Philippine Civil Code Article 1156-1162 PDF

ARTICLE 1156-1162 EXAMPLES: Article 1156 – An obligation is a juridical necessity to X borrowed P1m from Y payable in three years with give, to do or not to do. 6% per annum interest based on a Contract of Loan...

ARTICLE 1156-1162 EXAMPLES: Article 1156 – An obligation is a juridical necessity to X borrowed P1m from Y payable in three years with give, to do or not to do. 6% per annum interest based on a Contract of Loan that they executed on January 1, 2023 Article 1156 of the New Civil Code defines an obligation as the juridical necessity to give, to do or not X and Y entered into a Contract of Sale wherein X sold to do. This is also referred to as the Civil Obligation. his lot to Y for P2m. The Supreme Court defines an obligation as a juridical Article 1157 – Obligations arise from law, contracts, relation whereby a person (called the creditor) may quasicontracts, acts or omissions punished by law, demand from another (called the debtor) the observance and quasi-delicts. of a determinative conduct (giving, doing, or not doing), SOURCES OF OBLIGATION and in case of breach, may demand satisfaction from the assets of the latter. -Law Civil obligations are based on positive law, whereas -Private Acts (contracts, quasi-contracts, delict, natural obligations, are based on equity and natural law. quasi-delict) In civil obligations, a right of action to compel their Private acts may either be unilateral (quasidelict, performance is granted to the creditor in case of non- delict, quasicontract) or bilateral (contract) performance, while in natural obligations, no such right Private unilateral acts are either lawful is granted. However, the voluntary fulfilment of a natural (quasicontracts) or unlawful (delict and quasi delict) obligation by the debtor will preclude him/her from recovering what he/she delivered to or rendered for the The list is exclusive. “expressio unius est exclusio creditor. alterius” EXAMPLES: Article 1158 – Obligations derived from law are not presumed. Only those expressly determined in this X borrowed P1m from Y payable on December 31, 2023 Code or in special laws are demandable, and shall be as evidenced by a promissory note. If on December 31, regulated by the precepts of the law which 2023, X makes no payment, Y may file a court action to establishes them; and as to what has not been enforce payment within 10 years foreseen, by the provisions of this book. X borrowed P1m from Y payable on December 31, 2023 Law is a rule of conduct laid down by legitimate as evidenced by a promissory note. No action was filed in authority for the common observance and benefit court by Y to enforce payment 10 years from December 31, 2023. Hence, the obligation has prescribed. In the Philippines, law includes: ELEMENTS OF OBLIGATION a. statutes enacted by the legislature; 1. Active Subject -obligee or creditor -the b. presidential decrees and executive orders issued possessor of a right -person in whose favor the by the President in the exercise of his legislative obligation is constituted powers; 2. Passive Subject -obligor or debtor -the party who has the duty of giving, doing, or not doing c. rulings of the Supreme Court construing the law; 3. Object/Prestation -the particular conduct d. rules and regulations promulgated by required to be observed by the debtor -to give, administrative or executive officers pursuant to a do, or not to do delegated power; and 4. Juridical Tie -the efficient cause established by e. ordinances passed by the Sanggunians of local the sources of obligations -law, contracts, government units. quasicontracts, delicts, and quasi-delicts To be demandable, that is to qualify as a civil obligation, it must be expressly imposed by law. EXAMPLES: The Supreme Court, in Loria vs Munoz, discussed that there is unjust enrichment when a person a. Obligation to pay taxes; b. 13th month pay; c. unjustly retains a benefit to the loss of another, or Parental support; and d. Obligation not to give when a person retains money or property of another alms to beggars. against the fundamental principles of justice, equity Jurisprudence Dela Cruz vs Northern Theatrical and good conscience. Enterprises (1954) A quasi-contract, however, is not the same as an Facts: X, security guard, killed a gate crusher in a implied contract because in an implied contract, movie theatre. A case was filed against X and he was there is a meeting of the minds, which is not present forced to engage the services of a lawyer to defend in a quasi-contract. himself. X was acquitted. Thereafter, X sought to Two Principal Forms: recover his expenses from his employer. 1. Negotiorum Gestio Issue: Is the employer liable? This happens when someone voluntarily Ruling: No, the employer is not liable because there takes charge of an abandoned property is no law requiring the employer to furnish legal or business of another without the assistance to its employees. latter’s authority (Article 2144) Article 1159 – Obligations arising from contracts Elements of Negotiorum Gestio have the force of law between the contracting i. Gestor – the person who voluntarily parties and should be complied with in good faith assumes the management of the business or Article 1305 of the New Civil Code defines a property of another; contract as a meeting of the minds between two ii. Abandoned business/property – the persons whereby one binds himself, with respect to business/property must be abandoned; the other, to give something or to render some otherwise, it will result to an service unauthorized/unenforceable contract; iii. No authorization from the owner – The Obligatory force of contracts gestor was not authorized by the owner, Obligations arising from contracts have the force ether expressly or impliedly; otherwise, it of law between the contracting parties and should be will be a case of agency; and complied with in good faith. iv. Good faith – The gestor must take charge of the business/property in good faith Relativity of contracts EXAMPLE: A and B are owners of adjacent piggery Contracts are effective only between the parties. farms. A was hospitalized and had no one to tend to EXAMPLES: his farm. When B noticed that A had not been around for two days, he took it upon himself to feed the pigs, 1. Contract of Loan 2. Contract of Carriage 3. clean the pens, and performed other acts to preserve Contract of enrolment the property of A. B incurred necessary and useful expenses in the process. B must reimburse A for Article 1160 – Obligations derived from quasi- those expenses. contracts shall be subject to the provisions of Chapter I, Title XVII, of this Book. 2. Solutio Indebiti Article 2142 of the New Civil Code defines quasi- As defined by Article 2154 of the New Civil Code, contracts as a juridical relation that arises from this happens when something is received when there certain lawful, unilateral, and voluntary acts to the is no right to demand it, and it was unduly delivered end that no one shall be unjustly enriched or thru mistake resulting in the obligation to return benefitted at the expense of another. what has been delivered. Requisites of Solutio Indebiti Requisites i. There is payment even though there is no a. There must be a crime or a felonious act or omission; binding relation between the payor, who is not b. Which results in damage or injury to another; and obliged to pay, and the person who received the c. Which is the direct and proximate cause thereof. payment; and ii. The payment was made by mistake. EXAMPLE: X stole the carabao of Y. If X is found guilty of the crime of theft, he has the civil liability of restoring EXAMPLE: X is supposed to send P100thou to Y via gcash the carabao to Y. X is also liable for other damages. account. Because X entered the wrong gcash number by mistake, the P100thou was sent to Z instead. Z, must But what if the accused in the criminal case is return the money to X. acquitted? Will there be no civil liability as well? Jurisprudence on Solutio Indebiti UST COOPERATIVE vs It depends on the kind of acquittal. CITY OF MANILA (1965) The accused is acquitted because he/she is not Facts: The UST Coop paid municipal taxes and license the author of the act or omission complained of. In this fees to the city government of Manila unaware that it