriously ill, and he is
t reat ed or helped while he is not in a condit ion to give
consent to a cont ract , he shall be liable to pay for t he
services of t he physician or ot her person aiding him,
unless t he service has been rendered out of pure
generosit y.

Art . 2168. When during a fire, flood, storm, or ot her

calamit y, propert y is saved from dest ruct ion by anot her
person wit hout t he knowledge of t he owner, t he lat t er is
bound to pay t he former just compensat ion.

Art . 2169. When t he government , upon t he failure of any

person to comply wit h healt h or safet y regulat ions
concerning propert y, undert akes to do t he necessary
work, even over his object ion, he shall be liable to pay t he
expenses.

Art . 2170. When by accident or ot her fort uitous event ,

movables separat ely pert aining to t wo or more persons
are commingled or confused, t he rules on co-ownership
shall be applicable.

Art . 2171. T he right s and obligat ions of t he finder of lost

personal propert y shall be governed by Art icles 719 and
720.

Art . 2172. T he right of every possessor in good fait h to

reimbursement for necessary and useful expenses is
governed by Art icle 546.

Art . 2173. When a t hird person, wit hout t he knowledge of

t he debtor, pays t he debt , t he right s of t he former are
governed by Art icles 1236 and 1237.

Art . 2174. When in a small communit y a nat ionalit y of

t he inhabit ant s of age decide upon a measure for
prot ect ion against lawlessness, fire, flood, storm or
ot her calamit y, any one who object s to t he plan and
refuses to cont ribut e to t he expenses but is benefit ed
by t he project as execut ed shall be liable to pay his
share of said expenses.

Art . 2175. Any person who is const rained to pay t he

t axes of anot her shall be ent it led to reimbursement
from t he lat t er.

CHAPT ER 2

QUASI-DELICTS

Art . 2176. Whoever by act or omission causes damage

to anot her, t here being fault or negligence, is obliged to
pay for t he damage done. Such fault or negligence, if
t here is no pre-exist ing cont ract ual relat ion bet ween
t he part ies, is called a quasi-delict and is governed by
t he provisions of t his Chapt er. (1902a)

Art . 2177. Responsibilit y for fault or negligence under

t he preceding art icle is ent irely separat e and dist inct
from t he civil liabilit y arising from negligence under t he
Penal Code. But t he plaint iff cannot recover damages
t wice for t he same act or omission of t he defendant .
(n)

Art . 2178. T he provisions of Art icles 1172 to 1174 are

also applicable to a quasi-delict . (n)

Art . 2179. When t he plaint iff's own negligence was t he

immediat e and proximat e cause of his injury, he cannot
recover damages. But if his negligence was only
cont ributory, t he immediat e and proximat e cause of t he
injury being t he defendant 's lack of due care, t he
plaint iff may recover damages, but t he court s shall
mit igat e t he damages to be awarded. (n)

Art . 2180. T he obligat ion imposed by Art icle 2176 is

demandable not only for one's own act s or omissions,
but also for t hose of persons for whom one is
responsible.

T he fat her and, in case of his deat h or incapacit y, t he

mot her, are responsible for t he damages caused by t he
minor children who live in t heir company.

Guardians are liable for damages caused by t he minors

or incapacit at ed persons who are under t heir aut horit y
and live in t heir company.

T he owners and managers of an est ablishment or

ent erprise are likewise responsible for damages caused
by t heir employees in t he service of t he branches in
which t he lat t er are employed or on t he occasion of
t heir funct ions.

Employers shall be liable for t he damages caused by

t heir employees and household helpers act ing wit hin
t he scope of t heir assigned t asks, even t hough t he
former are not engaged in any business or indust ry.

T he St at e is responsible in like manner when it act s

t hrough a special agent ; but not when t he damage has
been caused by t he official to whom t he t ask done
properly pert ains, in which case what is provided in
Art icle 2176 shall be applicable.

Last ly, t eachers or heads of est ablishment s of art s and

t rades shall be liable for damages caused by t heir pupils
and st udent s or apprent ices, so long as t hey remain in
t heir custody.

T he responsibilit y t reat ed of in t his art icle shall cease

when t he persons herein ment ioned prove t hat t hey
observed all t he diligence of a good fat her of a family to
prevent damage. (1903a)

Art . 2181. Whoever pays for t he damage caused by his

dependent s or employees may recover from t he lat t er
what he has paid or delivered in sat isfact ion of t he
claim. (1904)

Art . 2182. If t he minor or insane person causing damage

has no parent s or guardian, t he minor or insane person
shall be answerable wit h his own propert y in an act ion
against him where a guardian ad lit em shall be
appoint ed. (n)

Art . 2183. T he possessor of an animal or whoever may

make use of t he same is responsible for t he damage
which it may cause, alt hough it may escape or be lost .
T his responsibilit y shall cease only in case t he damage
should come from force majeure or from t he fault of
t he person who has suffered damage. (1905)

Art . 2184. In motor vehicle mishaps, t he owner is

solidarily liable wit h his driver, if t he former, who was in
t he vehicle, could have, by t he use of t he due diligence,
prevent ed t he misfort une. It is disput ably presumed
t hat a driver was negligent , if he had been found guilt y or
reckless driving or violat ing t raffic regulat ions at least
t wice wit hin t he next preceding t wo mont hs.

