Ito Naa

OBLIGATIONS AND CONTRACTS
REVIEWER
TITLE I – OBLIGATIONS (c) NEGATIVE OBLIGATION – the obligation not

to do (which naturally inludes not to give)
CHAPTER 1 D. From the viewpoint of persons obliged -
GENERAL PROVISIONS “sanction” -
(a) UNILATERAL – where only one of the parties
1156. An obligation is a juridical necessity to give, to is bound (e.g. Plato owes Socrates P1,000.
do, or not to do. Plato must pay Socrates.)
(d) BILATERAL – where both parties are bound
JURIDICAL NECESSITY – juridical tie; connotes that in case of (e.g. In a contract of sale, the buyer is
noncompliance, there will be legal sanctions. obliged to deliver)
- may be:
 An obligation is nothing more than the duty of a (b.1) reciprocal
person (obligor) to satisfy a specific demandable (b.2) non-reciprocal – where performance by one is non-
claim of another person (obligee) which, if breached, dependent upon performance by the other
is enforceable in court.
ELEMENTS OF OBLIGATION
 A contract necessarily gives rise to an obligation but a) ACTIVE SUBJECT – (Creditor / Obligee) the person who
an obligation does not always need to have a is demanding the performance of the obligation;
contract. b) PASSIVE SUBJECT – (Debtor / Obligor) the one bound to
perform the prestation or to fulfill the obligation or duty;
DAMAGES – sum of money given as a compensation for the c) PRESTATION – (to give, to do, or not to do) object;
injury or harm suffered by the obligee for the violation of his subject matter of the obligation; conduct required to be
right. observed by the debtor;
d) EFFICIENT CAUSE – the JURIDICAL TIE which binds the
KINDS OF OBLIGATION parties to the obligation; source of the obligation.
A. From the viewpoint of “sanction” - e) CAUSA (causa debendi/causa obligationes) - why
(a) CIVIL OBLIGATION – that defined in Article obligation exists
1156; an obligation, if not fulfilled when it
becomes due and demandable, may be PRESTATION (Object)
enforced in court through action; based on 1. TO GIVE – delivery of a thing to the creditor (in sale,
law; the sanction is judicial due process deposit, pledge, donation);
(b) NATURAL OBLIGATION – a special kind of 2. TO DO – covers all kinds of works or services
obligation which cannot be enforced in court (contract for professional services);
but which authorizes the retention of the 3. NOT TO DO – consists of refraining from doing some
voluntary payment or performance made by acts (in following rules and regulations).
the debtor; based on equity and natural law.
(i.e. when there is prescription of duty to Requisites of Prestation / Object:
pay, still, the obligor paid his dues to the 1) licit (if illicit, it is void)
obligee – the obligor cannot recover his 2) possible (if impossible, it is void)
payment even there is prescription) the 3) determinate or determinable (or else, void)
sanction is the law, but only conscience had 4) pecuniary value
originally motivated the payment.
(c) MORAL OBLIGATION – the sanction is  INJURY – wrongful act or omission which causes loss
conscience or morality, or the law of the or harm to another
church. (Note: If a Catholic promises to hear  DAMAGE – result of injury (loss, hurt, harm)
mass for 10 consecutive Sundays in order to
receive P1,000, this obligation becomes a 1157. Obligation arises from – (1) law; (2) contracts;
civil one.) (3) quasi-contracts; (4) acts or omissions punished by
B. From the viewpoint of subject matter - law; (5) quasi-delicts.
(a) REAL OBLIGATION – the obligation to give
(b) PERSONAL OBLIGATION – the obligation to (1) LAW (Obligation ex lege) – imposed by law itself; must
do or not to do (e.g. the duty to paint a be expressly or impliedly set forth and cannot be presumed
house, or to refrain from committing a - [See Article 1158]
nuisance)
C. From the affirmativeness and negativeness of the (2) CONTRACTS (Obligation ex contractu) – arise from
obligation - stipulations of the parties: meeting of the minds / formal
(a) POSITIVE OR AFFIRMATIVE OBLIGATION – agreement
the obligation to give or to do - must be complied with in good faith because it is the “law”
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between parties; neither party may unilaterally evade his Code itself.
obligation in the contract, unless:  Special laws – refer to all other laws not contained in
a) contract authorizes it the Civil Code.
b) other party assents
1159. Obligations arising from contracts have the force
Note: of law between the contracting parties and should be
Parties may freely enter into any stipulations, provided they complied with in good faith.
are not contrary to law, morals, good customs, public order or
public policy CONTRACT – meeting of minds between two persons whereby
- [See Article 1159] one binds himself, with respect to the other, to give, to do
something or to render some service; governed primarily by
(3) QUASI-CONTRACTS (Obligation ex quasi-contractu) – the agreement of the contracting parties.
arise from lawful, voluntary and unilateral acts and which are
enforceable to the end that no one shall be unjustly enriched VALID CONTRACT – it should not be against the law, contrary
or benefited at the expense of another to morals, good customs, public order, and public policy.
- 2 kinds:
a. Negotiorum gestio - unauthorized management;  In the eyes of law, a void contract does not exist and
This takes place when a person voluntarily takes no obligation will arise from it.
charge of another’s abandoned business or
property without the owner’s authority OBLIGATIONS ARISING FROM CONTRACTS – primarily
b. Solutio indebiti - undue payment; This takes governed by the stipulations, clauses, terms and conditions of
place when something is received when there is their agreements.
no right to demand it, and it was unduly
delivered thru mistake  If a contract’s prestation is unconscionable (unfair)
- [See Article 1160] or unreasonable, even if it does not violate morals,
law, etc., it may not be enforced totally.
(4) DELICTS (Obligation ex maleficio or ex delicto) – arise
from civil liability which is the consequence of a criminal  Interpretation of contract involves a question of law.
offense
- Governing rules: COMPLIANCE IN GOOD FAITH – compliance or performance in
1. Pertinent provisions of the RPC and other penal laws accordance with the stipulations or terms of the contract or
subject to Art 2177 Civil Code agreement.
[Art 100, RPC – Every person criminally liable for a felony is
also civilly liable] FALSIFICATION OF A VALID CONTRACT – only the
2. Chapter 2, Preliminary title, on Human Relations ( unauthorized insertions will be disregarded; the original terms
Civil Code ) and stipulations should be considered valid and subsisting for
3. Title 18 of Book IV of the Civil Code – on damages the partied to fulfill.
- [See Article 1161]
1160. Obligations derived from quasi-contracts shall be
(5) QUASI-DELICTS / TORTS (Obligation ex quasi-delicto subject to the provisions of chapter 1, title 17 of this
or ex quasi-maleficio) – arise from damage caused to another book.
through an act or omission, there being no fault or
negligence, but no contractual relation exists between the QUASI-CONTRACT – juridical relation resulting from lawful,
parties voluntary and unilateral acts by virtue of which, both parties
- [See Article 1162] become bound to each other, to the end that no one will be
unjustly enriched or benefited at the expense of the other.
1158. Obligations from law are not presumed. Only
those (1) expressly determined in this code or (2) in  There is no consent - consent is PRESUMED.
special laws are demandable, and shall be regulated by
the precepts of the law which establishes them; and as (1) NEGOTIORUM GESTIO – juridical relation
to what has not been foreseen, by the provisions of this which takes place when somebody
code. voluntarily manages the property affairs of
another without the knowledge or consent
 Unless such obligations are EXPRESSLY provided by of the latter; owner shall reimburse the
law, they are not demandable and enforceable, and gestor for necessary and useful expenses
cannot be presumed to exist. incurred by the latter for the performance of
 The Civil Code can be applicable suppletorily to his function as gestor.
obligations arising from laws other than the Civil (2) SOLUTIO INDEBITI – something is received
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when there is no right to demand it and it obligation to pay for the damage done, there being fault or
was unduly delivered through mistake; negligence but there is no pre-existing contractual relation
obligation to return the thing arises on the between parties.
part of the recipient. (e.g. If I let a
storekeeper change my P500 bill and by REQUISITES:
error he gives me P560, I have the duty to a. omission
return the extra P60) b. negligence
c. damage cause to the plaintiff
1161. Civil obligations arising from criminal offenses d. direct relation of omission, being the cause, and
shall be governed by the penal laws, subject to the the damage, being the effect
provisions of Article 2177, and of the pertinent e. no pre-existing contractual relations between
provisions of Chapter 2, Preliminary in Human parties
Relations, and of Title 18 of this book, regulating
damages. Fault or Negligence – consists in the omission of that diligence
which is required by the nature of the obligation and
Governing rules: corresponds with the circumstances of the person, time, and
1. Pertinent provisions of the RPC and other penal laws of the place.
subject to Art 2177 Civil Code
[Art 100, RPC – Every person criminally liable for a felony is BASIS DELICTS QUASI-DELICTS
also civilly liable] 1. INTENT Criminal / Negligence
2. Chapter 2, Preliminary title, on Human Relations ( malicious
Civil Code ) 2. INTEREST Affects PUBLIC Affects PRIVATE
3. Title 18 of Book IV of the Civil Code – on damages interest interest
3. LIABILITY Criminal and Civil liability
 Every person criminally liable for a felony is also civil liabilities
criminally liable (art. 100, RPC) 4. PURPOSE Purpose – Indemnification
punishment
CRIMINAL LIABILITY INCLUDES: 5.COMPROMISE Cannot be Can be compromised
(a) RESTITUTION – restoration of property compromised
previously taken away; the thing itself shall 6. GUILT Proved beyond Preponderance of
be restored, even though it be found in the reasonable evidence
possession of a third person who has doubt
acquired it by lawful means, saving to the
latter his action against the proper person
who may be liable to him.
(b) REPARATION OF THE DAMAGE CAUSED – Note:
court determines the amount of damage: The SC in Sagrada v. Naccoco implied that the sources of
price of a thing, sentimental value, etc. obligation in Art 1162 is exclusive. Many commentators
(c) INDEMNIFICATION FOR CONSEQUENTIAL believe, however that it should not be. At present, there is
DAMAGES – includes damages suffered by one more possible source of obligations - PUBLIC OFFER
the family of the injured party or by a third (Public Offer is in fact a source of obligation in
person by reason of the crime. the German Civil Code) – Ateneo memory aid
Effect of acquittal in criminal case: *** The enumeration in 1157 is not scientific because in
a. when acquittal is due to reasonable doubt – no civil reality there are only 2 sources of obligations: law and
liability contract (quasi-contract, delicts, and quasi-delicts are
b. when acquittal is due to exempting circumstances – there imposed by law) [Leung Ben v. O'Brien, 38 Phil. 182]
is civil liability
c. when there is preponderance of evidence – there is civil CHAPTER 2
liability NATURE AND EFFECT OF OBLIGATIONS
1163. Every person obliged to give something is also