case, there will be no civil liability based on delict was exempt under a new law from all taxes and government fees. Later, it learned of its exemption and The accused is acquitted because his/her guilt sought to recover from the city government the taxes it has not been proved beyond reasonable doubt. In this had paid. The city government refused to refund said case, the accused can still be liable for civil liability for taxes the act or omission complained of because civil liability requires a lower quantum of proof, that is, Issue: Whether or not the City of Manila government preponderance of evidence should refund the taxes erroneously paid by the UST Coop. But what if the accused dies before the final judgment is rendered in the criminal case? Ruling: The UST Coop can recover such taxes from the city government of Manila which has a duty to return Both his criminal liability, as well as the civil what has been paid by mistake under the principle of liability arising from the crime are extinguished solution indebiti. The government is not exempt from Article 1162 – Obligations derived from quasi-delicts the application of solution indebiti. It should not unjustly shall be governed by the provisions of Chapter 2, Title enrich itself at the expense of taxpayers. XVII of this Book, and by special laws. Article 1161 – Civil Obligations arising from criminal This obligation is also referred to as torts or culpa offenses shall be governed by penal laws, subject to the aquiliana. provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human This is based on Article 2176 of the New Civil Code which Relations, and of Title XVIII of this Book, regulating provides that whoever by act or omission causes damages. damage to another, there being fault or negligence, and there being no pre-existing contractual relation between This obligation is based on Article 100 of the Revised the parties, is obliged to pay for the damage done. Penal Code which provides that every person criminally liable for felony is also civilly liable. Requisites GENERAL RULE: when one commits a crime, he/she A. Damage suffered by the plaintiff; offends the State and the person of the victim. B. Fault or negligence of the defendant; and Civil action is impliedly instituted with the criminal C. Proximate cause or the connection of cause and action unless the offended party waives, reserves, or effect between the fault or negligence of the defendant instituted it prior to the criminal action. and damages incurred by the plaintiff EXAMPLES: X was cleaning the window pane of his In giving a determinate thing, the debtor is not only condominium unit. Due to lack of care, he caused the obliged to make the delivery but to take care of the thing glass to break and fall on the street, the splinters hitting before its delivery with the diligence of a good father of the head of a pedestrian and the cars that were parked a family on the ground. X shall be liable for damages to the Jurisprudence defines diligence of a good father of a pedestrian for any injury sustained by him and to the car family as the diligence which an ordinary prudent man owner for the scratches and dents on the car would exercise with regard to his own property. Article 2183. The possessor of an animal or whoever EXAMPLE: X has the obligation to deliver a specific car to may make use of the same is responsible for the damage Y on December 31, 2023 based on a contract they which it may cause, although it may escape or be lost. executed on January 01, 2023. Before delivery, X must This responsibility shall cease only in case the damage regularly warm up the engine of the car, check its oil and should come from force majeure or from the fault of the other fluids, see to it that it is parked at a safe area, and person who has suffered damage. do other acts which an ordinary owner would do to Quasi-delict is different from breach of contract in preserve it three respects: GENERAL RULE: failure to observe the diligence required a. In quasi-delict, negligence must be proved, while in in the preservation of the thing will give rise to liability breach of contract, negligence is presumed; such as payment of damages b. In quasi-delict, there should be no preexisting The diligence required may change subject to law or the relation between the plaintiff and the defendant, agreement of the parties. while in breach of contract, there is; and c. In quasi-delict, the defense of good father of a family Common carriers are bound to observe extraordinary is a proper defense insofar as parents, guardians, diligence and employers are concerned, while in breach of contract, it is not a proper defense in the selection Article 1164 – The creditor has a right to the fruits of the and supervision of employees. thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the ARTICLE 1163-1178 same has been delivered to him Article 1163 – Every person obliged to give something is Three kinds of fruits also obliged to take care of it with the proper diligence Natural fruits refer to the spontaneous products of the of a good father of a family, unless the law or the soil such as trees and plants and the young and other stipulation of the parties requires another standard of products of animals such as eggs produced by chicken. care Industrial fruits are those that come into existence Article 1163 speaks of the obligation to give or real because of human cultivation and labor. obligation. The thing to be given or delivered may either be determinate or generic. As defined by Article 1460 of Civil fruits are those arising from juridical relation such the New Civil Code, a determinate thing is one which is as lease and rental contracts. particularly designated or physically segregated from all others of the same class. A generic or indeterminate It must be noted, however, that the creditor’s right to thing, on the other hand, refers to a class or genus. the fruits begins only from the time the obligation to deliver the thing arises on the part of the debtor. As In obligation, there is delivery which may either be such, a distinction must be made between a pure physical as when the debtor places the thing in the obligation and an obligation that is subject to a control and possession of the creditor or constructive as suspensive condition or period. when the debtor executes a public document in favor of the creditor or gives the key of a car, or of the place EXAMPLES: where thing is kept to the creditor. On July 1, 2023, X obliged himself to deliver a specific agricultural land to Y. Hence, from July 1, 2023, the perfection of the contract, Y is entitled to the fruits of The obligation referred to in Article 1165 is a real the land. obligation, that is, the obligation to give which may either be determinate or generic On July 1, 2023, X obliged himself to deliver a specific agricultural land to Y if C passes the 2024 CPA Licensure In case of nonperformance by the debtor to Examination. If Y passes the CPALE on October 15, 2024, deliver a determinate thing, the creditor may compel the Y will only be entitled to the fruits of the land from that debtor to make the delivery and demand payment of day. Any fruits accruing before that shall pertain to X damages Furthermore, while the creditor already has the right to EXAMPLE: On July 1, 2023, X obliged himself to deliver the fruits from the time the obligation to deliver it arises, to Y a specific horse on August 1, 2023. If X will fail, Y the nature of the right differs with respect to delivery. may demand the delivery of the horse plus damages. Before delivery, the creditor can enforce the right, that In case of non-performance by the debtor to is, the delivery of the thing and the fruits, only against deliver a generic thing, the creditor may ask that the the debtor. The nature of the right is a personal right or obligation be complied with at the expense of the debtor jus in personam. and to demand payment of damages. EXAMPLE: On July 1, 2023, X obliged himself to deliver EXAMPLE: On July 1, 2023, X obliged himself to deliver to Y a specific goat on August 1, 2023. If X will fail to to Y 100 sacks of sugar on August 1, 2023. If X will fail, Y deliver the goat on August 1, 2023, and the goat gave may get the 100 sacks of sugar from another person at birth to a kid on August 2, 2023, Y can demand from X the expense of X plus damages. the delivery of the goat and the kid In both cases, the creditor must institute a court Supposed, instead of delivering the goat to Y on action and obtain a favorable judgment. August 1, 2023, X will sell it to Z. The owner will be Z, and GENERAL RULE: the debtor is not liable for loss in a Y will have no right of action against X. Instead, the only determinate obligation if the same is due to a fortuitous remedy of Y is to go after X for damages. event. But after delivery, the creditor, who already has a real Two exceptions: right over the thing and its fruits, can enforce possession and ownership over the thing against the whole world. 