If t he owner was not in t he motor vehicle, t he provisions

of Art icle 2180 are applicable. (n)

Art . 2185. Unless t here is proof to t he cont rary, it is

presumed t hat a person driving a motor vehicle has
been negligent if at t he t ime of t he mishap, he was
violat ing any t raffic regulat ion. (n)

Art . 2186. Every owner of a motor vehicle shall file wit h

t he proper government office a bond execut ed by a
government -cont rolled corporat ion or office, to answer
for damages to t hird persons. T he amount of t he bond
and ot her t erms shall be fixed by t he compet ent public
official. (n)

Art . 2187. Manufact urers and processors of foodst uffs,

drinks, toilet art icles and similar goods shall be liable for
deat h or injuries caused by any noxious or harmful
subst ances used, alt hough no cont ract ual relat ion
exist s bet ween t hem and t he consumers. (n)

Art . 2188. T here is prima facie presumpt ion of

negligence on t he part of t he defendant if t he deat h or
injury result s from his possession of dangerous
weapons or subst ances, such as firearms and poison,
except when t he possession or use t hereof is
indispensable in his occupat ion or business. (n)

Art . 2189. Provinces, cit ies and municipalit ies shall be

liable for damages for t he deat h of, or injuries suffered
by, any person by reason of t he defect ive condit ion of
roads, st reet s, bridges, public buildings, and ot her public
works under t heir cont rol or supervision. (n)

Art . 2190. T he proprietor of a building or st ruct ure is

responsible for t he damages result ing from it s tot al or
part ial collapse, if it should be due to t he lack of
necessary repairs. (1907)

Art . 2191. Proprietors shall also be responsible for

damages caused:

(1) By t he explosion of machinery which has not

been t aken care of wit h due diligence, and t he
inflammat ion of explosive subst ances which have
not been kept in a safe and adequat e place;

(2) By excessive smoke, which may be harmful to

persons or propert y;

(3) By t he falling of t rees sit uat ed at or near

highways or lanes, if not caused by force majeure;

(4) By emanat ions from t ubes, canals, sewers or

deposit s of infect ious mat t er, const ruct ed
 wit hout precaut ions suit able to t he place. (1908)

Art . 2192. If damage referred to in t he t wo preceding

art icles should be t he result of any defect in t he
const ruct ion ment ioned in Art icle 1723, t he t hird person
suffering damages may proceed only against t he
engineer or archit ect or cont ractor in accordance wit h
said art icle, wit hin t he period t herein fixed. (1909)

Art . 2193. T he head of a family t hat lives in a building or

a part t hereof, is responsible for damages caused by
t hings t hrown or falling from t he same. (1910)

Art . 2194. T he responsibilit y of t wo or more persons

who are liable for quasi-delict is solidary. (n)

T itle XVIII. - DAMAGES

CHAPT ER 1

GENERAL PROVISIONS

Art . 2195. T he provisions of t his T it le shall be

respect ively applicable to all obligat ions ment ioned in
Art icle 1157.

Art . 2196. T he rules under t his T it le are wit hout

prejudice to special provisions on damages formulat ed
elsewhere in t his Code. Compensat ion for workmen and
ot her employees in case of deat h, injury or illness is
regulat ed by special laws. Rules governing damages laid
down in ot her laws shall be observed insofar as t hey are
not in conflict wit h t his Code.

Art . 2197. Damages may be:

(1) Act ual or compensatory;

(2) Moral;

(3) Nominal;

(4) Temperat e or moderat e;

 (5) Liquidat ed; or

(6) Exemplary or correct ive.

Art . 2198. T he principles of t he general law on damages

are hereby adopt ed insofar as t hey are not inconsist ent
wit h t his Code.

CHAPT ER 2

ACT UAL OR COMPENSATORY DAMAGES

Art . 2199. Except as provided by law or by st ipulat ion,

one is ent it led to an adequat e compensat ion only for
such pecuniary loss suffered by him as he has duly
proved. Such compensat ion is referred to as act ual or
compensatory damages.