1162. Obligations derived from quasi-delicts shall be obliged to take care of it with the proper diligence of a
governed by the provisions of chapter 2, title 17 of this good father of a family, unless the law or the
book, and by special laws. stipulation of the parties requires another standard of
care.
QUASI-DELICT (culpa aquiliana) – an act or omission by a
person which causes damage to another giving rise to an  Speaks of an obligation to care of a DETERMINATE
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thing (that is one which is specific; a thing identified yet the owner of the property before the delivery.
by its individuality) which an obligor is supposed to
deliver to another. � ACTUAL DELIVERY – actual delivery of a thing from the
 Reason: the obligor cannot take care of the whole hand of the grantor to the hand of the grantee (presonally),
class/genus or manifested by certain possessory acts executed by the
grantee with the consent of the grantor (realty).
DUTIES OF DEBTOR: � CONSTRUCTIVE TRADITION – representative of symbolical
in essence and with intention to deliver the ownership.
 Preserve or take care of the things due.
 DILIGENCE OF A GOOD FATHER – a good father FRUITS:
does not abandon his family, he is always ready 1. NATURAL – spontaneous products of the soil, the
to provide and protect his family; ordinary care young and other products of animals;
which an average and reasonably prudent man 2. INDUSTRIAL – produced by lands of any cultivation
would do. or labor;
 ANOTHER STANDARD OF CARE – extraordinary 3. CIVIL – those derived by virtue of juridical relation.
diligence provided in the stipulation of parties.
 FACTORS TO BE CONSIDERED – diligence 1165. When what is to be delivered is a determinate
depends on the nature of obligation and thing, the creditor … may compel the debtor to make
corresponds with the circumstances of the delivery. If the thing is indeterminate or generic, he
person, time, and place. may ask that the obligation be complied with at the
expense of the debtor. If the obligor delays or has
** Debtor is not liable if his failure to deliver the thing is due promised to deliver the same ting to two or more
to fortuitous events or force majeure… without negligence or persons who do not have the same interest, he shall be
fault in his part. responsible for any fortuitous event until he has
effected the delivery.
 Deliver the fruits of a thing
 Deliver the accessions/accessories DETERMINATE THING
 Deliver the thing itself  something which is susceptible of particular
 Answer for damages in case of non-fulfillment or breach designation or specification;
 obligation is extinguished if the thing is lost due to
1164. The creditor has a right to the fruits of the thing fortuitous events.
from the time the obligation to deliver it arises. INDETERMINATE THING
However, he shall acquire no real right over it until the  something that has reference only to a class or
same has been delivered to him. genus;
 obligation to deliver is not so extinguished by
REAL RIGHT (jus in re) – right pertaining to person over a fortuitous events.
specific thing, without a passive subject individually
determined against whom such right may be personally REMEDIES FOR FAILURE OF DELIVERY (determinate thing)
enforced. 1. Complaint for specific performance – an action to
 a right enforceable against the whole world compel the fulfillment of the obligation.
2. Complaint for rescission of the obligation – action to
PERSONAL RIGHT (jus ad rem) – a right pertaining to a rescind
person to demand from another, as a definite passive subject, 3. Complaint for damages – action to claim for
the fulfillment of a prestation to give, to do or not to do. compensation of damages suffered
 a right enforceable only against a definite person or
group of persons.  As a general rule, “no person shall be responsible for
those events which could not be foreseen, or which,
 Before the delivery, the creditor, in obligations to though foreseen, are inevitable, except:
give, has merely a personal right against the debtor 1. in cases expressly specified by the law
– a right to ask for delivery of the thing and the 2. when it is stipulated by the parties
fruits thereof. 3. when the nature of the obligation requires
 Once the thing and the fruits are delivered, then he assumption of risk
acquires a real right over them.  An indeterminate thing cannot be object of
 Ownership is transferred by delivery which could be destruction by a fortuitous event because genus
either actual or constructive. (Art. 1477) � never perishes.
 The remedy of the buyer when there is no delivery
despite demand is to file a complaint for “SPECIFIC 1166. The obligation to give a determinate thing
PERFORMANCE AND DELIVERY” because he is not includes that of delivering all its accessions and
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accessories, even though they may not have been

mentioned.
ORDINARY DELAY – mere failure to perform an obligation at
ACCESSIONS – fruits of the thing or additions to or the appointed time.
improvements upon the principal LEGAL DELAY (DEFAULT) – tantamount to non-fulfillment of
 those which are naturally or artificially attached to the the obligation and arises after an extrajudicial or judicial
thing demand was made upon the debtor.
ACCESSORIES – things included with the principal for the KINDS OF DEFAULT:
latter’s embellishment, better use, or completion a) MORA SOLVENDI – delay on the part
of the debtor to fulfill his obligation;
When does right to fruits arise? – from the time the obligation REQUISITES:
to deliver arises 1. failure of the obligor to perform obligation on
 Conditional – from the moment the condition the DATE agreed upon;
happens 2. demand (j/ej) by the creditor;
 With a term/period – upon the expiration of the 3. failure to comply with such demand
term/period
 Simple – from the perfection of the contract EFFECTS:
1) debtor – liable for damages and
1167. If a person obliged to do something fails to do it, interests
the same shall be executed at his cost. This same rule 2) debtor – liable for the loss of a thing
shall be observed if he does it in contravention of the due to a fortuitous event
tenor of the obligation … it may be decreed that what
has been poorly done be undone. KINDS:
1) mora solvendi ex re – default in real
THREE SITUATIONS: obligations (to give)
a) Debtor’s failure to perform an obligation 2) mora solvendi ex persona – default in
 creditor may do the obligation, or by another, at personal obligations (to do)
the expense of the debtor;
 recover damages b) MORA ACCIPIENDI – delay on the
b) Performance was contrary to the terms agreed part of the creditor to accept the
upon performance of the obligation;
 order of the court to undo the same at the Effects:
expense of the debtor 1. creditor – liable for damages
c) Performance in a poor manner 2. creditor – bears the risk of loss of the thing
 order of the court to undo the same at the 3. debtor – not liable for interest from the time of
expense of the debtor creditor’s delay
4. debtor – release himself from the obligation
1168. When the obligation consists in NOT DOING and
the obligor does what has been forbidden him, it shall c) COMPENSATIO MORAE – delay of the
also be undone at his expense. obligors in reciprocal obligation.
Effect: the default of one compensates the default of
1169. Those obliged to deliver or to do something incur the other; their respective liabilities shall be offset
in delay from the time the obligee judicially or equitable.
extrajudicially demands from them the fulfillment of
their obligation.  Default / Delay in negative obligation is not possible.
However, the demand by the creditor shall not be (In negative obligation, only fulfillment and violation
necessary in order that delay may exists: are possible)
 When the law or obligation so expressly declares; 1170. Those who in the performance of their
 When from the nature of the contract, time us the obligations are guilty of fraud, negligence, or delay,
essence and motivating factor for its and those who in any manner contravene the tenor
establishment; thereof, are liable for damages.
 When demand would be useless (prestation is
impossible); FRAUD (dolo) – deliberate intentional evasion of the faithful
 In reciprocal obligations, from the moment one of fulfillment of an obligation;
the parties fulfills his obligation; NEGLIGENCE (culpa or fault) – voluntary act or omission of
 When the debtor admits he is in default diligence, there being no malice, which prevents the normal
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fulfillment of an obligation; NATURE OF Direct, Incidental to the

DELAY (mora) – default or tardiness in the performance of an NEGLIGENCE substantive and performance of the
obligation after it has been due and demandable; independent obligation.
CONTRAVENTION OF TERMS OF OBLIGATION (violatio)– GOOD FATHER OF Complete and Not complete and
violation of terms and conditions stipulated in the obligation; THE FAMILY proper defense proper defense in
this must not be due to a fortuitous event. DEFENSE (parents, the selection of
guardian, employees.
employers)
1171. Responsibility arising from fraud is demandable PRESUMPTION OF No presumption There is presumption
in all obligations. Any waiver of an action for future NEGLIGENCE – injured party – defendant must
fraud is void. must prove prove that there was
negligence of no negligence in the
 To allow such waiver will necessarily render the the defendant. carrying out of the
obligatory force of contracts illusory. terms of the
 The law does not prohibit waiver of an action for contract.
damages based on fraud already committed.
 Any deliberate deviation from the normal way of
1173. The fault or negligence of the obligor consists in
fulfilling the obligation may be a proper basis for
the omission of that diligence which is required by the
claim for damages against the guilty party.
nature of the obligation and corresponds with the
circumstances of the persons, of he time and of the
INCIDENTAL FRAUD – committed in the performance of an
place… If the law or contract does not state the
obligation already existing because of a contract.
diligence which is to be observed in the performance,
CAUSAL FRAUD – employed in the execution of contract in
that which is expected if a good father of a family shall
order to secure consent; remedy is annulment bec of vitiation
be required.
of consent.
FRAUD distinguished from NEGLIGENCE
1172. Responsibility arising from negligence in the
performance of every kind of obligation is also FRAUD NEGLIGENCE
demandable, but such liability may be regulated by the There is deliberate intention There is no deliberate
courts, according to circumstances. to cause damage. intention to cause damage.
Liability cannot be Liability may be mitigated.
Court’s discretion because: mitigated.
(a) negligence depends upon the Waiver for future fraud is Waiver for future negligence
circumstances of a case – good or bad void. may be allowed in certain
faith of the obligor may be considered cases:
as well as the conduct or misconduct of 1. gross – can never be
the obligee; excused in advance;
(b) it is not as serious as fraud. against public policy
2. simple – may be
Negligence – lack of foresight or knowledge excused in certain cases
Imprudence – lack of skill or precaution
DILIGENCE – the attention and care required of a person in a
TEST OF NEGLIGENCE given situation and is opposite of negligence.
Did the defendant, in doing the alleged negligent act, use the
reasonable care and caution which an ordinary prudent man NEGLIGENCE – consists in the omission of that diligence
would have used in the same situation? which is required by the nature of the particular obligation
and corresponds with the circumstances of the persons, of the
TWO TYPES OF NEGLIGENCE: time, and of the place.
Basis 1. Culpa 2. Culpa KINDS of DILIGENCE:

Aquiliana Contractual 1. DILIGENCE OF A GOOD FATHER – a good father
(Quasi-delict) (Breach of does not abandon his family, he is always ready
contract) to provide and protect his family; ordinary care
DEFINITION Negligence Negligence in the which an average and reasonably prudent man
between parties performance of would do.
not so related contractual 2. Diligence required by the law governing the
by pre-existing obligation particular obligation
contract 3. Diligence stipulated by the parties
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1174. Except in cases expressly specified by the law, or USURY LAW – makes the usurers criminally liable if the
when it is otherwise declared by stipulation, or when interest charged on loans are more that the limit prescribed
the nature of the obligation requires the assumption of by law.
risk, no person shall be responsible for those events  This law is repealed – Circular No. 905 of the Central
which could not be foreseen, or which, though Bank has expressly removed the interest ceilings
foreseen, were inevitable. prescribed by the USURY LAW.
FORTUITOUS EVENT – an occurrence or happening which 1176. The receipt of the principal by the creditor
could not be foreseen or even if foreseen, is inevitable; without reservation with respect to the interest, shall
absolutely independent of human intervention; act of God. give rise to the presumption that said interest has been
paid.
FORCE MAJEURE - an event caused by the legitimate or The receipt of a later installment of a debt without
illegitimate acts of persons other than the obligor; there is reservation as to prior installments, shall likewise raise
human intervention. the presumption that such installments have been paid.
 conditions which exempt obligor from liability:  These are mere presumptions.
1. event is independent of the will of obligor  To be sure – write the interest and the dates covered
2. it must either be unforeseeable or unavoidable by such payment in the receipt.
3. occurrence must render it impossible for the debtor
to fulfill the obligation in a normal matter 1177. The creditors, after having pursued the property
4. the obligor is free of partiipation in injury to creditor. in possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of the
REQUISITES OF FORTUITOUS EVENT: latter for the same purpose, save those which are
1. Independent of the human will (or at least of the inherent in his person; they may also impugn the acts
obligor’s) which the debtor may have done to defraud them.
2. Unforeseen or unavoidable
3. Of such character as to render it impossible for REMEDIES AVAILABLE TO CREDITORS FOR THE
the obligor to comply with his obligation in a SATISFACTION OF THEIR CLAIMS:
normal manner 1. Exact fulfillment with right to damages
4. Obligor – free from any 2. Exhaustion of the debtor’s properties still in his
participation/aggravation of the injury to the possession – writ of attachment (before judgment)
obligee (no negligence or imprudence) or writ of execution (for final judgment not yet
executed)
EXEPTIONS: 3. ACCION SUBROGATORIA – an action where the
1. When it is expressly stipulated that he shall be liable creditor whose claims had not been fully satisfied,
even if non-performance of the obligation is due to may go after the debtors (3rd person) of the
fortuitous events; defendant debtor.
2. When the nature of the obligation requires the 4. ACCION PAULIANA – an action where the creditor
assumption of risk; files an action in court for the RESCISSION of acts or
3. When the obligor is in delay; contracts entered into by the debtor designed to
4. When the obligor has promised the same thing to defraud the former.
two or more persons who do not have the same
interest; 1178. Subject to the laws, all rights acquired in virtue
5. When the possessor is in bad faith and the thing lost of an obligation are transmissible, if there has been no
or deteriorated due to fortuitous event; stipulation to the contrary.
6. When the obligor contributed to the loss of the thing.
EXCEPTIONS:
1175. Usurious transactions shall be governed by a) Those not transmissible by their nature like
special laws. purely personal rights;
b) Those not transmissible by provision of law;
USURY – contracting for or receiving interest in excess of the c) Those not transmissible by stipulation of parties.
amount allowed by law for the loan or use of money, goods,
etc. CHAPTER 3
DIFFERENT KINDS OF OBLIGATIONS
SIMPLE LOAN – one of the parties delivers to another, money
or other consumable thing upon the condition that the same Section 1 – Pure and Conditional Obligations
amount of the same kind and quality shall be paid.
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1179. Every obligation whose performance does not creditor depends upon the happening of the event which
depend upon a future or uncertain event, or upon a constitutes the condition; if such condition does not take
past event unknown to the parties, is demandable at place, it would be as of the conditional obligation had never
once. existed.
Every obligation which contains a resolutory condition (e.g. promise to give a car after graduating from law school
shall also be demandable, without prejudice to the as cum laude)
effects of the happening of the event.
Resolutory Condition – the rights and obligations already
CONDITION – an event which is both future and uncertain existing are under threat of extinction upon the happening or
upon which the existence or extinguishment of an obligation fulfillment of such condition.
is made to depend. (e.g. donation by reason of marriage – the celebration of
marriage is a resolutory condition; if the marriage did not
PURE OBLIGATION – an obligation which does not contain any push through, the donation may be revoked)
condition or term upon which the fulfillment is made to
depend; immediately demandable by the creditors and the 1182. When the fulfillment of the condition depends
debtor cannot be excused from not complying with his upon the sole will of the debtor, the conditional
prestation. obligation shall be void. If it depends upon chance or
upon the will of a third person, the obligation shall take
CONDITIONAL OBLIGATION – an obligation subject to a effect in conformity with the provisions of this Code.
condition.
a) Suspensive Obligation – its fulfillment gives rise  Applies only to suspensive conditions.
to an obligation; the demandability of the
obligation or the effectivity of the contract can
take place only after the condition has been 3 KINDS OF CONDITIONS UNDER THIS ARTICLE:
fulfilled. 1. POTESTATIVE – a suspensive condition
b) Resolutory Obligation – its happening which depends upon the will of one of the
extinguishes the obligation which is already contracting parties = if at the sole will of the
existing; debtor, it is void; if at the creditor’s, still
valid. this is to prevent the establishment of
1180. When the debtor binds himself to pay when his illusory obligations.
means permit him to do so, the obligation shall be 2. CASUAL – the condition depends upon
deemed to be one with a period, subject to the chance or the will of a third person;(i.e.
provisions of Article 1197. cellphone warranty)
3. MIXED – the condition depends partly upon
 Speaks of a period depending on the will of the the will of the parties and partly upon
DEBTOR. If its purpose is to delay, immediate action chance or the will of a third person;
is allowed. The court fixes the terms. (example ni Atty. De Chavez: passing the
bar)
PERIOD – a future and certain event upon the arrival of
which, the obligation subject to it either arises or is 1183. Impossible conditions, those contrary to good
extinguished. customs or public policy and those prohibited by law
shall annul the obligation which depends upon them. If
INDICATIONS OF A TERM OR PERIOD: the obligation is divisible, that part thereof which is not
When the debtor binds himself to pay – affected by the impossible or unlawful condition shall
 when his means permit him to do so be valid.
 little by little The condition not to do an impossible thing shall be
 as soon as possible considered as not having been agreed upon.
 from time to time
 as soon as I have the money POSSIBLE CONDITION – if it is capable of realization or
 in partial payment actualization according to nature, law, public policy or good
 when in the position to pay customs.
1181. In conditional obligations, the acquisition of 2 KINDS OF IMPOSSIBLE CONDITIONS:

rights, as well as the extinguishment or loss of those 1. Physically Impossible – cannot exist or cannot be done in
already acquired, shall depend upon the happening of its nature;
the event which constitutes the condition. 2. Legally Impossible – contrary to law, good customs, or
public policy.
Suspensive Condition – the acquisition of rights by the
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When a conditional obligation is VOID – impossible conditions