1. The debtor is guilty of delay The nature of the right becomes jus in re. EXAMPLE: X has the obligation to deliver a specific EXAMPLE: On July 1, 2023, X obliged himself to deliver goat to Y on August 1, 2023. On August 1, 2023, despite to Y a specific goat on August 1, 2023. If X will deliver the demand by Y, X failed to deliver. On August 2, 2023, the goat to Y on August 1, 2023, Y acquires ownership over goat was killed by lightning while under the possession the goat which Y can enforce against the whole world of X. Here, even if the loss is due to a fortuitous event, X is liable for the value of the goat plus damages because This is the meaning of the phrase “the creditor acquires he is in delay. no real right over the thing until the same has been delivered to him”. 2. The debtor has promised to deliver the same thing to two or more persons who do not have the same Article 1165 – When what is to be delivered is a interest. determinate thing, the creditor, in addition to the right granted to him by article 1170, may compel the debtor EXAMPLE: On July 1, 2023, X obliged himself to to make the delivery. If the thing is indeterminate or deliver a specific goat to Y on August 1, 2023. On July 3, generic, he may ask that the obligation be complied with 2023, X also obliged himself to deliver the same specific at the expense of the debtor. If the obligor delays, or has goat to Z on August 3, 2023. On July 23, 2023, the goat promised to deliver the same thing to two or more was killed by a lightning. Here, X will be liable both to Y persons who do not have the same interest, he shall be and Z for the value of the goat plus damages. responsible for any fortuitous event until he has effected the delivery Article 1166 – The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been applied. Here, Y may ask X to repaint the house, or if X mentioned will refuse, Y may ask another person to do it at the expense of X plus damages. Accessions refer to those produced by the determinate thing or those which are incorporated thereto, either Article 1168 – When the obligation consists in not doing, naturally or artificially. It also includes the fruits and the obligor does what has been forbidden him, it shall also be undone at his expense. Accessories, on the other hand, are those that are attached to the determinate thing through which it is Speaks of a negative personal obligation, that is, an increased in terms of utility, ornamented, preserved, or obligation not to do something. Should the debtor do completed. what is forbidden of him, the creditor may ask that what has been done be undone at the expense of the debtor Although accessions and accessories are not mentioned and demand payment of damages in the agreement, the debtor is obliged to deliver them. However, the parties may agree that the accessions and EXAMPLE: X and Y are owners of adjoining lots in a accessories are not included subdivision whose rules prohibit residents from constructing a fence between lots higher than two Article 1167 – If a person obliged to do something fails meters to allow sunlight and air to pass through. If X will to do it, the same shall be executed at his cost. The same construct a fence four meters in height between his lot rule shall be observed if he does it in contravention of and that of Y, Y may ask that the fence be reduced to two the tenor of the obligation. Furthermore, it may be meters, or if X refuses, ask another person to do it at the decreed that what has been poorly done be undone. expense of X plus damages in either case. THREE SCENARIOS: Article 1169 – Those obliged to deliver or to do 1. If the debtor fails to perform the obligation, the something incur in delay from the time the obligee creditor may have the obligation be executed by judicially or extrajudicially demands from them the another at the expense of the debtor. In addition, fulfillment of their obligation. he may demand payment of damages from the However, the demand by the creditor shall not be debtor. necessary in order that delay may exist: EXAMPLE: X obliged to construct a house for Y within six 1. When the obligation or the law expressly so declares; months. If after six months, X has not yet commence the or construction, Y may have another person to construct his house at the expense of X plus damages. 2. When from the nature and the circumstances of the obligation it appears that the designation of the time 2. the debtor performs the obligation but in a manner when the thing is to be delivered or the service is to be that is contrary to what the parties have agreed rendered was a controlling motive for the establishment upon of the contract; or EXAMPLE: Assuming the house which X is obliged to 3. When demand would be useless, as when the obligor construct should have four bedrooms. If X constructed has rendered it beyond his power to perform. only three, Y may demand the construction of an additional bed room, or if X will refuse, Y may have In reciprocal obligations, neither party incurs in delay if another do it at the expense of X plus damages the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From 3. The debtor performs the obligation in a poor the moment one of the parties fulfills his obligation, manner, in addition to the right to demand delay by the other begins. payment of damages from the debtor, the creditor may ask that what was poorly done be undone at Speaks of delay or mora in the performance of the the expense of the debtor. obligation. And when there is delay, we are talking about a starting point or a specific time from which the EXAMPLE: X is obliged to paint the house of Y. After obligation is due and demandable fulfilling the obligation, the painting was unevenly There are three kinds of delay: EXAMPLE: An individual taxpayer engaged in business who does not file his income tax return and pay the tax 1. Moral Solvendi – This delay is incurred by the debtor on April 15 for his income earned in the preceding year in the fulfillment of his obligation. It may either be: will be in delay even if there is no demand from the a. Mora solvendi ex re or the delay in the government because there is a law that expressly performance of real obligations; or provides for it b. Mora solvendi ex persona or the delay in the 3. When the designation of time was a controlling performance of personal obligations motive for the establishment of the contract; 2. Mora accipiendi – This delay is incurred by the EXAMPLE: X is obliged to deliver a graduation gown to Y creditor. on or before 10 am on August 1, 2023 in time for Y’s attendance to his commencement ceremonies. If X will 3. Compensatio morae – This delay happens in fail to deliver on the said date and time, X will be delay reciprocal obligations wherein the delay of one will give even if there is no demand from Y. rise to the delay of the other. 