18 Questions
In an obligation with a penal clause, what does the penalty take the place of?
Indemnity for damages
According to Art. 1226, what is not necessary in order to demand the penalty in an obligation with a penal clause?
Proof of actual damages
When can the creditor demand both the fulfillment of the obligation and the satisfaction of the penalty in an obligation with a penal clause?
When the right has been clearly granted to him
What type of penal clause allows for only the penalty to be demanded in case of breach?
Subsidiary penal clause
In what situation can both the penalty and the principal obligation be enforced in an obligation with a penal clause?
When both the penalty and principal obligation are joint
Under what circumstance can a creditor not demand both the fulfillment of the obligation and the satisfaction of the penalty?
When a subsidiary penal clause is in place
What is subrogation in the context of the text?
The substitution of one person in the place of a creditor with reference to a lawful claim.
When is legal subrogation presumed according to the text?
When a creditor pays another creditor who is preferred.
What is required for voluntary or conventional subrogation to take place?
Consent of the original parties and of the third person.
Which statement about voluntary or conventional subrogation is true based on the text?
It must be clearly established for it to take place.
What cannot compel a creditor to subrogate a payer in his rights, according to the text?
Payment on behalf of the debtor without their knowledge.
In what cases is there a presumption of legal subrogation according to the text?
When a creditor pays another creditor who is preferred.
When can a penalty be enforced according to the Civil Code?
When there is a breach of the obligation and it is not contrary to law.
In which scenario can the penalty be demanded along with damages and interests according to the text?
When there is stipulation to the contrary.
Under what conditions can a court reduce a penalty imposed by the parties?
When the penalty is unconscionable even if there has been no performance.
What happens if the penal clause is declared null and void by the courts?
The nullity of the principal obligation carries with it that of the penal clause.
Under what circumstances may damages and interests be demanded aside from the penalty according to Art. 1126?
When there is stipulation to the contrary.
In what case can a penalty not be enforced according to Art. 1306?
When the penalty is unconscionable even if there has been no performance.
Study Notes
Obligation with a Penal Clause
- In an obligation with a penal clause, the penalty takes the place of damages and interest.
Demanding the Penalty
- According to Art. 1226, it is not necessary to prove the amount of damages to demand the penalty in an obligation with a penal clause.
- The creditor can demand both the fulfillment of the obligation and the satisfaction of the penalty when the obligation is breached.
Types of Penal Clauses
- A penal clause that allows for only the penalty to be demanded in case of breach is called a "penalty exclusive of damages".
- Both the penalty and the principal obligation can be enforced when the breach is not entirely the debtor's fault.
Subrogation
- Subrogation is the act of substituting one creditor for another.
- Legal subrogation is presumed when a third party pays the debt on behalf of the debtor or when a creditor receives payment from a third party.
- Voluntary or conventional subrogation requires the agreement of all parties involved.
- Voluntary or conventional subrogation is a contractual agreement between the parties.
- A creditor cannot be compelled to subrogate a payer in his rights.
Enforcing a Penalty
- A penalty can be enforced according to the Civil Code.
- The penalty can be demanded along with damages and interests when the breach is not entirely the debtor's fault.
Reducing a Penalty
- A court can reduce a penalty imposed by the parties if it is deemed excessive.
Null and Void Penal Clause
- If the penal clause is declared null and void by the courts, the creditor can still demand damages and interests.
Damages and Interests
- Damages and interests can be demanded aside from the penalty when the breach is not entirely the debtor's fault (Art. 1226).
- A penalty cannot be enforced if the debtor is not entirely at fault (Art. 1306).
Test your knowledge about obligations with a penal clause, which includes an accessory undertaking to pay a stipulated indemnity in case of breach. Learn about the different kinds of penalties based on their origin and purpose.
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