Art . 2200. Indemnificat ion for damages shall

comprehend not only t he value of t he loss suffered, but
also t hat of t he profit s which t he obligee failed to
obt ain. (1106)

Art . 2201. In cont ract s and quasi-cont ract s, t he

damages for which t he obligor who act ed in good fait h
is liable shall be t hose t hat are t he nat ural and probable
consequences of t he breach of t he obligat ion, and
which t he part ies have foreseen or could have
reasonably foreseen at t he t ime t he obligat ion was
const it ut ed.

In case of fraud, bad fait h, malice or wanton at t it ude,

t he obligor shall be responsible for all damages which
may be reasonably at t ribut ed to t he non-performance
of t he obligat ion. (1107a)

Art . 2202. In crimes and quasi-delict s, t he defendant

shall be liable for all damages which are t he nat ural and
probable consequences of t he act or omission
complained of. It is not necessary t hat such damages
have been foreseen or could have reasonably been
foreseen by t he defendant .

Art . 2203. T he part y suffering loss or injury must

exercise t he diligence of a good fat her of a family to
minimize t he damages result ing from t he act or
omission in quest ion.

Art . 2204. In crimes, t he damages to be adjudicat ed may

be respect ively increased or lessened according to t he
aggravat ing or mit igat ing circumst ances.

Art . 2205. Damages may be recovered:

(1) For loss or impairment of earning capacit y in

cases of t emporary or permanent personal injury;

(2) For injury to t he plaint iff's business st anding

or commercial credit .

Art . 2206. T he amount of damages for deat h caused by

a crime or quasi-delict shall be at least t hree t housand
pesos, even t hough t here may have been mit igat ing
circumst ances. In addit ion:

(1) T he defendant shall be liable for t he loss of

t he earning capacit y of t he deceased, and t he
indemnit y shall be paid to t he heirs of t he lat t er;
such indemnit y shall in every case be assessed
and awarded by t he court , unless t he deceased
on account of permanent physical disabilit y not
caused by t he defendant , had no earning capacit y
at t he t ime of his deat h;

(2) If t he deceased was obliged to give support

according to t he provisions of Art icle 291, t he
recipient who is not an heir called to t he
decedent 's inherit ance by t he law of t est at e or
int est at e succession, may demand support from
t he person causing t he deat h, for a period not
exceeding five years, t he exact durat ion to be
fixed by t he court ;
 (3) T he spouse, legit imat e and illegit imat e
descendant s and ascendant s of t he deceased
may demand moral damages for ment al anguish
by reason of t he deat h of t he deceased.

Art . 2207. If t he plaint iff's propert y has been insured,

and he has received indemnit y from t he insurance
company for t he injury or loss arising out of t he wrong or
breach of cont ract complained of, t he insurance
company shall be subrogat ed to t he right s of t he
insured against t he wrongdoer or t he person who has
violat ed t he cont ract . If t he amount paid by t he
insurance company does not fully cover t he injury or
loss, t he aggrieved part y shall be ent it led to recover t he
deficiency from t he person causing t he loss or injury.

Art . 2208. In t he absence of st ipulat ion, at torney's fees

and expenses of lit igat ion, ot her t han judicial cost s,
cannot be recovered, except :

(1) When exemplary damages are awarded;

(2) When t he defendant 's act or omission has

compelled t he plaint iff to lit igat e wit h t hird
persons or to incur expenses to prot ect his
int erest ;

(3) In criminal cases of malicious prosecut ion

against t he plaint iff;

(4) In case of a clearly unfounded civil act ion or

proceeding against t he plaint iff;

(5) Where t he defendant act ed in gross and

evident bad fait h in refusing to sat isfy t he
plaint iff's plainly valid, just and demandable claim;

(6) In act ions for legal support ;

(7) In act ions for t he recovery of wages of

household helpers, laborers and skilled workers;
 (8) In act ions for indemnit y under workmen's
compensat ion and employer's liabilit y laws;

(9) In a separat e civil act ion to recover civil liabilit y

arising from a crime;

(10) When at least double judicial cost s are

awarded;

(11) In any ot her case where t he court deems it

just and equit able t hat at torney's fees and
expenses of lit igat ion should be recovered.

In all cases, t he at torney's fees and expenses of

lit igat ion must be reasonable.

Art . 2209. If t he obligat ion consist s in t he payment of a

sum of money, and t he debtor incurs in delay, t he
indemnit y for damages, t here being no st ipulat ion to t he
cont rary, shall be t he payment of t he int erest agreed
upon, and in t he absence of st ipulat ion, t he legal
int erest , which is six per cent per annum. (1108)

Art . 2210. Int erest may, in t he discret ion of t he court , be

allowed upon damages awarded for breach of cont ract .

Art . 2211. In crimes and quasi-delict s, int erest as a part

of t he damages may, in a proper case, be adjudicat ed in
t he discret ion of t he court .