4. When demand would be useless. Four requisites so that one may be liable for delay: EXAMPLE: X has the obligation to deliver a specific goat 1. The obligation is already demandable and liquidated; to Y on July 30, 2023. Before the due date, X sells and 2. The debtor does not perform the obligation; delivers the specific goat to Z. Here, there is no need for 3. The creditor makes a demand, either judicially or demand from Y so that X will be in delay because it is now extrajudicially, from the debtor; and impossible for X to perform his obligation to Y. 4. The debtor failed to perform the obligation despite In reciprocal obligations, delay only begins when one of the demand. the parties fulfills his obligations. A good example of this is a contract of sale where the seller is obliged to deliver EXAMPLE: X has the obligation to deliver 10 bags of the thing subject of the contract and the buyer is obliged cement to Y on August 31, 2023. X did not deliver them to pay the price. on due date. Is X already in delay? No, Y must first make a demand. What if Y makes a demand on August 25, EXAMPLE: X sold his diamond ring to Y for P1m. As per 2023? Is X already in delay? No, the demand is their agreement, the delivery of the ring and the premature. payment of the price would be on August 1, 2023. If on August 1, Y paid the price, X will be in delay unless he GENERAL RULE: Article 1169 requires that the creditor delivers the ring. If, however, Y delivers the ring, X will be makes a demand, either judicially or extrajudicially, from in delay unless he gives the purchase price. Should the debtor before the latter could be liable for delay. A neither X nor Y does not perform his obligation, neither judicial demand is one filed in court by the creditor of them will be in delay. against the debtor. An extrajudicial demand is one made by the creditor either in writing or orally without court When the debtor is guilty of delay (mora solvendi), the intervention. following are the effects: Exception to the general rule demand is necessary in 1. He shall be liable for damages; order that delay may exist: 2. He shall bear the risk of loss; 1. When the obligation expressly so declares 3. He shall be liable for fortuitous event. EXAMPLE: In a lease contract where X must pay the Can there be a delay in an obligation not to do? rental to Y on the 5th day of the month without need of demand, X will be in delay if he fails to pay the rental to Article 1170 – Those who in the performance of their Y on the 5 th of the month even if there is no demand obligations are guilty of fraud, negligence, or delay, and from Y those who in any manner contravene the tenor thereof, are liable for damages. 2. When the law expressly so declares Four instances where a party may be held liable for Kinds of fraud. damages: 1. Contravention of the tenor of the obligation 1. Fraud at the time of giving consent, which may under Article 1167; 2. Delay under Article 1169; 3. Fraud either be: under Article 1171; and 4. Negligence under Articles a. Causal fraud or dolo causante – It refers to 1172 and 1173 fraud which vitiate the very consent of the Jurisprudence defines damages as the harm done and other party and without which that party the sum of money that may be recovered in reparation would have not consented. It makes the therefor. Injury, on the other hand, is the wrongful, contract voidable unlawful or tortuous act that causes loss or harm to EXAMPLE: X sold a ring to Y. Y bought the ring because another. It is the legal wrong to be redressed. In effect, he was induced by what X told him that it was made of damages refer to the effect while injury is the cause pure gold. X knew very well it is made of bronze. Here, thereof the contract is voidable and Y may ask for damages. Six kinds of damages B. Incidental fraud or dolo incidente – It 1. Actual or compensatory damages which refer to refers to fraud without which consent would the pecuniary loss that may be recovered have still been given but the person giving it including the value of the loss suffered and would have agreed on different terms. The profits not realized. contract is valid but the person guilty of fraud is 2. Nominal damages which are claimed to liable for damages vindicate or recognize a right, and not meant to EXAMPLE: X sold a farm lot to Y for P1m. Y told X during indemnify the loss suffered (trespass upon real the negotiation of the sale that he is a poor farmer property) although in reality he is a rich businessman. If X would 3. Liquidated damages which are agreed upon by have sold the farm to Y for a higher price had he known the parties in a contract and must be paid in case of the fact that Y is a rich businessman, then the fraud of breach employed by Y was only incidental. Here, the contract is 4. Moral damages which include physical suffering, valid. X can only demand payment of damages from Y. mental anguish fright, serious anxiety, besmirched reputation, wounded feelings, moral 2. Fraud at the time of performance – This is the shock, social humiliation, and similar injury deliberate evasion of one’s obligation which 5. Temperate or moderate damages which are entitles the injured party to recover damages. more than nominal but less than compensatory damages. It is recovered when the amount of the EXAMPLE: X sold 10 sacks of Denorado rice to Y. They pecuniary loss suffered cannot be ascertained agreed that X would deliver the rice to Y at the with certainty latter’s residence two days later. X delivered 10 sacks 6. Exemplary or corrective damages which are of Maharlika rice which he mixed with rice of a lower imposed by way of example or correction for quality. Here, X committed fraud in the performance public good. of his obligation. It will not affect the validity of the contract but Y may demand damages from X. Only the actual damages require proof so that they may be recovered, unless the same is provided by 3. Future fraud – Liability for future fraud cannot law or agreement of the parties. With respect to the be waived. Hence, even the parties stipulate to other kinds of damages, their assessment is left to that effect, that stipulation is void the sound discretion of the court. EXAMPLE: X has the obligation to deliver 10 sacks of Article 1171 – Responsibility arising from fraud is powder detergent to Y. Among the agreements demandable in all obligations. Any waiver of an between X and Y is that X will not be liable for fraud action for future fraud is void. committed in the performance of his obligation. When X delivered, he mixed the detergent powder Fraud refers to the intentional or deliberate evasion with chalk. Here, X will still be liable despite the of one’s obligation. waiver. 4. Past fraud – Liability for past fraud can be waived This diligence may vary depending on: because it already happened. It is just considered a. The nature of the obligation; an act of liberality by the creditor EXAMPLE: If the obligation is to transport a EXAMPLE: X has the obligation to deliver 10 sacks of fragile object, the nature of the obligation Denorado rice to Y. On due date, X delivered 10 sacks requires the placement of a cushion or other of rice to Y but of lower quality. Upon discovery, Y protective covering around the object threatened to sue X for damages. X pleaded. Moved b. The circumstances of the persons; by X’s plea, Y waived his right to hold X liable for EXAMPLE: A twenty year old and healthy woman damages. This waiver is valid. was hired to baby-sit. Her obligation requires that she must not sleep while on duty since the Article 1172 – Responsibility arising from negligence circumstances of her person were considered in the performance of every kind of obligation is also when she was hired. demandable, but such liability may be regulated by c. The circumstances of the time; or the courts, according to the circumstances. EXAMPLE: A security guard assigned on night Article 1173 – The fault or negligence of the obligor duty who does not have a flashlight is negligent consists in the omission of that diligence which is considering that the circumstances of nighttime required by the nature of the obligation and require him to have one. corresponds with the circumstances of the person, of d. The circumstances of the place. the time and of the place. When negligence shows EXAMPLE: A taxi driver who drives at 100km per bad faith, the provisions of articles 1171 and 2201, hour in a street surrounding the public market paragraph 2 shall apply. If the law or contract does where many people come and go is guilty of not state with diligence which is to be observed in negligence considering that the circumstances of the performance, that which is expected of a good the place require him to drive at a moderate father of a family shall be required. speed. As in fraud, liability arising from fault or negligence is The test of negligence is whether the defendant also demandable in all kinds of obligation. However, in doing the alleged negligent act used that the liability arising from fault or negligence may be