annul the obligation which depends upon them; the obligor 1184 1185
knows his obligation cannot be fulfilled, he has no intention to (POSITIVE SUSPENSIVE) (NEGATIVE SUSPENSIVE)
comply with his obligation. Jose obliges himself to give Jose obliges himself to give the
the pregnant woman Maria pregnant woman Maria P5000 if
When a conditional obligation is VALID – if the condition is P5000 if she would give birth she would NOT give birth on
negative (not to do an impossible thing), it is disregarded and on or before December 30. December 30.
the obligation is rendered pure and valid. a. Jose is LIABLE if Maria a. Jose is NOT LIABLE if Maria
gives birth on or before gives birth on December 30.
Only the affected obligation is void, if the obligation is December 30.
divisible, and the part thereof not affected by the impossible b. Jose is NOT LIABLE if b. Jose is LIABLE if Maria DID
condition is valid. Maria gives birth after NOT give birth on December 30
December 30. – if Maria gives birth BEFORE or
Only the condition is void if there is already a pre-existing AFTER December 30.
obligation and it does not depend upon the fulfillment of the c. If Maria would have a c. If Maria would have a
condition which is impossible. miscarriage before December miscarriage before December
30, the obligation is 30, the obligation is deemed
1184. The condition that some event happen at a EXTINGUISHED. FULFILLED.
determinate time shall extinguish the obligation as
soon as the time expires or if it has become indubitable
that the event will not take place.
1186. The condition shall be deemed fulfilled when the
Positive condition – refers to the fulfillment of an event or obligor voluntarily prevents its fulfillment.
performance of an act  This provision speaks of the DOCTRINE OF
CONSTRUCTIVE FULFILLMENT
Negative condition – refers to the non-fulfillment or non-
performance of an act. - REQUISITES:
1. The condition is SUSPENSIVE;
POSITIVE SUSPENSIVE CONDITION 2. The obligor ACTUALLY PREVENTS the fulfillment of
The obligation is extinguished: the condition;
1. As soon as the TIME EXPIRES without the event 3. He acts VOLUNTARILY.
taking place;
2. As soon as it has become certain that the EVENT  Malice or fraud is not required, as long as his
WILL NOT TAKE PLACE although the time specified purpose is to prevent the fulfillment of the condition.
has not yet expired.  No person shall profit by his own wrong.
** TIME is the condition – should happen for the obligation to 1187. The effects of a conditional obligation to give,
extinguish. once the condition has been fulfilled, shall retroact to
the day of the constitution of the obligation.
1185. The condition that some event will not happen at Nevertheless, when the obligation imposes reciprocal
a determinate time shall render the obligation effective prestations upon the parties, the fruits and interests
from the moment the time indicated has elapsed, or if it during the pendency of the condition shall be deemed
has become evident that the event cannot occur. to have been mutually compensated. If the obligation is
If no time has been fixed, the condition shall be unilateral, the debtor shall appropriate the fruits and
deemed fulfilled at such time as may have probably interests received, unless from the nature and
been contemplated, bearing in mind the nature of the circumstances of the obligation it should be inferred
obligation. that the intention of the person constituting the same
was different.
** This is a condition of non-happening of a future event. In obligations to do and not to do, the courts shall
determine, in each case, the retroactive effect of the
The obligation shall become effective and binding: condition that has been complied with.
a) From the moment the time indicated has elapsed
without the event taking place;  Applies only to fulfilled suspensive conditions.
b) From the moment it has become evident that the  Retroactive statute
event cannot occur, although the time indicated has  The effects of the obligation is deemed to commence
not yet elapsed. not from the fulfillment of the obligation but from the
day of its constitution (similar to the legitimation of a
1184 -vs- 1185 natural child)
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 The article does not require the delivery of fruits or 1190. When the conditions have for their purpose the
payment of interests accruing (accumulating) before extinguishment of an obligation to give, the parties,
the fulfillment of the suspensive condition. upon the fulfillment of said conditions, shall return to
each other what they have received.
 Obligations to do or not to do – the retroactive effect In case of the loss, deterioration or improvement of the
shall be determined by the court using its sound thing, the provisions which, with respect to the debtor,
discretion without disregarding the intentions of the are laid down in the preceding article shall be applied
parties. to the party who is bound to return.
As for the obligations to do and not to do, the
1188. The creditor may, before the fulfillment of the provisions of the second paragraph of Article 1187 shall
condition, bring the appropriate actions for the be observed as regards the effect of the
preservation of his right. extinguishment of the obligation.
The debtor may recover what during the same time he
has paid by mistake in case of a suspensive condition.  Refers to the fulfillment of a resolutory condition.
 When the resolutory condition happened, the
Preservation of the rights of CREDITOR – the debtor may obligation is considered as if it did not exist.
render nugatory (not serious, ignore) the obligation upon the  The parties are bound to return or restore whatever
happening of the obligation. they have received from each other – “reciprocal
 Action for prohibition restraining the alienation of the restitution”
thing pending the happening of the suspensive  Donation by reason of marriage – if the marriage
condition; does not happen, such donation should be returned
 Action to demand security if the debtor has become to the donor.
insolvent;  Loss, deterioration and improvement – governed by
 Action to set aside alienations made by the debtor in 1189.
fraud of creditors;  In obligations to do and not to do, the courts shall
 Actions against adverse possessors to interrupt the determine, in each case, the retroactive effect of the
running prescriptive period. condition that has been complied with.
 To have his rights annotated in the registry.
1191. The power to rescind obligations is implied in
Rights of the DEBTOR – entitled to recover what has been reciprocal ones, in case one of the obligors should not
paid by mistake prior to the happening of the suspensive comply with what is incumbent upon him.
condition. The injured party may choose between the fulfillment
and the rescission of the obligation, with the payment
1189. When the conditions have been imposed with the of damages in either case. He may also seek rescission,
intention of suspending the efficacy of an obligation to even after he has chosen fulfillment, if the latter should
give, the following rules shall be observed in case of become impossible.
the improvement, loss or deterioration of the thing The court shall decree the rescission claimed, unless
during the pendency of the condition: there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights
LOSS of third persons who have acquired the thing, in
(1) debtor without fault – obligation is accordance with Articles 1385 and 1388 and the
extinguished Mortgage Law.
(2) debtor with fault – obligation to pay
damages RECIPROCAL – arise from same causse; each is a debtor and
creditor of the other
DETERIORATION
1. debtor without fault – impairment is to RESCISSION – resolution or cancellation of the contract
be borne by the creditor  Applies only to reciprocal obligations where two
2. debtor with fault – creditor chooses: parties are mutually debtor and creditor of each
rescission of obligation, fulfillment, other in the same transaction. The cause must be
indemnity identical ad the obligations must arise
simultaneously.
IMPROVEMENT  The party who can demand rescission should be the
1. by nature or time – improvement: inure to the party who is ready, willing, and able to comply with
benefit of the creditor his own obligations while the other is not capable to
2. at the expense of the debtor – granted to the perform his own.
usufructuary
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REVIEWER
REMEDIES:
1. Specific performance or fulfillment of Term – length of time sure to come
obligation with damages; Condition – fact or event uncertain to come
2. Rescission of contract with damages.
Basis Period/Term Condition
Effect of rescission: the parties must surrender whatever they 1. TIME Always refers to Can refer to past
have received from the other, and the obligation to pay is FUTURE events unknown to
extinguished. the parties
2. FULFILLMENT Sure to happen at May or may not
If there is an express stipulation of automatic rescission an exact date or happen.
between parties – such resolution shall take place only after indefinite time but
the creditor has notified the debtor of his choice of rescission sure to come.
subject to judicial scrutiny. 3. INFLUENCE Merely fixes the May cause the arising
time for the or cessation of the
1192. In case both parties have committed a breach of demandability or obligation.
the obligation, the liability of the first infractor shall be performance of
equitably tempered by the courts. If it cannot be obligation.
determined which of the parties first violated the
contract, the same shall be deemed extinguished, and
each shall bear his own damages. REQUISITES:
3. Future
FIRST INFRACTOR KNOWN 4. Certain, sure to come
The liability of the first infractor should be equitably reduced. 5. Physically or legally possible
– equitably offset each other’s damages.
1194. In case of loss, deterioration or improvement of
FIRST INFRACTOR CANNOT BE DETERMINED the thing before the arrival of the day certain, the rules
The court shall declare the extinguishment of the obligation in Article 1189 shall be observed.
and each shall bear his own damages.
1195. Anything paid or delivered before the arrival of
Section 2 – Obligations with a Period the period, the obligor being unaware of the period or
believing that the obligation has become due and
1193. Obligations for whose fulfillment a day certain demandable, may be recovered, with the fruits and
has been fixed, shall be demandable only when that interests.
day comes.
Obligations with a resolutory period take effect at once,  The payment or delivery is done before the arrival of
but terminate upon arrival of the day certain. the period.
A day certain is understood to be that which must
necessarily come, although it may not be known when. CONSEQUENCES:
If the uncertainty consists in whether the day will come 1. If he was not aware of the period or he
or not, the obligation is conditional, and it shall be believes that the obligation has become due
regulated by the rules of the preceding Section. and demandable – he can recover what he
paid or delivered including fruits and
PERIOD / TERM – consists in a space or length of time upon interests;
the arrival of which, the demandability or the extinguishment 2. If he was aware and he paid voluntarily –
of an obligation is determined; it may be definite (exact date he cannot recover the delivery made; it is
or time is known) or indefinite (arrival of date is unknown but deemed a waiver of the benefit of the term
sure to come). and the obligation is considered already
- Future + Certain event matured.
GENERAL CLASSIFICATIONS:  The presumption is that the debtor knew that the
a) EX DIE / SUSPENSIVE PERIOD – from a day debt was not yet due. He has the burden of proving
certain give rise to the obligation; suspensive that he was unaware of the period.
effect.
b) IN DIEM / RESOLUTORY PERIOD – arrival of a 1196. Whenever in an obligation a period is designated,
term certain terminated the obligation; it is presumed to have been established for the benefit
resolutory effect. of both the creditor and the debtor, unless from the
tenor of the same or other circumstances it should
appear that the period has been established in favor of
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one or of the other. debtor.
 PRESUMPTION: Obligation with a period is for the  If the obligation does not state and intend a period,
benefit of both the creditor and debtor. the court is not authorized to fix a period.
 EXCEPTION: when it appears that the period is for  The court must fix the duration of the period to
the benefit of one or the other prevent the possibility that the obligation may never
be fulfilled or to cure a defect in a contract whereby
 This cannot apply when the court was authorized by it is made to depend solely upon the will of one of
the parties to fix a reasonable term. the parties.
 The benefit of the term may be the subject of Court cannot fix the period:
stipulation of the parties. 1. If there is a period agreed upon by the
1. Term is for the benefit of the debtor alone – parties and it has already lapsed or expired.
he cannot be compelled to pay prematurely, 2. From the very moment the parties give
but he can if he desires to do so. their acceptance and consent to the period
- Example: A obliges himself to pay B within 5 years. A fixed by the court, it becomes a law
cannot be compelled to pay prematurely, but he can pay governing their contract.
anytime within 5 years (A will benefit because he can pay
anytime he wants as long as it is within 5 years; B will not 1198. The debtor shall lose every right to make use of
benefit from the interests if A decides to pay early). the period:
2. Term is for the benefit of the creditor – He (1) When after the obligation has been contracted, he
may demand fulfillment even before the becomes insolvent, unless he gives a guaranty or
arrival of the term but the debtor cannot security for the debt;
require him to accept payment before the (2) When he does not furnish to the creditor the
expiration of the stipulated period. guaranties or securities which he has promised;
- Example: A borrows money from B and is obliged to make (3) When by his own acts he has impaired said
the payment on December 5. B may compel A to make the guaranties or securities after their establishment, and
payment before December 5, but A may not compel B to when through a fortuitous event they disappear, unless
receive the payment before December 5 (B will benefit from he immediately gives new ones equally satisfactory;
the interests that will accrue before December 5). (4) When the debtor violates any undertaking, in
consideration of which the creditor agreed to the
 The creditor may have reasons other than the period;
maturity of interest, that’s why, unless the creditor (5) When the debtor attempts to abscond.
consents, the debtor has no right to accelerate the
time of payment even if the premature tender The period is disregarded and the obligation becomes pure
includes an offer to pay the principal and interest in and immediately demandable: [IGIVA]
full.
 [I] When debtor becomes insolvent;
1197. If the obligation does not fix a period, but from  The insolvency need not be judicially
its nature and the circumstances it can be inferred that declared. It is sufficient that debtor could
a period was intended, the courts may fix the duration not pay his debts due to lack of money or
thereof. funds.
The courts shall also fix the duration of the period  [G] When the debtor does not furnish guaranties or
when it depends upon the will of the debtor. securities;
In every case, the courts shall determine such period  [I] When guaranties or securities given have been
as may under the circumstances have been probably impaired or have disappeared;
contemplated by the parties. Once fixed by the courts,  If security was lost through debtor’s fault -
the period cannot be changed by them. impairment
 If security was lost through fortuitous event -
JUDICIAL PERIOD – period designated by the court. disappearance
CONTRACTUAL PERIOD – period fixed by the parties in their  [V] When debtor violates an undertaking;
contract. If such undertaking is the reason for the creditor to agree
with such period.
Court will fix a period:  [A] When debtor attempts to abscond (escape).
1. When no period is mentioned, but it is inferable from Mere attempt to abscond is sufficient. It is an indication of
the nature and circumstances of the obligation that a bad faith.
period was intended by the parties.
2. When the period is dependent upon the will of the Section 3 – Alternative Obligations
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1199. A person alternatively bound by different  There being but one prestation available, this
prestations shall completely perform one of them. prestation becomes a simple obligation.
The creditor cannot be compelled to receive part of one
and part of the other undertaking. 1203. If through the creditor's acts the debtor cannot
make a choice according to the terms of the obligation,
OBLIGATIONS WITH PLURAL PRESTATIONS: the latter may rescind the contract with damages.
1. CONJUNCTIVE/COMPOUND OBLIGATION - an
obligation where the debtor has to perform ALL the (1) If the debtor could not make a choice due to
several prestations in the contract to extinguish the the creditor’s act of making the prestations
obligation. impossible, debtor may RESCIND the
2. ALTERNATIVE OBLIGATION – an obligation where contract with damages - rescission takes
the debtor is required to fulfill ONLY ONE of the place at the initiative of the debtor.
several prestations to extinguish the obligation. (2) If the debtor is being prevented to choose
3. FACULTATIVE OBLIGATION – an obligation where the only a particular prestation, and there are
debtor is bound to perform ONLY ONE prestation, others available, he is free to choose from
with a reserved right to choose another prestation as them, after notifying the creditor of his
SUBSTITUTE for the principal. decision.
1200. The right of choice belongs to the debtor, unless 1204. The creditor shall have a right to indemnity for
it has been expressly granted to the creditor. damages when, through the fault of the debtor, all the
The debtor shall have no right to choose those things which are alternatively the object of the
prestations which are impossible, unlawful or which obligation have been lost, or the compliance of the
could not have been the object of the obligation. obligation has become impossible.
The indemnity shall be fixed taking as a basis the value
Implied grant to the creditor is not allowed. If it does not of the last thing which disappeared, or that of the
appear on the agreement as to whom among them has the service which last became impossible.
right to choose, it is the debtor who can choose. Damages other than the value of the last thing or
service may also be awarded.
1201. The choice shall produce no effect except from
the time it has been communicated.  If the impossibility of all the objects of the
alternative obligation is caused by the debtor, the
1. The choice shall not produce any legal effect creditor is entitled to damages.
until it has been duly communicated to the other  If such impossibility is caused by a fortuitous event,
party. the obligation is extinguished and the debtor is
2. It can be done in writing, verbally, impliedly, or released from responsibility, unless the contrary is
any unequivocal means. stipulated by the parties.
3. Once the choice has been communicated to the  The creditor cannot claim for damages if the debtor
other party: can still perform the remaining prestations.
1. The obligation is now LIMITED only to the  The damages that may be recovered is based on the
PRESTATION CHOSEN, with all the natural last thing which disappeared or the service which
consequences flowing therefrom; became impossible. This last one is converted into a
2. The choice is IRREVOCABLE. simple obligation.
a. The performance of prestation without announcing
the choice to the creditor is NOT BINDING. 1205. When the choice has been expressly given to the
b. The consent of the other party is NOT REQUIRED in creditor, the obligation shall cease to be alternative
making the choice – that will in effect frustrate the from the day when the selection has been
clear intention of the law and the nature of the communicated to the debtor.
alternative obligation. Until then the responsibility of the debtor shall be
c. If there is delay in the making of choice – punish the governed by the following rules:
one who is supposed to exercise the right of choice
for the delay he caused – court may order the debtor A. only one thing lost – fortuitous event – creditor
to make a choice, or creditor to make the choice chooses from the remainder – debtor delivers the
within certain period, or court makes the choice. choice to creditor;
B. only one remains – debtor delivers the same to the
1202. The debtor shall lose the right of choice when creditor;
among the prestations whereby he is alternatively C. only one thing lost – fault of the debtor
bound, only one is practicable. 1. creditor may choose any one of the
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REVIEWER
remainders;  When the obligation is ambiguous, it must be

