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Chapter 3 Section 6 On BUSLAW

This document discusses obligations with a penal clause under Philippine law. It defines a penal clause as an accessory undertaking to pay a previously stipulated indemnity in case of breach. The purposes of a penal clause are to ensure performance of the principal obligation and substitute penalty for damages. The creditor can still recover damages and interest in addition to the penalty if stipulated by the parties, the obligor refuses to pay the penalty, or there is fraud by the obligor. The debtor can object to paying the penalty if there is performance or if the creditor already required fulfillment. In a case where a debtor failed to deliver a horse, the creditor can enforce the penalty even without proving damages, but cannot claim additional damages since

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Therese Chiu
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12K views1 page

Chapter 3 Section 6 On BUSLAW

This document discusses obligations with a penal clause under Philippine law. It defines a penal clause as an accessory undertaking to pay a previously stipulated indemnity in case of breach. The purposes of a penal clause are to ensure performance of the principal obligation and substitute penalty for damages. The creditor can still recover damages and interest in addition to the penalty if stipulated by the parties, the obligor refuses to pay the penalty, or there is fraud by the obligor. The debtor can object to paying the penalty if there is performance or if the creditor already required fulfillment. In a case where a debtor failed to deliver a horse, the creditor can enforce the penalty even without proving damages, but cannot claim additional damages since

Uploaded by

Therese Chiu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chapter 3, Sec.

6: Obligations with a Penal Clause


I. Definitions
Obligations with a penal clause one which contains an accessory undertaking to pay
a previously stipulated indemnity in case of breach.
Penal clause an accessory undertaking attached to an obligation to assume greater
liability in case of breach.
Joint penal clause - both the principal obligation and the penal clause can be enforced.
II. Discussions
What are the purposes of incorporating a penal clause to an obligation?
According to Art.1226, penal clauses are incorporated to obligations to insure their
performance (to make the consequence of breach as onerous as possible) and to
substitute penalty for indemnity for damages and payment of interests in noncompliance. The main purposes are reparation and punishment.
In an obligation with a penal clause, may the creditor still recover damages and
interests in addition to the stipulated penalty?
According to Art.1226, the creditor may still do so if it is stipulated by the parties, the
obligor refuses to pay the penalty (in which case the creditor may recover legal interest
thereon), or the obligor is guilty of fraud in the fulfillment of the obligation (in which case
the creditor may recover damages caused by such fraud).
In what cases may the debtor validly object to the enforcement of the stipulated
penalty?
According to Art.1227, debtor may object the enforcement of penalty if there is
performance on his part or if the creditor already required fulfillment of obligation.
III. Problems
Has Y the right to refuse to accept the penalty in lieu of the horse?
Yes. According to Art.1227, X cannot exempt himself from delivering the horse by paying
the penalty, unless this right was reserved for him.
Can Y still enforce the penalty?
Yes. According to Art 1228, Y does not have to prove that he suffered damages in order
to demand the penalty. Since X violated the obligation, Y can enforce the penalty.
Is X liable for damages in addition to the penalty?
No. According to Art.1226, X will only be liable for damages if the stipulations so states,
if X refuses to pay the penalty, or when there is fraud on Xs part. Since there is only
negligence and not fraud, Y cannot demand for damages in addition to the penalty and X
is only liable for the penalty.

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