Art . 2212. Int erest due shall earn legal int erest from t he
t ime it is judicially demanded, alt hough t he obligat ion
may be silent upon t his point . (1109a)

Art . 2213. Int erest cannot be recovered upon

unliquidat ed claims or damages, except when t he
demand can be est ablished wit h reasonably cert aint y.

Art . 2214. In quasi-delict s, t he cont ributory negligence

of t he plaint iff shall reduce t he damages t hat he may
recover.

Art . 2215. In cont ract s, quasi-cont ract s, and quasi-

delict s, t he court may equit ably mit igat e t he damages
under circumst ances ot her t han t he case referred to in
t he preceding art icle, as in t he following inst ances:

(1) T hat t he plaint iff himself has cont ravened t he

t erms of t he cont ract ;

(2) T hat t he plaint iff has derived some benefit as

a result of t he cont ract ;

(3) In cases where exemplary damages are to be

awarded, t hat t he defendant act ed upon t he
advice of counsel;

(4) T hat t he loss would have result ed in any event ;

(5) T hat since t he filing of t he act ion, t he

defendant has done his best to lessen t he
plaint iff's loss or injury.

CHAPT ER 3

OT HER KINDS OF DAMAGES

Art . 2216. No proof of pecuniary loss is necessary in

order t hat moral, nominal, t emperat e, liquidat ed or
exemplary damages, may be adjudicat ed. T he
assessment of such damages, except liquidat ed ones,
is left to t he discret ion of t he court , according to t he
circumst ances of each case.

SECT ION 1. - Moral Damages

Art . 2217. Moral damages include physical suffering,

ment al anguish, fright , serious anxiet y, besmirched
reput at ion, wounded feelings, moral shock, social
humiliat ion, and similar injury. T hough incapable of
pecuniary comput at ion, moral damages may be
recovered if t hey are t he proximat e result of t he
defendant 's wrongful act for omission.
Art . 2218. In t he adjudicat ion of moral damages, t he
sent iment al value of propert y, real or personal, may be
considered.

Art . 2219. Moral damages may be recovered in t he

following and analogous cases:

(1) A criminal offense result ing in physical injuries;

(2) Quasi-delict s causing physical injuries;

(3) Seduct ion, abduct ion, rape, or ot her lascivious

act s;

(4) Adult ery or concubinage;

(5) Illegal or arbit rary det ent ion or arrest ;

(6) Illegal search;

(7) Libel, slander or any ot her form of defamat ion;

(8) Malicious prosecut ion;

(9) Act s ment ioned in Art icle 309;

(10) Act s and act ions referred to in Art icles 21,

26, 27, 28, 29, 30, 32, 34, and 35.

T he parent s of t he female seduced, abduct ed, raped, or

abused, referred to in No. 3 of t his art icle, may also
recover moral damages.

T he spouse, descendant s, ascendant s, and brot hers

and sist ers may bring t he act ion ment ioned in No. 9 of
t his art icle, in t he order named.

Art . 2220. Willful injury to propert y may be a legal ground

for awarding moral damages if t he court should find
t hat , under t he circumst ances, such damages are just ly
due. T he same rule applies to breaches of cont ract
where t he defendant act ed fraudulent ly or in bad fait h.

SECT ION 2. - Nominal Damages

Art . 2221. Nominal damages are adjudicat ed in order
t hat a right of t he plaint iff, which has been violat ed or
invaded by t he defendant , may be vindicat ed or
recognized, and not for t he purpose of indemnifying t he
plaint iff for any loss suffered by him.

Art . 2222. T he court may award nominal damages in

every obligat ion arising from any source enumerat ed in
Art icle 1157, or in every case where any propert y right
has been invaded.

Art . 2223. T he adjudicat ion of nominal damages shall

preclude furt her cont est upon t he right involved and all
accessory quest ions, as bet ween t he part ies to t he
suit , or t heir respect ive heirs and assigns.

SECT ION 3. - Temperate or Moderate Damages

Art . 2224. Temperat e or moderat e damages, which are

more t han nominal but less t han compensatory
damages, may be recovered when t he court finds t hat
some pecuniary loss has been suffered but it s amount
can not , from t he nat ure of t he case, be provided wit h
cert aint y.

Art . 2225. Temperat e damages must be reasonable

under t he circumst ances.

SECT ION 4. - Liquidated Damages

Art . 2226. Liquidat ed damages are t hose agreed upon by

t he part ies to a cont ract , to be paid in case of breach
t hereof.

Art . 2227. Liquidat ed damages, whet her int ended as an

indemnit y or a penalt y, shall be equit ably reduced if t hey
are iniquitous or unconscionable.

Art . 2228. When t he breach of t he cont ract commit t ed

by t he defendant is not t he one cont emplat ed by t he
part ies in agreeing upon t he liquidat ed damages, t he law
shall det ermine t he measure of damages, and not t he
st ipulat ion.