reasonable care and caution which an ordinary regulated by the courts according to the person would have used in the same situation circumstances. Fault or negligence as the omission by the debtor of When negligence shows bad faith, such that diligence which is required by the nature of the negligence shall be considered as fraud and the obligation and corresponds with the circumstances debtor may also be held liable to damages that of the person, of the time and of the place. may be reasonably attributed to the non- performance of the obligation Jurisprudence, on the other hand, defines it as the failure to observe, for the protection or interest of Negligence has three kinds, namely contractual another person, that degree of care, precaution and negligence which is the negligence committed in vigilance which the circumstances justly demand, the performance of an obligation arising from whereby such person suffers injury. Some cases refer contract, civil negligence also referred to as tort to it as the omission to do something which a which is the wrong or negligence committed not reasonable man, guided by those considerations arising from contract and is committed without which ordinarily regulate the conduct of human criminal intent, and criminal negligence which affairs, would do, or the doing of something which a results in the commission of a crime reasonable man would not do EXAMPLE: Contractual Negligence (taxi driver, When the kind of diligence is not agreed upon by the passenger, owner) Civil Negligence (pedestrian, parties in a contract, that which is expected of a good taxi driver, owner) father of a family shall be required Fraud is different from negligence in two respects, that committed no contributory negligence that may have is, deliberate intent and degree of liability. occasioned the loss. 1. In fraud, there is deliberate intent to cause Jurisprudence: Roberto C. Sicam et al. vs Spouses Jorge damage or prejudice, whereas in negligence, (August 8, 2007) there is none. Ruling: In order for a fortuitous event to exempt one 2. In fraud, the degree of liability cannot be from liability, it is necessary that he has committed no reduced by the courts, whereas in negligence, negligence or misconduct that may have occasioned the the court may reduce the degree of liability loss. When the event is found to be partly the result of a depending on the circumstances. person’s participation – whether by active intervention, neglect, or failure to act – the whole occurrence is Article 1174 – Except in cases expressly specified by law, humanized and removed from the rules applicable to or when it is otherwise declared by stipulation or when acts of God the nature of the obligation requires the assumption of Article 1175 – Usurious transactions shall be governed by risk, no person shall be responsible for those events special laws. which could not be foreseen, or which though foreseen, were inevitable Jurisprudence defines usury as the act of taking more interest for the use of money than what the law allows. GENERAL RULE: a person may not be held liable for fortuitous events. The Usury Law, however, had been rendered legally inexistent by Resolution No. 224 dated December 3, Those events which could not be foreseen, or which 1982 of the Monetary Board of the Central Bank, and though foreseen, were inevitable later by Central Bank No. 905 which took effect on The test is impossibility from being foreseen. January 1, 1983. Three exceptions: These circulars, in effect, allow the parties to agree on any interest that may be charged on a loan. a. When the person is made expressly liable by law for fortuitous events; In July 1, 2013, the Monetary Board issued Circular No. 799 declaring that the rate of interest for the loan or EXAMPLE: In case of delay or when the debtor forbearance of money, goods, or credits and the rate has promised to deliver the same thing to two or more allowed in judgments, in the absence of an express persons who do not have the same interest. agreement as to such rate of interest, shall be six percent b. When a party to the contract is declared liable by the per annum. stipulation of the parties for fortuitous events; or Article 1176 – The receipt of the principal by the creditor, EXAMPLE: X has the obligation to deliver a specific without reservation with respect to the interest, shall goat to Y on August 1, 2023. X and Y agreed that X will give rise to the presumption that said interest has been still be liable even if the goat dies due to a fortuitous paid. The receipt of a later installment of a debt without event. One week before the due date, the goat was killed reservation as to prior installments, shall likewise raise by lightning. Here, X would not be exempt from liability the presumption that such installments have been paid. even if the loss of the thing is due to fortuitous event One must know the concept of presumption. because of their agreement. Jurisprudence defines it as an inference as to the c.When the nature of the obligation requires the existence of a fact not actually known, arising from its assumption of risk usual connection with another which is known. EXAMPLE: Insurance against fire. EXAMPLE: X was shot but nobody witnessed the incident. Y, however, was seen running away from the When a person claims that the loss is due to fortuitous crime scene holding a gun. The fact known was that X event, the burden is upon him/her to prove that indeed was shot. The unknown fact is the person who shot X. it was so. In addition, he/she must prove that he/she Given the known facts, however, the inference is that it Here, the creditor will go to court and was Y who shot X. ask the court to order that properties of the debtor not exempt from execution be attached Two kinds of presumption and sold at public action. The proceeds of the Conclusive presumption may not be rebutted by sale shall be applied to the payment of his claim. evidence to the contrary. b. Exercising all the rights and bring all the actions Disputable presumption may be overcome by other of the debtor, except those that are inherent in evidence. his person (accion subrogatoria); or Here, the creditor may be a substitute What is the presumption in Article 1176? for the rights of the debtor. For example, if the While the issuance of a receipt by the creditor for debtor has a right to collect money from another the payment by the debtor of the principal will give rise person, the creditor may exercise that right to the presumption that the interest has been paid, such c. Impugn the acts which the debtor may have presumption may be overcome by the creditor by done to defraud his creditors (accion pauliana). introducing evidence to the contrary. Here, the creditor may impugn certain acts of the debtor which the debtor did to EXAMPLE: X obtained from Y a loan of P1m which bears defraud him. For example, knowing that the a 20 percent per annum interest. X thereafter paid creditor will go after his only property to enforce P500thou to Y. Y then issued a receipt acknowledging X’s payment of his obligation, the debtor sold that payment of the principal P1m without indicating therein property to another person. The sale may be whether the interest has been paid or not. Here, the 20 rescinded by the creditor because it was done by percent interest is presumed to have been paid. Y, the debtor to defraud him. however, may prove that it has not yet been paid. Article 1178 – Subject to the laws, all rights acquired in While the issuance of a receipt by the creditor for virtue of an obligation are transmissible, if there has the payment by the debtor of later installment of a debt been no stipulation to the contrary. will give rise to the presumption that prior installments had been paid, such presumption may be overcome by GENERAL RULE: all rights acquired in virtue of an the creditor by introducing evidence to the contrary. obligation are transmissible. EXAMPLE: X owes Y P1m. The debt is payable in 10 equal EXAMPLE: X owes Y P1m. The debt is evidenced by a monthly installments as follows: P100thou due on every promissory note. Y may assign or transfer his credit right first of the March 2023. On July 1, 2023, Y issued a receipt to Z. In that case, Z will have the right to collect from X. acknowledging X’s payment of P100thou for the fifth Or if Y dies, his right to credit is transmitted to his heirs. installment without indicating that the first four Exceptions installments had been paid. The presumption arises that the same had been paid. When the parties agreed that such rights are not transmissible; Article 1177 – The creditors, after having pursued the property in possession of the debtor to satisfy their In our first example, the right to credit of Y is not claims, may exercise all the rights and bring all the transmissible if X and Y agreed against its transmissibility. actions of the latter for the same purpose, save those When the transmission of rights is prohibited by law; which are inherent in his person; they may also impugn and the acts which the debtor may have done to defraud them. In a partnership, the rights of general partner is not transmitted to his heirs upon his death because Remedies of the creditor to enforce payment of his according to law, the death of a general partner causes claim against the debtor aside from demanding the dissolution of the partnership. payment When the nature of the right does not allow its a. Going after the properties of the debtor; transmission.  