2. creditor may choose the price or value of considered as joint obligation.
the one which was lost;
3. may choose 1 or 2 plus damages CONSEQUENCES OF SOLIDARITY:
D. all things lost – fault of the debtor – creditor may 1. Passive Solidarity – full payment made by anyone of
choose the price of ANYONE of the things, with the solidary debtors extinguishes the obligation. The
damages if warranted. one who paid can claim reimbursement from his co-
debtors as regards their corresponding shares in the
The same rules shall be applied to obligations to do or obligation.
not to do in case one, some or all of the prestations A, B, & C are solidary debtors of D in the sum of P900.
should become impossible. D can demand payment of the entire obligation when it
becomes due, from any one of the debtors or from all of them
 This article applies only when the right of choice has at the same time.
been expressly granted to the creditor. If C paid the whole P900 to D, he may claim reimbursement
from A and B.
1206. When only one prestation has been agreed upon,
but the obligor may render another in substitution, the 2. Active Solidarity – full payment to any of the
obligation is called facultative. creditors extinguishes the obligation. The creditor
The loss or deterioration of the thing intended as a who received the entire amount will be liable to pay
substitute, through the negligence of the obligor, does the corresponding shares of his co-creditors in
not render him liable. But once the substitution has accordance with their internal agreement.
been made, the obligor is liable for the loss of the
Garfield owes the sum of P40,000 to Mickey, Minnie, Donald,
substitute on account of his delay, negligence or fraud.
and Pluto, who are solidary creditors. Garfield can pay anyone
of them. If Mickey received the P40,000, he is liable to pay
 If loss or deterioration happened before substitution
the corresponding shares of his co-creditors.
is made, obligor is not liable; after substitution is
communicated, he is liable for loss (through delay,
negligence or fraud) MIXED SOLIDARITY
Section 4 – Joint and Solidary Obligations a. Solidary Debtors, Joint Creditors

 P9,000.00 – total debt
1207. The concurrence of two or more creditors or of Debtors (Solidary) Creditors (Joint)
two or more debtors in one and the same obligation Aida pays P4,500.00 John = P 4,500.00
does not imply that each one of the former has a right Lorna pays P4,500.00 Marsha P 4,500.00
to demand, or that each one of the latter is bound to Fe
render, entire compliance with the prestation. There is
a solidary liability only when the obligation expressly b. Joint Debtors, Solidary Creditors
so states, or when the law or the nature of the  P 9,000.00 – total debt
obligation requires solidarity. Debtors (Joint) Creditors (Solidary)
Aida (P 3,000.00) John (can claim from debtors)
INDIVIDUAL OBLIGATION – one debtor and one creditor Lorna (P 3,000.00) Marsha (-same-)
Fe (P 3,000.00)
COLLECTIVE OBLIGATION – two or more debtors and two or
more creditors
1208. If from the law, or the nature or the wording of
1. JOINT – entire obligation is to be paid or the obligations to which the preceding article refers the
performed proportionately by the debtors; contrary does not appear, the credit or debt shall be
2. SOLIDARY – each one of the debtors are presumed to be divided into as many shares as there
obliged to pay the entire obligation, each are creditors or debtors, the credits or debts being
one of the creditors has the right to demand considered distinct from one another, subject to the
from any of the debtors, the fulfillment of Rules of Court governing the multiplicity of suits.
the entire obligation;
A. Passive Solidarity – solidarity on the part of  This provision speaks of JOINT DIVISIBLE
the DEBTORS OBLIGATION.
B. Active Solidarity – solidarity on the part of
the CREDITORS.  When there is a concurrence of several creditors or
 SOLIDARITY SHOULD BE EXPRESSED – law, of several debtors in one and in the same obligation,
stipulation, nature of obligation. there is a presumption that the obligation is joint.
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 Each of the creditors shall be entitled to demand only converted into monetary obligation for indemnity for
the payment of his proportionate share of the credit. damages. Batman and Robin will be liable only for P
 Each of the debtors may be compelled to pay only 750,000.00 each.
his proportionate share of the debt.
 The credits or debts shall be considered distinct from  The act of one is not binding (others must concur)
one another.
1210. The indivisibility of an obligation does not
CONSEQUENCES OF JOINT OBLIGATION: necessarily give rise to solidarity. Nor does solidarity of
1. Each debtor – liable for a proportionate part of the itself imply indivisibility.
entire debt;
Thales, Socrates, Plato, & Aristotle owe P100 to Bruce Lee  Solidarity is expressed in the stipulations of the
= 4 debts and 1 credit party, law governing the obligation, or the nature of
Each of them owes Bruce Lee P25 the obligation.
Bruce Lee cannot collect the entire P100 from any one of
them. INDIVISIBLE OBLIGATION – an obligation where the
2. Each creditor – entitled to a proportionate part of the prestation or object to be delivered cannot be performed by
credit; parts without altering its essence or substance.
Piggy owes P100 to Froggy and Fishy
= 1 debt and 2 credits Basis Indivisibility Solidarity
Froggy can only collect 50 from Piggy, 1. Nature Refers to the Refers to the tie
Same with Fishy prestation of the existing between
3. Demand made by one creditor upon one debtor contract parties of the
produces the effects of default only as between obligation (who is
them, but not with respect to the others; liable)
Bubbles demanded payment from Buttercup; Buttercup was 2. Number of Does not require Requires plurality of
in default. This does not mean that the others are in default subjects / parties plurality of parties parties
too because Bubbles did not demand from them. 3. Effect of breach Obligation is The liability, even if
4. The interruption of prescription caused by the of obligation converted into converted into
demand made by one creditor upon one debtor will monetary indemnity for
not benefit the co-creditors; obligation for damages, remains
indemnity for solidary.
Wittgenstein extended the period in which Tarski should have
damages – each
paid his debt to him. This does not mean that the same
debtor is liable
extension applies to Tarski's debt to Davidson.
only for his part in
5. The insolvency of one debtor will not increase the the indemnity.
liability of his co-debtors, nor will it allow a creditor
to demand anything from the co-creditors.
1211. Solidarity may exist although the creditors and
If Husserl and Merleau-Ponty are debtors of Sartre for
the debtors may not be bound in the same manner and
P1,000,000.00 and Husserl becomes insolvent, the liability of
by the same periods and conditions.
Merleau-Ponty will only be P500,000.00 representing his
proportional share of ½ in the whole obligation.
 The solidarity of the debtors is not affected even if
different terms and conditions are made applicable to
1209. If the division is impossible, the right of the
them.
creditors may be prejudiced only by their collective
 Enforcement of the terms and conditions may be
acts, and the debt can be enforced only by proceeding
made at different times. The obligations which have
against all the debtors. If one of the latter should be
matured can be enforced while those still undue will
insolvent, the others shall not be liable for his share.
have to be awaited. Enforcement can be made
against any one of the solidary debtors although it
JOINT INDIVISIBLE OBLIGATION – an obligation where
can happen that a particular obligation chargeable to
solidarity is not provided and the prestation or object is not
a particular debtor is not yet due. He will be
susceptible of division; its fulfillment requires the concurrence
answerable for all the prestations which fall due
of all debtors, while doing each one’s parts.
although chargeable to the other co-debtors.
Batman and Robin jointly obliged themselves to deliver a

Sad Face, Happy, and Fanny got a loan of P150 from Smiley.
brand new Toyota Fortuner worth P1,500,000.00 to
They signed a promissory note solidarily binding themselves
Superman. The object, a vehicle, is indivisible. They must
to pay Smiley under the following terms:
deliver the thing jointly. In case of breach, the obligation is
Sad Face will pay P50 with 3% on December 30,
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REVIEWER
2006
Happy will pay P50 with 4% on December 30, 2007 1215. Novation, compensation, confusion or remission
Fanny will pay P50 with 5% on December 30, 2008 of the debt, made by any of the solidary creditors or
On December 31, 2006, Smiley can collect his P50 with 3% with any of the solidary debtors, shall extinguish the
from any one of the debtors, but not the whole P150 because obligation, without prejudice to the provisions of
it is not yet entirely due. The maturity of the other amounts Article 1219.
should still be awaited. If maturity comes, Smiley can collect The creditor who may have executed any of these acts,
from any of the debtors, because they are expressly solidary as well as he who collects the debt, shall be liable to
in liabilities, and not affected by the secondary stipulations. the others for the share in the obligation corresponding
to them.
1212. Each one of the solidary creditors may do
whatever may be useful to the others, but not anything NOVATION – obligations are modified by:
which may be prejudicial to the latter. 1. Changing their object or principal conditions;
2. Substituting the person of the debtor; and
 Every solidary creditor is benefited by the useful acts 3. Subrogating (placing) a third person in the rights of
of any one of them. the creditor. [Art. 1291, CC]
 If a solidary creditor performs an act which is not fair
to his co-creditors, the act may have valid legal COMPENSATION – takes place when two persons, in their own
effects or the obligation of the debtor due to them right, become creditors and debtors of each other
may be extinguished, but the performing creditor  the amount of one is covered by the amount of the other
shall be liable to his co-creditors. Erap borrowed P100 from Fernando.
Fernando borrowed P75 from Erap.
 Question: May solidary creditors perform an act Erap’s obligation to Fernando is now P25 only, because the
that is beneficial to others? original obligation was offset by Fernando’s supposed-to-be
obligation to Erap.
1213. A solidary creditor cannot assign his rights
without the consent of the others. CONFUSION – takes place when the characters of creditor
and debtor are merged in the same person.
Assign – transfer of right Tito pays his debt to Vic with a check payable to “cash”.
Vic paid his debt to Joey with the same check.
 The assignee does not become a solidary creditor, Joey paid his debt to Tito, with the same check Tito issued to
and any payment made upon him by the debtor does Vic.
not extinguish the obligation. He is considered a Tito becomes paid by his own check. He becomes the debtor
STRANGER, and his acts are not binding to the and the creditor of himself at the same time.
solidarity.
REMISSION – the gratuitous abandonment by the creditor of
 DOCTRINE OF MUTUAL AGENCY - In solidary
his right; acceptance of the obligor is necessary.
obligations, the act of one is act of the others.
 Exceptions to the doctrine:  These 4 modes of extinguishing obligations are acts
1. Art. 1212 – a creditor may not perform an act
prejudicial to the other solidary co-creditors because
prejudicial to other creditors
these have the effect of extinguishing the debt or
2. Art. 1213 – a creditor cannot transfer his right
obligation which is due to all of them.
without consent  The only recourse of the co-creditors is to let the one
who executed any of those acts be liable for the
1214. The debtor may pay any one of the solidary
shares corresponding to all his co-creditors (in their
creditors; but if any demand, judicial or extrajudicial,
internal agreement).
has been made by one of them, payment should be
made to him.
1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously.
 The debtor can pay any one of the solidary creditors.
The demand made against one of them shall not be an
Such payment when accepted by any of the solidary
obstacle to those which may subsequently be directed
creditors will extinguish the obligation.
against the others, so long as the debt has not been
 To avoid confusion on the payment of the obligation,
fully collected.
the debtor is required to ay only to the demanding
creditor and that payment is sufficient to effect the  When there is passive solidarity, the creditor can
extinguishment of the obligation.
proceed against:
 In case two or more demands made by the other
1. Any of the solidary debtors;
creditors, the first demand must be given priority.
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2. Some of the solidary debtors;  Atty De Chavez: Ito ay provision sa tanga...