SECT ION 5. - Exemplary or Corrective Damages

Art . 2229. Exemplary or correct ive damages are

imposed, by way of example or correct ion for t he public
good, in addit ion to t he moral, t emperat e, liquidat ed or
compensatory damages.

Art . 2230. In criminal offenses, exemplary damages as a

part of t he civil liabilit y may be imposed when t he crime
was commit t ed wit h one or more aggravat ing
circumst ances. Such damages are separat e and
dist inct from fines and shall be paid to t he offended
part y.

Art . 2231. In quasi-delict s, exemplary damages may be

grant ed if t he defendant act ed wit h gross negligence.

Art . 2232. In cont ract s and quasi-cont ract s, t he court

may award exemplary damages if t he defendant act ed
in a wanton, fraudulent , reckless, oppressive, or
malevolent manner.

Art . 2233. Exemplary damages cannot be recovered as a

mat t er of right ; t he court will decide whet her or not t hey
should be adjudicat ed.

Art . 2234. While t he amount of t he exemplary damages

need not be proved, t he plaint iff must show t hat he is
ent it led to moral, t emperat e or compensatory damages
before t he court may consider t he quest ion of whet her
or not exemplary damages should be awarded. In case
liquidat ed damages have been agreed upon, alt hough no
proof of loss is necessary in order t hat such liquidat ed
damages may be recovered, nevert heless, before t he
court may consider t he quest ion of grant ing exemplary
in addit ion to t he liquidat ed damages, t he plaint iff must
show t hat he would be ent it led to moral, t emperat e or
compensatory damages were it not for t he st ipulat ion
for liquidat ed damages.

Art . 2235. A st ipulat ion whereby exemplary damages are

renounced in advance shall be null and void.

T itle XIX. - CONCURRENCE AND PREFERENCE

OF CREDITS

CHAPT ER 1

GENERAL PROVISIONS

Art . 2236. T he debtor is liable wit h all his propert y,

present and fut ure, for t he fulfillment of his obligat ions,
subject to t he exempt ions provided by law. (1911a)

Art . 2237. Insolvency shall be governed by special laws

insofar as t hey are not inconsist ent wit h t his Code. (n)

Art . 2238. So long as t he conjugal part nership or

absolut e communit y subsist s, it s propert y shall not be
among t he asset s to be t aken possession of by t he
assignee for t he payment of t he insolvent debtor's
obligat ions, except insofar as t he lat t er have redounded
to t he benefit of t he family. If it is t he husband who is
insolvent , t he administ rat ion of t he conjugal part nership
of absolut e communit y may, by order of t he court , be
t ransferred to t he wife or to a t hird person ot her t han
t he assignee. (n)

Art . 2239. If t here is propert y, ot her t han t hat ment ioned

in t he preceding art icle, owned by t wo or more persons,
one of whom is t he insolvent debtor, his undivided share
or int erest t herein shall be among t he asset s to be
t aken possession of by t he assignee for t he payment of
t he insolvent debtor's obligat ions. (n)

Art . 2240. Propert y held by t he insolvent debtor as a

t rust ee of an express or implied t rust , shall be excluded
from t he insolvency proceedings. (n)
 CHAPT ER 2

CLASSIFICAT ION OF CREDITS

Art . 2241. Wit h reference to specific movable propert y

of t he debtor, t he following claims or liens shall be
preferred:

(1) Dut ies, t axes and fees due t hereon to t he

St at e or any subdivision t hereof;

(2) Claims arising from misappropriat ion, breach

of t rust , or malfeasance by public officials
commit t ed in t he performance of t heir dut ies, on
t he movables, money or securit ies obt ained by
t hem;

(3) Claims for t he unpaid price of movables sold,

on said movables, so long as t hey are in t he
possession of t he debtor, up to t he value of t he
same; and if t he movable has been resold by t he
debtor and t he price is st ill unpaid, t he lien may be
enforced on t he price; t his right is not lost by t he
immobilizat ion of t he t hing by dest inat ion,
provided it has not lost it s form, subst ance and
ident it y; neit her is t he right lost by t he sale of t he
t hing toget her wit h ot her propert y for a lump
sum, when t he price t hereof can be det ermined
proport ionally;

(4) Credit s guarant eed wit h a pledge so long as

t he t hings pledged are in t he hands of t he
creditor, or t hose guarant eed by a chat t el
mort gage, upon t he t hings pledged or mort gaged,
up to t he value t hereof;

(5) Credit s for t he making, repair, safekeeping or

preservat ion of personal propert y, on t he movable
t hus made, repaired, kept or possessed;

(6) Claims for laborers' wages, on t he goods

manufact ured or t he work done;
 (7) For expenses of salvage, upon t he goods
salvaged;

(8) Credit s bet ween t he landlord and t he t enant ,

arising from t he cont ract of t enancy on shares,
on t he share of each in t he fruit s or harvest ;