Personal rights. Resolutory condition (condition subsequent) – Contrary to the nature of a suspensive condition which gives birth only to the obligation upon the happening of the event, ARTICLE 1179-1192 an obligation subject to a resolutory condition is immediately enforceable as if it is a pure obligation and Article 1179 - Every obligation whose performance does will be extinguished only upon the happening of the not depend upon a future or uncertain event, or upon a event. Simply put, in an obligation subject to the past event unknown to the parties, is demandable at resolutory condition, the obligation will be terminated once. Every obligation which contains a resolutory once the condition is fulfilled. condition shall also be demandable, without prejudice to the effects of the happening of the event. EXAMPLE: I will let you use my car until you finish your course in Accountancy Speaks of an obligation which is either pure or conditional. A pure obligation does not have a term or a A special feature of an obligation subject to a resolutory condition. Being as such, it is immediately demandable condition, however, is mutual restitution, that is, the parties shall return to each other what they have EXAMPLES: I promise to give you P1m. I promise received during the effectivity of the obligation before to deliver to you a cow on demand. the resolutory condition takes place. Article 1180 – When the debtor binds himself to pay In our previous example, once you finish your course, you when his means permit him to do so, the obligation shall should return the car to me. be deemed to be one with a period, subject to the provisions of Article 1197 Article 1182 – When the fulfillment of the condition depends upon the sole will of the debtor, the conditional A situation where the time of the performance of the obligation shall be void. If it is dependent upon chance or obligation by the debtor cannot be determined. upon the will of a third person, the condition shall take effect in conformity with the provisions of this Code. EXAMPLES: I will pay you my debt as soon as possible; as soon as I have the money; when I can afford; Article 1182 talks of three kinds of condition in relation when my means permit me to do so to the party or parties on which they depend. As such, it must be treated as an obligation subject to a 1. Potestative condition – Here, the condition depends period. But who determines the period within which the upon the exclusive will of one of the parties. Hence, it debtor must perform the obligation? may either be: Article 1181 – In conditional obligations, the acquisition a. Potestative on the part of the debtor – the of rights, as well as the extinguishment or loss of those condition depends upon the exclusive will of the debtor. already acquired, shall depend upon the happening of the event that constitutes the condition. Potestative on the part of the debtor, at the same time suspensive: A conditional obligation is one whose performance will depend on a condition an uncertain event which wields EXAMPLES: I will give you a pearl earring if I go an influence on a legal relationship to the pearl farm in Davao. Both the condition and the obligation are void Suspensive condition (condition precedent) – From the term suspensive, this kind of condition suspends the Potestative on the part of the debtor, at enforceability of the obligation until the condition is the same time resolutory: fulfilled. Stated otherwise, if the condition will not take EXAMPLE: I will let you use my car until I return place, there will be no obligation to speak of. from Baguio. Both the condition and the obligation are EXAMPLE: I promise to give you a house and lot valid if you marry X. b. Potestative on the part of the creditor – the condition depends upon the exclusive will of the creditor. Here, the obligation and the condition are valid whether EXAMPLE: X agrees to give Y all his books in Accounting the condition is suspensive or resolutory in the review class if Y enrols with him at the ABC CPA Review Center and P1m if Y can steal the questions in the EXAMPLES: I will give you P1m if you go to coming CPALE Baguio. I will let you use my car until you return from Baguio If the obligation is indivisible, the entire obligation is void 2.Casual condition – Here, the condition depends upon EXAMPLE: X agrees to give Y P1m if Y enrolls with him at either chance or upon the will of a third person. The the ABC CPA Review Center and if Y steals the questions obligation and the condition are valid. in coming CPALE. EXAMPLES: I will give you a car if I win the grand When a negative impossible condition is imposed, the prize in the lotto on a bet I placed this morning. I will give obligation is demandable at once as if there is no you P1m if X goes to Singapore. condition at all. 1. Mixed condition – Here, the condition partly EXAMPLE: X agrees to give Y P1m if Y will not swim across depends upon the will of one of the parties and the Pacific Ocean. partly upon chance or the will of a third person. The Article 1184 – The condition that some event happen at obligation and condition are valid as well. a determinate time shall extinguish the obligation as EXAMPLES: I will give you 50% of my winnings if you soon as the time expires or if it has become indubitable place my bet in the lotto. I will give you a house and lot that the event will not take place. if you marry X. Article 1185 - The condition that some event will not Article 1183 – Impossible conditions, those contrary to happen at a determinate time shall render the obligation good customs or public policy and those prohibited by effective from the moment the time indicated has law shall annul the obligation which depends upon elapsed, or if it has become evident that the event will them. If the obligation is divisible, that part thereof not occur. which is not affected by the impossible or unlawful If no time has been fixed, the condition shall be deemed condition shall be valid. The condition not to do an fulfilled at such time as may have probably been impossible thing shall be considered as not having been contemplated, bearing in mind the nature of the agreed upon obligation Telling us that a condition may either be possible or 1. Positive condition – refers to a condition that impossible. A possible condition is one that is capable of some event will happen at a determinate time being fulfilled. An impossible condition is one that is not (Pedro’s passing the CPALE within 2 years from capable of being fulfilled, which may either be: graduation). There are three scenarios. First, the 1. Physical impossibility – one that cannot be two-year period has expired without Pedro performed physically passing the CPALE. Second, Pedro died before EXAMPLE: I will give you P1m if you can swim across the expiration of the two year period. In both the Pacific Ocean instances, the obligation that depends upon 2. Legal impossibility – one that is contrary to law, them shall be extinguished. Third, Pedro passed morals, good customs, public order and public the CPALE within 2 years from graduation policy. EXAMPLE: X obliged to Y a house and lot if Y will EXAMPLE: I will give you P1m if you will not vote in marry Z within 1 year. What are the three scenarios? the coming elections. 