3. All of the solidary debtors, simultaneously. (siyempre, 'pag nagbayad na, wala nang obligation,
wala na ding ire-remit...)
Extrajudicial demands - first demand shall not prevent
subsequent demands on the other co-debtors, if co-debtor  Any belated (delayed) remission by the creditor of
first to have been required to fulfill obligation did not act on the share of any of the debtor has no effect on the
it. internal relationship of the co-debtors.
1217. Payment made by one of the solidary debtors Payment before remission: A, B, and C solidarily owe D
extinguishes the obligation. If two or more solidary P1,500.00. B paid the entire obligation. After which, D
debtors offer to pay, the creditor may choose which remitted the share of C. B can collect P500.00 each from A
offer to accept. and C even if the share of C in the obligation had been
He who made the payment may claim from his co- remitted.
debtors only the share which corresponds to each, with
the interest for the payment already made. If the
Remission before payment: A, B, and C solidarily owe D
payment is made before the debt is due, no interest for
P1,500.00. D remitted the share of C. Thereafter, B paid the
the intervening period may be demanded.
entire obligation. B can collect P500.00 from A but not from
When one of the solidary debtors cannot, because of
C. However, B may ask D to give back P500, which is the
his insolvency, reimburse his share to the debtor
supposed-to-be share of C.
paying the obligation, such share shall be borne by all
his co-debtors, in proportion to the debt of each.
 After the prior payment of the entire obligation,
Payment – consists in the delivery of the thing or the there is nothing to remit because the obligation had
rendition (rendering) of the service whish is the object of the been extinguished.
obligation.
1220. The remission of the whole obligation, obtained
Interest – compensation for the use of borrowed money by one of the solidary debtors, does not entitle him to
reimbursement from his co-debtors.
Partial payment – the solidary debtor who made the partial
payment is entitles to be reimbursed only for such amount of
 There is nothing to be reimbursed because he did not
money which he had paid and which exceeds his own share in spend any money, the remission being a gratuitous
the obligation. act.
If one of the debtors is insolvent and could not pay his share 1221. If the thing has been lost or if the prestation has
in the obligation, all solidary debtors including the paying become impossible without the fault of the solidary
debtor shall share proportionately in the settlement of the debtors, the obligation shall be extinguished.
corresponding share of the insolvent debtor. [In short, his co- If there was fault on the part of any one of them, all
debtors will save his ass.] shall be responsible to the creditor, for the price and
the payment of damages and interest, without
1218. Payment by a solidary debtor shall not entitle prejudice to their action against the guilty or negligent
him to reimbursement from his co-debtors if such debtor.
payment is made after the obligation has prescribed or If through a fortuitous event, the thing is lost or the
become illegal. performance has become impossible after one of the
solidary debtors has incurred in delay through the
No reimbursement if: judicial or extrajudicial demand upon him by the
creditor, the provisions of the preceding paragraph
1. Obligation PRESCRIBES shall apply.
 The creditor did not make any demand for more than
10 years. Loss of the thing or impossibility of prestation –
2. Obligation becomes ILLEGAL 1. NO FAULT – solidary debtors –
 Law has been passed, making such prestation illegal. obligation is extinguished
2. FAULT of any one of them – all are
1219. The remission made by the creditor of the share liable because of their mutual agency
which affects one of the solidary debtors does not 3. FORTUITOUS EVENT – delay on the
release the latter from his responsibility towards the part of the debtors – all will be liable
co-debtors, in case the debt had been totally paid by
anyone of them before the remission was effected.
 If the thing due was not lost, but there is merely a
delay, fraud or negligence on the part of one of the
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solidary debtors, all (including the innocent) debtors  The unfulfilled undertaking (duty) is converted into a
will share in the payment of the PRINCIPAL monetary obligation which is not divisible.
prestation. The damages and interest imposed will  The guilty debtor is liable for damages.
be borne by the guilty debtor.
 Obligation to deliver is converted into an obligation 1225. For the purposes of the preceding articles,
to pay indemnity when there us loss or impossibility obligations to give definite things and those which are
of performance. not susceptible of partial performance shall be deemed
to be indivisible.
1222. A solidary debtor may, in actions filed by the When the obligation has for its object the execution of
creditor, avail himself of all defenses which are derived a certain number of days of work, the accomplishment
from the nature of the obligation and of those which of work by metrical units, or analogous things which by
are personal to him, or pertain to his own share. With their nature are susceptible of partial performance, it
respect to those which personally belong to the others, shall be divisible.
he may avail himself thereof only as regards that part However, even though the object or service may be
of the debt for which the latter are responsible. physically divisible, an obligation is indivisible if so
provided by law or intended by the parties.
DEFENSES OF A SOLIDARY DEBTOR: In obligations not to do, divisibility or indivisibility shall
be determined by the character of the prestation in
1. Defense arising from the nature of the obligation – each particular case.
such as payment, prescription, remission, statute of
frauds, presence of vices of consent, etc. The following are considered INDIVISIBLE obligations:
2. Defenses which are personal to him or which 1. Obligation to give definite things
pertains to his own share alone – such as minority, 2. Obligations which are not susceptible of partial
insanity and others purely personal to him. performance
3. Defenses personal to the other solidary creditors but 3. Even though the object or service may be physically
only as regards that part of the debt for which the divisible, it is indivisible if:
other creditors are liable. a. the law so provides
b. when the parties intended it to be indivisible
Section 5 – Divisible and Indivisible Obligations
The following obligations are deemed DIVISIBLE:
1223. The divisibility or indivisibility of the things that 1. When the object of the obligation is the execution of
are the object of obligations in which there is only one a certain number of days of work
debtor and only one creditor does not alter or modify 2. When the object of the obligation is the
the provisions of Chapter 2 of this Title. accomplishment of work measured in units
3. When the object of the obligation is susceptible of
DIVISIBILITY – refers to the susceptibility of an obligation to partial compliance
be performed partially. 4. When the object of the obligation is such that the
 Obligation to deliver 100 sacks of rice or a particular debtor is required to pay in installments
type
INDIVISIBILITY – refers to the non-susceptibility of an  If the contract is divisible, and a part of it is illegal,
obligation to partial performance. the illegal part is void, and the rest shall be valid and
 Obligation to deliver a particular computer set enforceable.
 If the contract is indivisible, and a part of it is illegal,
If a thing could be divided into parts and as divided, its value the entire contract is void.
is impaired disproportionately, that thing is INDIVISIBLE.  Partial performance of an indivisible obligation is
tantamount to non-performance.
1224. A joint indivisible obligation gives rise to
indemnity for damages from the time anyone of the Section 6 – Obligations with a Penal Clause
debtors does not comply with his undertaking. The
debtors who may have been ready to fulfill their 1226. In obligations with a penal clause, the penalty
promises shall not contribute to the indemnity beyond shall substitute the indemnity for damages and the
the corresponding portion of the price of the thing or of payment of interests in case of noncompliance, if there
the value of the service in which the obligation is no stipulation to the contrary. Nevertheless,
consists. damages shall be paid if the obligor refuses to pay the
penalty or is guilty of fraud in the fulfillment of the
JOINT INDIVISIBLE OBLIGATION – the object is indivisible obligation.
but the liability of the parties is joint. The penalty may be enforced only when it is
demandable in accordance with the provisions of this
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Code. and penalty are extinguished
PENALTY CLAUSE 1228. Proof of actual damages suffered by the creditor

 Purposes: Jurado book is not necessary in order that the penalty may be
 This is an accessory obligation attached to the demanded.
principal obligation, which imposes an additional
liability in case of breach of the principal obligation. d. As long as the agreement or contract is breached.
 It pushes the debtor to perform his obligation e. The mere non-fulfillment of the principal obligation
faithfully and without delay – within the period entitles the creditor to the penalty stipulated.
agreed upon, or else, he suffers a fixed civil penalty f. The purpose of the penalty clause is precisely to
without need of proving the damages of the other avoid proving damages.
party.
1229. The judge shall equitably reduce the penalty
The penalty imposable is a substitute for the indemnity for: when the principal obligation has been partly or
a. damages irregularly complied with by the debtor. Even if there
b. payment of interest in case of breach of obligation has been no performance, the penalty may also be
1. unless the contrary is stipulated! reduced by the courts if it is iniquitous or
unconscionable.
EXCEPTIONS – additional damages may be recovered from
the following acts: JUDICIAL REDUCTION OF PENALTY
4. If the debtor refuses to pay the penalty  Principal obligation – partly complied with by the
5. If the debtor is guilty of fraud in the fulfillment debtor (but not in indivisible obligation, because it is
of the obligation tantamount to non-compliance)
6. If there is express stipulation that the other  Principal obligation – complied not in accordance
damages or interests are demandable to the with the tenor of the agreement (refers to irregular
penalty in the penal clause performance)
 Penalty – iniquitous or unconscionable
1227. The debtor cannot exempt himself from the
performance of the obligation by paying the penalty,  Judge’s power to reduce penalties are limited to
save in the case where this right has been expressly private contracts.
reserved for him. Neither can the creditor demand the
fulfillment of the obligation and the satisfaction of the INIQUITOUS OR UNCONSCIONABLE – when it is revolting to
penalty at the same time, unless this right has been the conscience or common sense; grossly disproportionate to
clearly granted him. However, if after the creditor has the damages suffered.
decided to require the fulfillment of the obligation, the
performance thereof should become impossible without PENALTY NOT ENFORCEABLE:
his fault, the penalty may be enforced. 1. Impossible performance of principal
obligation due to fortuitous events
 A debtor cannot evade from payment of his principal 2. Creditor prevented the debtor from fulfilling
obligation by choosing to pay the penalty stipulated, the obligation
except when the debtor is EXPRESSLY granted with 3. Penalty is contrary to good morals or good
the right to substitute the penalty for the principal customs
obligation. – an obligation with penalty clause cannot 4. Both parties are guilty of breach of contract
be turned to facultative obligation unless expressly 5. Breach of contract by the creditor
stipulated in the contract. 6. None of the parties committed any willful or
 The creditor cannot demand the stipulated fulfillment culpable violation of the agreement
of the principal obligation and the penalty at the
same time, except 1230. The nullity of the penal clause does not carry
a. when the creditor was clearly given the right to with it that of the principal obligation.
enforce both the principal obligation and The nullity of the principal obligation carries with it
penalty; that of the penal clause.
b. when the creditor has demanded fulfillment of
the obligation but cannot be fulfilled due to the Because the penal clause is only an accessory to the principal
1. debtor’s fault – creditor may demand obligation, it cannot exist alone.
for penalty If the penal clause is void, the principal obligation remains
2. creditor’s fault – he cannot claim the enforceable.
penalty
3. fortuitous event – principal obligation The nullity of penal clause does not mean the nullity of the
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principal. be delivered or released