(9) Credit s for t ransport at ion, upon t he goods

carried, for t he price of t he cont ract and
incident al expenses, unt il t heir delivery and for
t hirt y days t hereaft er;

(10) Credit s for lodging and supplies usually

furnished to t ravellers by hot el keepers, on t he
movables belonging to t he guest as long as such
movables are in t he hot el, but not for money
loaned to t he guest s;

(11) Credit s for seeds and expenses for

cult ivat ion and harvest advanced to t he debtor,
upon t he fruit s harvest ed;

(12) Credit s for rent for one year, upon t he

personal propert y of t he lessee exist ing on t he
immovable leased and on t he fruit s of t he same,
but not on money or inst rument s of credit ;

(13) Claims in favor of t he depositor if t he

deposit ary has wrongfully sold t he t hing
deposit ed, upon t he price of t he sale.

In t he foregoing cases, if t he movables to which

t he lien or preference at t aches have been
wrongfully t aken, t he creditor may demand t hem
from any possessor, wit hin t hirt y days from t he
unlawful seizure. (1922a)

Art . 2242. Wit h reference to specific immovable

propert y and real right s of t he debtor, t he following
claims, mort gages and liens shall be preferred, and shall
const it ut e an encumbrance on t he immovable or real
right :
(1) Taxes due upon t he land or building;

(2) For t he unpaid price of real propert y sold, upon

t he immovable sold;

(3) Claims of laborers, masons, mechanics and

ot her workmen, as well as of archit ect s,
engineers and cont ractors, engaged in t he
const ruct ion, reconst ruct ion or repair of
buildings, canals or ot her works, upon said
buildings, canals or ot her works;

(4) Claims of furnishers of mat erials used in t he

const ruct ion, reconst ruct ion, or repair of
buildings, canals or ot her works, upon said
buildings, canals or ot her works;

(5) Mort gage credit s recorded in t he Regist ry of

Propert y, upon t he real est at e mort gaged;

(6) Expenses for t he preservat ion or improvement

of real propert y when t he law aut horizes
reimbursement , upon t he immovable preserved or
improved;

(7) Credit s annot at ed in t he Regist ry of Propert y,

in virt ue of a judicial order, by at t achment s or
execut ions, upon t he propert y affect ed, and only
as to lat er credit s;

(8) Claims of co-heirs for warrant y in t he part it ion

of an immovable among t hem, upon t he real
propert y t hus divided;

(9) Claims of donors or real propert y for pecuniary

charges or ot her condit ions imposed upon t he
donee, upon t he immovable donat ed;

(10) Credit s of insurers, upon t he propert y

insured, for t he insurance premium for t wo years.
(1923a)
Art . 2243. T he claims or credit s enumerat ed in t he t wo
preceding art icles shall be considered as mort gages or
pledges of real or personal propert y, or liens wit hin t he
purview of legal provisions governing insolvency. Taxes
ment ioned in No. 1, Art icle 2241, and No. 1, Art icle 2242,
shall first be sat isfied. (n)

Art . 2244. Wit h reference to ot her propert y, real and

personal, of t he debtor, t he following claims or credit s
shall be preferred in t he order named:

(1) Proper funeral expenses for t he debtor, or

children under his or her parent al aut horit y who
have no propert y of t heir own, when approved by
t he court ;

(2) Credit s for services rendered t he insolvent by

employees, laborers, or household helpers for one
year preceding t he commencement of t he
proceedings in insolvency;

(3) Expenses during t he last illness of t he debtor

or of his or her spouse and children under his or
her parent al aut horit y, if t hey have no propert y of
t heir own;

(4) Compensat ion due t he laborers or t heir

dependent s under laws providing for indemnit y
for damages in cases of labor accident , or illness
result ing from t he nat ure of t he employment ;

(5) Credit s and advancement s made to t he

debtor for support of himself or herself, and
family, during t he last year preceding t he
insolvency;

(6) Support during t he insolvency proceedings,

and for t hree mont hs t hereaft er;

(7) Fines and civil indemnificat ion arising from a

criminal offense;
 (8) Legal expenses, and expenses incurred in t he
administ rat ion of t he insolvent 's est at e for t he
common int erest of t he creditors, when properly
aut horized and approved by t he court ;

(9) Taxes and assessment s due t he nat ional

government , ot her t han t hose ment ioned in
Art icles 2241, No. 1, and 2242, No. 1;

(10) Taxes and assessment s due any province,

ot her t han t hose referred to in Art icles 2241, No.
1, and 2242, No. 1;

(11) Taxes and assessment s due any cit y or

municipalit y, ot her t han t hose indicat ed in
Art icles 2241, No. 1, and 2242, No. 1;

(12) Damages for deat h or personal injuries

caused by a quasi-delict ;