2. Negative condition – refers to a condition that If the condition is impossible, the obligation that depends some event will not happen at a determinate upon it is void. Even if you do not vote, you cannot time (Pedro’s not passing the CPALE within 2 demand P1m from me years from graduation). There are also three But if the obligation is divisible, the part that will not be scenarios. First, the two-year period expired and affected by the impossible condition shall remain valid Pedro did not pass the CPALE. Second, Pedro  died before the two-year period expired. In both interests received, unless from the nature and instances, the obligation that depends upon circumstances of the obligation it should be inferred that them becomes demandable. Third, Pedro passed the intention of the person constituting the same was the CPALE within 2 years from graduation. different. In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of EXAMPLE: X obliged to give Y a house and lot if Y will the condition that has been complied with. not marry Z within 1 year. What are the possible scenarios? Effects of suspensive condition. Article 1186 – The condition shall be deemed fulfilled 1. In conditional obligation to give when the obligor voluntarily prevents its fulfilment It has been discussed so far that the obligation subject to a suspensive GENERAL RULE: when the debtor voluntarily condition will become effective and prevents the fulfillment of the condition, the demandable only upon the fulfillment of condition is deemed fulfilled and the obligation that the suspensive condition. depends upon it becomes demandable. This is Article 1187 is telling us that in referred to as the constructive fulfillment of conditional obligation to give, the effects condition of the obligation shall retroact to the day Two requisites for there to be constructive the obligation was perfected fulfillment of condition: In other words, while the obligation was born only upon the happening of the 1. Intent on the part of the debtor to prevent suspensive condition, the effects of such compliance with the condition; and obligation will begin from the time the 2. Actual prevention of its fulfillment by the debtor. obligation was constituted EXAMPLE: D, a job recruiter, obliged himself to provide a EXAMPLE: On July 1, 2023, X promised to give his job to C in one of the firms abroad that he represent, agricultural lot to Y if Y passes the CPA LE in October provided that C passes the pre-employment physical 2023. Here, it is as if Y is entitled to the lot on July 1, 2023. examination including the drug test. D, however, put a Hence, any alienation such as donation of the lot made dangerous drug in the drink of C; hence, C failed in his by Y before October 2023 is valid. physical examination and did not qualify for the job. There are instances, however, that this retroactive Here, the condition that C must pass the pre- effect cannot be applied: employment physical exam is deemed fulfilled. i. In reciprocal obligations where both the EXCEPTION: arises when the debtor prevents its debtor and the creditor received fruits fulfillment in the exercise of a lawful right or for and interests during the pendency of the justifiable reasons condition, they are not required to EXAMPLE: Donato obliged himself to give a house and lot return what they have received as they to Carmelo if Carmelo marries Teresa. Later, Donato tried will be deemed to have been mutually to convince Carmelo not to marry Teresa because compensated. Donato found out that Teresa was the daughter of EXAMPLE: On May 1, 2023, X agreed to sell his coconut Carmelo’s father by another woman. plantation to Y and Y agreed to pay P1m for the Article 1187 – The effects of a conditional obligation to plantation to X if Y passes the October 2023 CPALE. give, once the condition has been fulfilled, shall retroact Assuming Y passes the CPALE on October 22, 2023, S to the day of the constitution of the obligation. must deliver the plantation but not the fruits thereof Nevertheless, when the obligation imposes reciprocal from May 1, 2023 until October 22, 2023. B, on the other prestations upon the parties, the fruits and interests hand, shall pay the P1m purchase price but not the during the pendency of the condition shall be deemed to interest thereon during the same period. The fruits of the have been mutually compensated. If the obligation is plantation and interest of the purchase price will offset unilateral, the debtor shall appropriate the fruits and each other.  ii. In unilateral obligations, the debtor may b. The condition is not fulfilled – he can recover. appropriate for himself the fruits and Article 1189 – When the conditions have been imposed interests unless there appears to be a with the intention of suspending the efficacy of an contrary intent. obligation to give, the following rules shall be observed EXAMPLE: On July 1, 2023, X promised to give his in case of the improvement, loss or deterioration of the agricultural lot to Y if Y passes the October 2023 CPALE. thing during the pendency of the conditions: 1. If the If Y passes the October 22, 2023 CPALE, X must deliver thing is lost without the fault of the debtor, the the lot to Y. However, X shall keep the fruits from July 1, obligation shall be extinguished; 2. If the thing is lost 2023 until October 22, 2023, unless X and Y agreed through the fault of the debtor, he shall be obliged to pay otherwise damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such 2. In conditional obligation to do and not to do. a way that its existence is unknown or it cannot be The courts will determine the recovered; 3. When the thing deteriorates without the retroactive of the condition that has fault of the debtor, impairment is to be borne by the been complied with. creditor; 4. If it deteriorates through the fault of the debtor, the creditor may choose between the rescission Article 1188 – The creditor may, even before the of the obligation and its fulfillment, with indemnity for fulfillment of the condition, bring the appropriate actions damages in either case; 5. If the thing is improved by its for the preservation of his right. The debtor may recover nature, or by time, the improvement shall inure to the what during the same time he has paid by mistake in case benefit of the creditor; 6. If it is improved at the expense of a suspensive condition. of the debtor, he shall have no other right than that Creditor’s right before the fulfilment, the right to take granted to the usufructuary. appropriate actions so that he can preserve his right Four requisites: while the suspensive condition has not yet been fulfilled: 1. The object is determinate; 1. Filing an action before the courts to prevent the debtor from alienating, destroying, or concealing the property; 2. The loss, deterioration, or improvement occurs before the fulfillment of the suspensive condition; 2. Recording of the expected right with the Register of Deeds to give notice to third persons; and 3. The obligation is subject to a suspensive condition; and 3. Requiring the debtor to provide security if he is about 4. The suspensive condition is eventually fulfilled to be insolvent. There is loss when: EXAMPLE: X obliged himself to give Y a specific fishpond 1. the thing perishes (house razed by fire completely); provided Y completes his course in Agriculture. To preserve his right, Y may cause the annotation of his 2. goes out of commerce (old bill/food banned); expected right on the Certificate of Title covering the 3. or disappears in such a way that its existence is fishpond with the register of Deeds. In case X sells the unknown (misplaced), or it cannot be recovered (ring fishpond, the buyer will take it subject to the right of Y. dropped at the bottom of the Marianas Trench) Debtor’s right to recover payment: If the debtor made “GENUS NUNQUAM PERIT” payment before the fulfillment of the suspensive condition, he has the right to recover what he has paid. 1. Lost without the fault of the debtor, the obligation shall be extinguished. 