For example: b.) integrity – prestation must be fulfilled completely
In case of non-payment of P10,000, P1,000 per day as  Time of payment – the payment or performance
penalty shall be imposed. It is a void contract but it is not an must be on the date stipulated (may be made even
excuse that you don't have to pay the principal which is on Sundays or on any holiday, although some states
P10,000. like the Negotiable Instruments Law states that
payment in such case may be made on the next
CHAPTER 4 succeeding business day)
EXTINHGUISHMENT OF OBLIGATIONS  The burden of proving that the obligation has been
extinguished by payment devolves upon the debtor
GENERAL PROVISIONS
who offers such a defense to the claim of the plaintiff
creditor
1231. Obligations are exringuished:
5. by payment or performance  The issuance of a receipt is a consequence of usage
6. by loss of the thing due and good faith which must be observed (although
7. by condonation or remission our Code has no provision on this) and the refusal of
8. by confusion or merger of the rights of the creditor to issue a receipt without just cause is a
creditor and debtor ground for consignation under Art 1256 ( if a receipt
9. by compensation has been issued by payee, the testimony alone of
10. by novation payer would be insufficient to prove alleged
Other causes of extinguishment of obligations, such as payments)
annulment, rescission, fulfillment of a resolutory
condition, and prescription, are governed elsewhere in 1234. If the obligation has been substantially
this Code. performed in good faith, the obligor may recover as
though there had been a strict and complete
1232. Payment means not only the delivery of money fulfillment, less damages suffered by the obligee.
but also the performance, in any other manner of an  In order that there may be substantial performance
obligation. of an obligation, there must have been an attempt in
good faith to perform, without any willful or
Payment means not only delivery of money but also the intentional departure therefrom
performance.  The non-performance of a material part of a contract
will prevent the performance from amounting to a
 It is the fulfillment of the prestation due that substantial compliance
extinguishes the obligation by the realization of the  A party who knowingly and willfully fails to perform
purposes for which it was constituted his contract in any respect, or omits to perform a
 It is a juridical act which is voluntary, licit and made material part of it cannot be permitted under the
with the intent to extinguish an obligation protection of this rule to compel the other party to
 Requisites: perform; and the trend of the more recent decisions
1. person who pays is to hold that the percentage of omitted or irregular
2. the person to whom payment is made performance may in and of itself be sufficient to
3. the thing to be paid show that there has not been a substantial
4. the manner, time and place of payment etc performance
 The paying as well as the one receiving should have  The party who has substantially performed may
the requisite capacity enforce specific performance of the obligation of the
other party or may recover damages for their breach
 Kinds:
upon an allegation of performance, without proof of
1. normal –when the debtor voluntarily performs the
complete fulfillment.
prestation stipulated
2. abnormal – when he is forced by means of a judicial  The other party, on the other hand, may by an
proceeding either to comply with prestation or to pay independent action before he is sued, or by a
indemnity counterclaim after commencement of a suit against
him, recover from the first party the damages which
1233. A debt shall not be understood to have been he has sustained by the latter’s failure to completely
paid unless the thing or service in which the oligatoin fulfill his obligation
consists has been completely delivered or rendered, as
the case may be. 1235 – When the oblige accepts the performance,
knowing its incompleteness or irregularity, and without
 States 2 requisites of payment:
expressing any protest or objection, the obligation is
a.) identity of prestation - the very thing or service due must
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deemed fully complied with payment