(13) Gift s due to public and privat e inst it ut ions of

charit y or beneficence;

(14) Credit s which, wit hout special privilege,

appear in (a) a public inst rument ; or (b) in a final
judgment , if t hey have been t he subject of
lit igat ion. T hese credit s shall have preference
among t hemselves in t he order of priorit y of t he
dat es of t he inst rument s and of t he judgment s,
respect ively. (1924a)

Art . 2245. Credit s of any ot her kind or class, or by any

ot her right or t it le not comprised in t he four preceding
art icles, shall enjoy no preference. (1925)

CHAPT ER 3

ORDER OF PREFERENCE OF CREDITS

Art . 2246. T hose credit s which enjoy preference wit h

respect to specific movables, exclude all ot hers to t he
ext ent of t he value of t he personal propert y to which
t he preference refers.

Art . 2247. If t here are t wo or more credit s wit h respect

to t he same specific movable propert y, t hey shall be
sat isfied pro rat a, aft er t he payment of dut ies, t axes
and fees due t he St at e or any subdivision t hereof.
(1926a)

Art . 2248. T hose credit s which enjoy preference in

relat ion to specific real propert y or real right s, exclude all
ot hers to t he ext ent of t he value of t he immovable or
real right to which t he preference refers.

Art . 2249. If t here are t wo or more credit s wit h respect

to t he same specific real propert y or real right s, t hey
shall be sat isfied pro rat a, aft er t he payment of t he
t axes and assessment s upon t he immovable propert y
or real right . (1927a)

Art . 2250. T he excess, if any, aft er t he payment of t he

credit s which enjoy preference wit h respect to specific
propert y, real or personal, shall be added to t he free
propert y which t he debtor may have, for t he payment of
t he ot her credit s. (1928a)

Art . 2251. T hose credit s which do not enjoy any

preference wit h respect to specific propert y, and t hose
which enjoy preference, as to t he amount not paid, shall
be sat isfied according to t he following rules:

(1) In t he order est ablished in Art icle 2244;

(2) Common credit s referred to in Art icle 2245 shall be

paid pro rat a regardless of dat es. (1929a)

T RANSIT IONAL PROVISIONS

Art . 2252. Changes made and new provisions and rules

laid down by t his Code which may prejudice or impair
vest ed or acquired right s in accordance wit h t he old
legislat ion shall have no ret roact ive effect .

For t he det erminat ion of t he applicable law in cases

which are not specified elsewhere in t his Code, t he
following art icles shall be observed: (Pars. 1 and 2,
Transit ional Provisions).

Art . 2253. T he Civil Code of 1889 and ot her previous laws

shall govern right s originat ing, under said laws, from
act s done or event s which took place under t heir
regime, even t hough t his Code may regulat e t hem in a
different manner, or may not recognize t hem. But if a
right should be declared for t he first t ime in t his Code, it
shall be effect ive at once, even t hough t he act or event
which gives rise t hereto may have been done or may
have occurred under prior legislat ion, provided said new
right does not prejudice or impair any vest ed or acquired
right , of t he same origin. (Rule 1)

Art . 2254. No vest ed or acquired right can arise from

act s or omissions which are against t he law or which
infringe upon t he right s of ot hers. (n)

Art . 2255. T he former laws shall regulat e act s and

cont ract s wit h a condit ion or period, which were
execut ed or ent ered into before t he effect ivit y of t his
Code, even t hough t he condit ion or period may st ill be
pending at t he t ime t his body of laws goes into effect .
(n)

Art . 2256. Act s and cont ract s under t he regime of t he

old laws, if t hey are valid in accordance t herewit h, shall
cont inue to be fully operat ive as provided in t he same,
wit h t he limit at ions est ablished in t hese rules. But t he
revocat ion or modificat ion of t hese act s and cont ract s
aft er t he beginning of t he effect ivit y of t his Code, shall
be subject to t he provisions of t his new body of laws.
(Rule 2a)
Art . 2257. Provisions of t his Code which at t ach a civil
sanct ion or penalt y or a deprivat ion of right s to act s or
omissions which were not penalized by t he former laws,
are not applicable to t hose who, when said laws were in
force, may have execut ed t he act or incurred in t he
omission forbidden or condemned by t his Code.

If t he fault is also punished by t he previous legislat ion,

t he less severe sanct ion shall be applied.