 A person entering into a contract has a right to insist
on its performance in all particulars, according to its 1238. Payment made by a third person who does not
meaning and spirit. But if he chooses to waive any of intend to be reimbursed by the debtor is deemed to be
the terms introduced for his own benefit, he may do a donation, which requires the debtor’s consent/ but
so. the payment is in any case valid as to the creditor who
 But he is not obliged to accept anything else in place has accepted it
of that which he has contracted for and if he does ART 1239. In obligations to give, payment made by one
not waive this right, the other party cannot recover who does not have the free disposal of the thing due
against him without performing all the stipulations and capacity to alienate it shall not be valied, without
on is part prejudice to the provisions of article 1427 under the
 To constitute a waiver, there must be an intentional Title on “Natural Obligations”
relinquishment of a known right. A waiver will not  consignation will not be proper here. In case the
result from a mere failure to assert a claim for creditor accepts the payment, the payment will not
defective performance/payment. There must have be valid except in the case provided in article 1427
been acceptance of the defective performance with
actual knowledge if the incompleteness or defect, 1240. Payment shall be made to the person in whose
under circumstances that would indicate an intention favor the obligation has been constituted, or his
to consider the performance as complete and successor in interest, or any person authorized to
renounce any claim arising from the defect receive it
 A creditor cannot object because of defects in  the authority of a person to receive payment for the
performance resulting from his own acts or directions creditor may be
a.) legal – conferred by law (e.g.,guardian of the
1236. The creditor is not bound to accept payment or incapacitated, administrator of the estate of the deceased)
performance by a third person who has no interest in b.) conventional – when the authority has been given by
the fulfillment of the obligation, unless there is a the creditor himself (e.g., agent who is appointed to collect
stipulation to the contrary. Whoever pays for another from the debtor
may demand from the debtor what he has paid, except  payment made by the debtor to a wrong party does
that if he paid without the knowledge or against the not extinguish the obligation as to the creditor
will of the debtor, he can recover only insofar as the (void), if there is no fault or negligence which can be
payment has been beneficial to the debtor imputed to the latter (even when the debtor acted in
 Reason for this article: whenever a third person pays utmost good faith, or through error induced by the
there is a modification of the prestation that is due. fraud of the 3rd person). It does not prejudice the
 Generally, the 3rd person who paid another’s debt is creditor and the accrual of interest is not suspended
entitled to recover the full amount he paid. The law, by it
however limits his recovery to the amount by which
the debtor has been benefited, if the debtor has no 1241. Payment to a person who is incapacitated to
knowledge of, or has expressed his opposition to administer his property shall be valid if he has kept the
such payment thing delivered, or insofar as the payment has been
 If the debt has been remitted, paid compensated or beneficial to him. Payment made to a third person shall
prescribed, a payment by a third person would also be valid insofar as it has redounded to the benefit
constitute a payment of what is not due; his remedy of the creditor. Such benefit to the creditor need not be
would be against the person who received the proved in the following cases:
payment under such conditions and not against the (1) If after the payment, the third person acquires the
debtor who did not benefit from the payment creditor's rights;
 payment against debtor’s will – even if payment of (2) If the creditor ratifies the payment to the third
the third party is against the will of the debtor, upon person;
payment by the third party, the obligation between (3) If by the creditor's conduct, the debtor has been led
the debtor and creditor is already extinguished to believe that the third person had authority to receive
the payment. (1163a)
1237. Whoever pays on behalf of the debtor without  payment shall be considered as having benefited the
the knowledge or against the will of the latter, cannot incapacitated person if he made an intelligent and
compel the creditor to subrogate him in his rights, such reasonable use thereof, for purposes necessary or
as those arising from a mortgage, guaranty or penalty useful to him, such as that which his legal
 This article gives to the third person who paid only a representative would have or could have done under
simple personal action for reimbursement, without similar circumstances, even if at the time of the
the securities, guaranties and other rights recognized complaint the effect of such use no longer exists
in the creditor, which are extinguished by the (e.g., taxes on creditor’s property, money to
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extinguish a mortgage on creditor’s property) the creditor, if he expressly so declares or if, with
 the debtor is not released from liability by a payment knowledge thereof, he accepts the thing without
to one who is not the creditor nor one authorized to protest or disposes of it or consumes it
receive the payment, even if the debtor believed in
good faith that he is the creditor, except to the 1245. Dation in payment, whereby property is alienated
extent that the payment inured to the benefit of the to the creditor in satisfaction of a debt in money, shall
creditor be governed by the law of sales. (n)
 in addition to those mentioned above, payment to a  This is the delivery and transmission of ownership of
third person releases the debtor: a thing by the debtor to the creditor as an accepted
a.) when, without notice of the assignment of credit, he equivalent of the performance of the obligation.
pays to the original creditor  The property given may consist not only of a thing
b.) when in good faith he pays to one in possession of the
but also of a real right (such as a usufruct)
credit
 even when the creditor receives no benefit from the  Considered as a novation by change of the object
payment to a third person, he cannot demand  Where the debt is money, the law on sale shall
payment anew, if the mistake of the debtor was due govern; in this case, the act is deemed to be a sale
to the fault of the creditor with the amount of the obligation to the extent that
it is extinguished being considered as price
1242. Payment made in good faith to any person in  Difference between Dation and Cession (see Art.
possession of the credit shall release the debtor. 1255)
(1164)
 the person in possession of the credit is neither the 1246. When the obligation consists in the delivery of an
creditor nor one authorized by him to receive indeterminate or generic thing, whose quality and
payment, but appears under the circumstances of circumstances have not been stated, the creditor
the case, to be the creditor. He appears to be the cannot demand a thing of superior quality. Neither can
owner of the credit, although in reality, he may not the debtor deliver a thing of inferior quality. The
be the owner (e.g., an heir who enters upon the purpose of the obligation and other circumstances shall
hereditary estate and collects the credits thereof, but be taken into consideration. (1167a)
who is later deprived of the inheritance because of  If there is disagreement between the debtor and the
incapacity to succeed) creditor as to the quality of the thing delivered, the
 it is necessary not only that the possession of the court should decide whether it complies with the
credit be legal, but also that the payment be in good obligation, taking into consideration the purpose and
faith other circumstances of the obligation
 Both the creditor and the debtor may waive the
1243. Payment made to the creditor by the debtor after benefit of this article
the latter has been judicially ordered to retain the debt  see Art. 1244
shall not be valid. (1165)
 the payment to the creditor after the credit has been 1247. Unless it is otherwise stipulated, the
attached or garnished is void as to the party who extrajudicial expenses required by the payment shall
obtained the attachment or garnishment, to the be for the account of the debtor. With regard to judicial
extent of the amount of the judgment in his favor. costs, the Rules of Court shall govern. (1168a)
 The debtor upon whom garnishment order is served  This is because the payment is the debtor’s duty and
can always deposit the money in court by way of it inures to his benefit in that he is discharged from
consignation and thus relieve himself from further the burden of the obligation
liability
1248. Unless there is an express stipulation to that
1244. The debtor of a thing cannot compel the creditor effect, the creditor cannot be compelled partially to
to receive a different one, although the latter may be of receive the prestations in which the obligation consists.
the same value as, or more valuable than that which is Neither may the debtor be required to make partial
due. In obligations to do or not to do, an act or payments.
forbearance cannot be substituted by another act or However, when the debt is in part liquidated and in
forbearance against the obligee's will. (1166a) part unliquidated, the creditor may demand and the
debtor may effect the payment of the former without
 Upon agreement of consent of the creditor, the
waiting for the liquidation of the latter. (1169a)
debtor may deliver a different thing or perform a
 The creditor who refuses to accept partial prestations
different prestation in lieu of that stipulated. In this
does not incur delay except when there is abuse of
case there may be dation in payment or novation
right or if good faith requires acceptance
 The defects of the thing delivered may be waived by  This article does not apply to obligations where there
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are several subjects or where the various parties are expenses shall be borne by him. These provisions
bound under different terms and conditions are without prejudice to venue under the Rules of
Court.(1171a)
1249. The payment of debts in money shall be made in  Since the law fixes the place of payment at the
the currency stipulated, and if it is not possible to domicile of the debtor, it is the duty of the creditor to
deliver such currency, then in the currency which is go there and receive payment; he should bear the
legal tender in the Philippines. The delivery of expenses in this case because the debtor cannot be
promissory notes payable to order, or bills of exchange made to shoulder the expenses which the creditor
or other mercantile documents shall produce the effect incurs in performing a duty imposed by law and
of payment only when they have been cashed, or when which is for his benefit.
through the fault of the creditor they have been  But if the debtor changes his domicile in bad faith or
impaired.
after he has incurred in delay, then the additional
In the meantime, the action derived from the original
expenses shall be borne by him
obligation shall be held in the abeyance. (1170)
 LEGAL TENDER means such currency which in a  When the debtor has been required to remit money
given jurisdiction can be used for the payment of to the creditor, the latter bears the risks and the
debts, public and private, and which cannot be expenses of the transmission. In cases however
refused by the creditor where the debtor chooses this means of payment, he
 so long as the notes were legal tender at the time bears the risk of loss.
they were paid or delivered, the person accepting
them must suffer the loss if thereafter they became SUBSECTION 1
valueless APPLICATION OF PAYMENTS
 the provisions of the present article have been
modified by RA No. 529 which states that payments 1252. He who has various debts of the same kind in
of all monetary obligations should now be made in favor of one and the same creditor, may declare at the
currency which is legal tender in the Phils. A time of making the payment, to which of them the
stipulation providing payment in a foreign currency is same must be applied. Unless the parties so stipulate,
null and void but it does not invalidate the entire or when the application of payment is made by the
contract party for whose benefit the term has been constituted,
 A check, whether a manager’s check or an ordinary application shall not be made as to debts which are not
check is not legal tender and an offer of the check in yet due.
payment of debt is not a valid tender of payment If the debtor accepts from the creditor a receipt in
which an application of the payment is made, the
1250. In case an extraordinary inflation or deflation of former cannot complain of the same, unless there is a
the currency stipulated should supervene, the value of cause for invalidating the contract. (1172a)
the currency at the time of the establishment of the  Requisites:
obligation shall be the basis of payment, unless there is 1. 1 debtor and 1 creditor only
an agreement to the contrary. (n) 2. 2 or more debts of the same kind
 Applies only where a contract or agreement is 3. all debts must be due
involved. It does not apply where the obligation to 4. amount paid by the debtor must not be
pay arises from law, independent of contracts sufficient to cover the total amount of all
the debts
 Extraordinary inflation of deflation may be said to be
that which is unusual or beyond the common  It is necessary that the obligations must all be due.
fluctuations in the value of the currency, which Exceptions: (1) whe there is a stipulation to the
parties could not have reasonably foreseen or which contrary; and (2) the application of payment is made
was manifestly beyond their contemplation at the by the party for whose benefit the term or period has
time when the obligation was constituted been constituted (relate to Art. 1196).
 It is also necessary that all the debts be for the same
1251. Payment shall be made in the place designated in kind, generally of a monetary character. This
the obligation. There being no express stipulation and includes obligations which were not originally of a
if the undertaking is to deliver a determinate thing, the monetary character, but at the time of application of
payment shall be made wherever the thing might be at payment, had been converted into an obligation to
the moment the obligation was constituted. In any pay damages by reason of breach or
other case the place of payment shall be the domicile of nonperformance.
the debtor.  If the debtor makes a proper application of payment
 If the debtor changes his domicile in bad faith or but the creditor refuses to accept it because he
after he has incurred in delay, the additional wants to apply it to another debt, such creditor will
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REVIEWER
incur in delay  Example: debtor owes his creditor several debts, all
 RIGHT OF DEBTOR TO MAKE APPLICATION. If at the of them due, to wit: (1) unsecured debt, (2) a debt
time of payment, the debtor does not exercise his secured with mortgage of the debtor's property, (3)
right to apply it to any of his debts, the application a debt with interest, (4) a debt in which the debtor is
shall be understood as provided by law, unless the solidarily liable with another. Partial payment was
creditor makes the application and his decision is made by the debtor, without specification as to
accepted by the debtor. This application of payment which the payment should be applied.
can be made by the creditor only in the receipt The most onerous is (4), followed by (2), then
issued at the time of payment (although the (3), then (1). Consequently, payment shall be
application made by creditor may be contested by made in that order.
the debtor if the latter’s assent to such application
was vitiated by such causes as mistake, violence, SUBSECTION 2
intimidation, fraud, etc) PAYMENT BY CESSION
 The debtor and the creditor by agreement, can
1255. The debtor may cede or assign his property to his
validly change the application of payment already
creditors in payment of his debts. This cession, unless
made without prejudice to the rights of third persons
there is stipulation to the contrary, shall only release
acquired before such agreement
the debtor from responsibility for the net proceeds of
the thing assigned. The agreements which, on the
1253. If the debt produces interest, payment of the
effect of the cession, are made between the debtor and
principal shall not be deemed to have been made until
his creditors shall be governed by special laws. (1175a)
the interests have been covered. (1173)
  Cession is a special form of payment whereby the
Interest paid first before principal
debtor abandons or assigns all of his property for the
 Applies both to compensatory interest (that benefit of his creditors so that the latter may obtain
stipulated as earnings of the amount due under the payment of their credits from the proceeds of the
obligation) and to interest due because of delay or property.
mora on the part of the debtor
 Requisites:
 SC held that this provision applies only in the 1. plurality of debts
absence of a verbal or written agreement to the 2. partial or relative insolvency of the debtor
contrary (merely directory, not mandatory) 3. acceptance of cession by the creditors
 Kinds of Cession:
1254. When the payment cannot be applied in
1. Contractual (Art. 1255)
accordance with the preceding rules, or if application
2. Judicial (Insolvency Law)
can not be inferred from other circumstances, the debt
which is most onerous to the debtor, among those due,  Must be initiated by debtors
shall be deemed to have been satisfied. If the debts  Requires two or more creditors, debtors insolvent,
due are of the same nature and burden, the payment cession accepted by creditors
shall be applied to all of them proportionately. (1174a)  Such assignment does not have the effect of making
 As to which of 2 debts is more onerous is the creditors the owners of the property of the
fundamentally a question of fact, which courts must debtor unless there is an agreement to that effect
determine on the basis of the circumstances of each
case  Difference between Dation and Cession
 Debts are not of the same burden (1st par.)– Rules:
1. Oldest are more onerous than new ones DATION CESSION
2. One bearing interest more onerous than one may be 1 creditor many creditors
that does not
3. secured debt more onerous than unsecured does not require insolvency requires partial or relative
one insolvency
4. principal debt more onerous than guaranty delivery of a thing delivery of all the property
5. solidary debtor more onerous than sole
debtor transfer of ownership of the no transfer of ownership (only
6. share in a solidary obligation more onerous property of possession and
to a solidary debtor administration)
7. liquidated debt more onerous than a novation
unliquidated
 Debts are of the same burden (2nd par.)– the payment extinguishes the effect is merely to release
payment shall be applied to all of them pro rata or obligation (to the extent of debtor from the net proceeds
proportionately. the value of the thing of the property; hence, partial
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REVIEWER
delivered) extinguishment of obligation. because of some legal cause provided in the present
article
3. [N] That previous notice of the consignation has
SUBSECTION 3 been given to persons interested in the performance
TENDER OF PAYMENT AND CONSIGNATION of the obligation
4. [D] The amount or thing due was placed at the
1256. If the creditor to whom tender of payment has disposal of the court
been made refuses without just cause to accept it, the 5. [N] After the consignation had been made the
debtor shall be released from responsibility by the persons interested had been notified thereof
consignation of the thing or sum due.
Consignation alone shall produce the same effect in the  If the reason for consignation is the unjust refusal of
following cases: the creditor to accept payment, it must be shown:
(1) When the creditor is absent or unknown, or does 1. That there was previous tender of payment, without
not appear at the place of payment; which the consignation is ineffective
(2) When he is incapacitated to receive the payment at 2. That the tender of payment was of the very thing
the time it is due; due, or in case of money obligations that legal tender
(3) When, without just cause, he refuses to give a currency was offered
receipt; 3. That the tender of payment was unconditional and
(4) When two or more persons claim the same right to 4. That the creditor refused to accept payment without
collect; just cause
(5) When the title of the obligation has been lost.
(1176a)  Exception to requirement for tender of payment:
 Tender of payment : manifestation made by the [AIR-TT]
debtor to the creditor of his desire to comply with his 1. [A] When creditor is absent or unknown or does not
obligation; The act of the debtor of offering to the appear at place of payment
creditor the thing or amount due 2. [I] When he is incapacitated to receive payment
 Consignation : Deposit of the object or the amount 3. [R] When he refuses to give receipt, without just
due with the proper court after refusal or inability of cause
the creditor to accept the tender of payment 4. [T] When two or more persons claim same right to
 Tender of payment by certified check is valid; a mere collect
check would also be valid for tender of payment if 5. [T] When title of the obligation has been lost
the creditor makes no prompt objection, but this
does not estop the latter from later demanding  The 1st and 2nd Special Requisites of Consignation
payment in cash are embodied in Article 1256.
 As to the 2nd requisite ([L] – legal cause) the
 When a tender of payment is made in such a form
following musst be present:
that the creditor could have immediately realized
(a) the tender of payment must have been made prior to
payment if he had accepted the tender, followed by a
the consignation
prompt attempt of the debtor to deposit the means
(b) that it must have been unconditional [e.g. where the
of payment in court by way of consignation, the
debtor tendered a check for P3,250 to the creditor as
accrual of interest on the obligation will be
payment of a debt conditioned upon the signing by
suspended from the date of such tender. But when
the latter of a motion to dismiss a complaint for legal
the tender of payment is not accompanied by the
separation, such tender of payment is invalid.]
means of payment, and the debtor did not take any
(c) that the creditor must have refused to accept the
immediate step to make a consignation, then the
payment without just cause [it is not necessary for
interest is not suspended from the time of such
the court where the thing or the amount is deposited
tender.
to determine whether the refusal of the creditor to
accept the same was with or without just cause. The
 GENERAL REQUISITES OF VALID CONSIGNATION vs
question will be resolved anyway in a subsequent
SPECIAL REQUISITES
proceeding. Hence, the mere refusal of the creditor
General Req : relative to payment (Arts. 1232 -
to accept the tender of payment will be sufficient
1251)
(Manresa)]
Special Req : very nature of consignation (Arts.
1256 – 1258)
1257. In order that the consignation of the thing due
may release the obligor, it must first be announced to
 Special Requisites of consignation: [DLN-DN]
the persons interested in the fulfillment of the
1. [D] There was a debt due
obligation.
2. [L] The consignation of the obligation was made
The consignation shall be ineffectual if it is not made
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OBLIGATIONS AND CONTRACTS

TITLE I – OBLIGATIONS (c) NEGATIVE OBLIGATION – the obligation not

1163. Every person obliged to give something is also

accessories, even though they may not have been

fulfillment of an obligation; NATURE OF Direct, Incidental to the

Basis 1. Culpa 2. Culpa KINDS of DILIGENCE:

1181. In conditional obligations, the acquisition of 2 KINDS OF IMPOSSIBLE CONDITIONS:

When a conditional obligation is VOID – impossible conditions

one or of the other. debtor.

remainders;  When the obligation is ambiguous, it must be

Section 4 – Joint and Solidary Obligations a. Solidary Debtors, Joint Creditors

Batman and Robin jointly obliged themselves to deliver a

2. Some of the solidary debtors;  Atty De Chavez: Ito ay provision sa tanga...

Code. and penalty are extinguished

PENALTY CLAUSE 1228. Proof of actual damages suffered by the creditor

principal. be delivered or released

deemed fully complied with payment

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