If a cont inuous or repeat ed act or omission was

commenced before t he beginning of t he effect ivit y of
t his Code, and t he same subsist s or is maint ained or
repeat ed aft er t his body of laws has become operat ive,
t he sanct ion or penalt y prescribed in t his Code shall be
applied, even t hough t he previous laws may not have
provided any sanct ion or penalt y t herefor. (Rule 3a)

Art . 2258. Act ions and right s which came into being but
were not exercised before t he effect ivit y of t his Code,
shall remain in full force in conformit y wit h t he old
legislat ion; but t heir exercise, durat ion and t he
procedure to enforce t hem shall be regulat ed by t his
Code and by t he Rules of Court . If t he exercise of t he
right or of t he act ion was commenced under t he old
laws, but is pending on t he dat e t his Code t akes effect ,
and t he procedure was different from t hat est ablished
in t his new body of laws, t he part ies concerned may
choose which met hod or course to pursue. (Rule 4)

Art . 2259. T he capacit y of a married woman to execut e

act s and cont ract s is governed by t his Code, even if her
marriage was celebrat ed under t he former laws. (n)

Art . 2260. T he volunt ary recognit ion of a nat ural child

shall t ake place according to t his Code, even if t he child
was born before t he effect ivit y of t his body of laws. (n)

Art . 2261. T he exempt ion prescribed in Art icle 302 shall

also be applicable to any support , pension or grat uit y
already exist ing or grant ed before t his Code becomes
effect ive. (n)

Art . 2262. Guardians of t he propert y of minors,

appoint ed by t he court s before t his Code goes into
effect , shall cont inue to act as such, not wit hst anding
t he provisions of Art icle 320. (n)

Art . 2263. Right s to t he inherit ance of a person who

died, wit h or wit hout a will, before t he effect ivit y of t his
Code, shall be governed by t he Civil Code of 1889, by
ot her previous laws, and by t he Rules of Court . T he
inherit ance of t hose who, wit h or wit hout a will, die aft er
t he beginning of t he effect ivit y of t his Code, shall be
adjudicat ed and dist ribut ed in accordance wit h t his new
body of laws and by t he Rules of Court ; but t he
t est ament ary provisions shall be carried out insofar as
t hey may be permit t ed by t his Code. T herefore,
legit imes, bet t erment s, legacies and bequest s shall be
respect ed; however, t heir amount shall be reduced if in
no ot her manner can every compulsory heir be given his
full share according to t his Code. (Rule 12a)

Art . 2264. T he st at us and right s of nat ural children by

legal fict ion referred to in art icle 89 and illegit imat e
children ment ioned in Art icle 287, shall also be acquired
by children born before t he effect ivit y of t his Code. (n)

Art . 2265. T he right of ret ent ion of real or personal

propert y arising aft er t his Code becomes effect ive,
includes t hose t hings which came into t he creditor's
possession before said dat e. (n)

Art . 2266. T he following shall have not only prospect ive

but also ret roact ive effect :

(1) Art icle 315, whereby a descendant cannot be

compelled, in a criminal case, to t est ify against
his parent s and ascendant s;

(2) Art icles 101 and 88, providing against collusion

in cases of legal separat ion and annulment of
 marriage;

(3) Art icles 283, 284, and 289, concerning t he

proof of illegit imat e filiat ion;

(4) Art icle 838, aut horizing t he probat e of a will on

pet it ion of t he t est ator himself;

(5) Art icles 1359 to 1369, relat ive to t he

reformat ion of inst rument s;

(6) Art icles 476 to 481, regulat ing act ions to quiet
t it le;

(7) Art icles 2029 to 2031, which are designed to

promot e compromise. (n)

Art . 2267. T he following provisions shall apply not only to

fut ure cases but also to t hose pending on t he dat e t his
Code becomes effect ive:

(1) Art icle 29, Relat ive to criminal prosecut ions

wherein t he accused is acquit t ed on t he ground
t hat his guilt has not been proved beyond
reasonable doubt ;

(2) Art icle 33, concerning cases of defamat ion,

fraud, and physical injuries. (n)

Art . 2268. Suit s bet ween members of t he same family

which are pending at t he t ime t his Code goes into
effect shall be suspended, under such t erms as t he
court may det ermine, in order t hat compromise may be
earnest ly sought , or, in case of legal separat ion
proceedings, for t he purpose of effect ing, if possible, a
reconciliat ion. (n)

Art . 2269. T he principles upon which t he preceding

t ransit ional provisions are based shall, by analogy, be
applied to cases not specifically regulat ed by t hem.
(Rule 13a)

REPEALING CLAUSE
Art . 2270. T he following laws and regulat ions are hereby
repealed:

(1) T hose part s and provisions of t he Civil Code of

1889 which are in force on t he dat e when t his new
Civil Code becomes effect ive:

(2) T he provisions of t he Code of Commerce

governing sales, part nership, agency, loan,
deposit and guarant y;

(3) T he provisions of t he Code of Civil Procedure

on prescript ion as far as inconsist ent wit h t his
Code; and

(4) All laws, Act s, part s of Act s, rules of court ,

execut ive orders, and administ rat ive regulat ions
which are inconsist ent wit h t his Code. (n)

Approved, June 18, 1949

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