1. If by mistake, he can recover. EXAMPLE: X obliged himself to give a specific car 2. If with knowledge that the suspensive condition has to Y, his lawyer, if Y obtains a favorable judgment in a civil not yet been fulfilled: case where Y represents X. The car, however, is struck by a. The condition is eventually fulfilled – he can lightning and is burned completely before the condition no longer recover is fulfilled. X’s obligation to deliver the car is extinguished because the car being determinate cannot be replaced or EXAMPLE: X obliged himself to give a specific substituted. barrel of wine produced by his vineyard and presently stored in his wine cellar to Y if Y completes his course in 2. Lost through the debtor’s fault, he shall be Law. Let’s say Y completed his Law course for 10 years. obliged to pay the value of the thing plus By that time, the taste of the wine, having been aged, had damages. greatly improved. Here, the improvement will go to the EXAMPLE: In the previous example, if the car is benefit of Y. burned completely because X placed highly flammable The thing is improved at the expense of the debtor, the materials in its trunk, then X shall be liable to pay debtor’s right shall be that of a usufructuary, to wit: damages consisting of the value of the car to Y plus damages. a. To enjoy the property with the obligation of preserving its form and substance There is deterioration of the thing when: (Article 562); There is an impairment of quality, function or condition b. To remove the improvements as long in the determinate thing. as thing will not be damaged; otherwise, he must 3. Deteriorates without the fault of the debtor, deliver the thing in its improved condition the deterioration shall be shouldered by the without right to reimbursement (Article 579); creditor. and EXAMPLE: X obliged himself to give his only car c. To set off against the improvements to Y if Y passes the CPALE. Due to wear and tear resulting any damage he had caused upon the thing. from its use before Y passed the CPALE, the car EXAMPLE: X agreed to give a particular car to Y if decreased in value. Here, Y bears the Y passes the Bar Examination. Before passing the Bar, X impairment/deterioration had the car repainted and installed a removable car 4. Deteriorates thought the debtor’s fault, the stereo. X has the right to use the car in its improved creditor may choose either to: a. Rescind the condition during the pendency of the condition. Upon Y’s obligation with a right to damages; or b. passing of the Bar, X must give the car to Y. Here, X can Demand fulfillment of the obligation with a remove the car stereo as no damage will be caused on right to damages. the car. However, X cannot remove the paint of the car as damaged will be caused to it, and he will not be EXAMPLE: In the previous example, let’s say the reimbursed for it. If X had cause a dent to the car, he may car deteriorated because X used it frequently in drag set it off against the cost of the repainting. racing and drove speedily even on bad roads thereby causing the car to suffer serious mechanical problems. Y Article 1190 – When the conditions have for their has 2 options: purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall 1. Cancel the obligation and require X to pay the return to each other what they have received. value of the car plus damages; or In case of loss, deterioration or improvement of the 2. Demand delivery of the car from X and require thing, the provisions which, with respect to the debtor, X to pay the amount necessary for the car’s are laid down in the preceding article, shall be applied to repair plus damages. the party who is bound to return. There is improvement when: As for obligations to do and not to do, the provisions of There is an enhancement of value or quality in the thing, the second paragraph of Article 1187 shall be observed such as when something is added or attached to it. as regards the effect of the extinguishment of the obligation. The thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor. Effects of fulfilment of a resolutory condition in conditional obligation to give: a. The obligation will be extinguished. obligation of one is dependent upon the obligation of the other b. There shall be mutual restitution unless a contrary intent appears; and And if one of the parties performs his obligation but the other party does not, the party who performs his c. In case of loss, deterioration or improvement, Article obligation suffers injury because of delay. 1189 shall be applicable. Remedies for the injured party, namely: EXAMPLES: 1. rescission with damages; 1. X allowed the use of his car by Y until Y The power to rescind is implied in reciprocal completes his Law course. X’s obligation to allow the use obligations. This means that there is no need for of his car by Y is immediately demandable subject to a the parties to agree on it resolutory condition. Upon completion by Y of his law The power to rescind is implied in reciprocal course, the obligation of X is extinguished and Y should obligations. This means that there is no need for return the car to X. If the car deteriorates due to wear the parties to agree on it. This power, however, and tear, the deterioration shall be born by X. If the car is subject to the following conditions: was lost due to Y’s fault, Y shall pay damages to X. This power, however, is subject to the following 2.X promised to give Y a monthly allowance of conditions: P1m until Y finishes his course at Harvard. X’s obligation to give monthly allowance is a. There is no automatic, unilateral, and extrajudicial immediately demandable. But when Y finishes rescission. A judicial decision is necessary to effect his course at Harvard, X’s obligation shall be one. However, the parties can agree on the extinguished. Y, however, has no obligation to automatic revocation of their contract once its return what he had received from X as it was not terms are violated. In such a case, the court decision their intention. will be merely declaratory delving only on the propriety of the rescission. Effects of fulfilment of a resolutory condition in b. Rescission cannot be availed of if there is a just conditional obligation to do and not to do: cause for fixing the period within which the debtor Here, the court will decide whether or not to give the can perform his obligation. extinguishment of the obligation a retroactive effect. c. Rescission cannot be availed of if the thing subject matter of the obligation is already in the possession Article 1191 – The power to rescind is implied in of a third person who acquired it in good faith. reciprocal ones, in case one of the obligors should not d. Rescission is available only where there is a comply with what is incumbent upon him. fundamental or substantial breach as to defeat the The injured party may choose between fulfillment and purpose of the parties in making the agreement. It the rescission of the obligation, with the payment of cannot be availed of if the breach is merely slight or damages in either case. He may also seek rescission, even casual. after he has chosen fulfillment, if the latter should 2. fulfillment of the obligation with damages become impossible EXAMPLE: X sold his car to Y for P1m. Upon the perfection of the contract, Y paid the price by X The court shall decree the rescission claimed, unless failed to deliver the car. Here, Y has the right to file there be just cause authorizing the fixing of the period. a court action against X to require the delivery of the This is understood to be without prejudice to the rights car and the payment of damages. Or, Y may choose of third persons who have acquired the thing, in for the rescission of the contract with damages accordance with Articles 1385 and 1388 and the which will result in the return of the price. Mortgage Law. Nature of the two remedies: Article 1191 applies only to a reciprocal obligation, one These remedies are alternative, meaning the injured which arises from the same cause and in which each party cannot ask for both. If he asks for rescission, he can party is a debtor and creditor of the other, such that the no longer ask for fulfillment. However, if he asks for Obligations with a resolutory period take effect at once, fulfillment, he can still ask for rescission if fulfillment but terminate upon arrival of the day certain. becomes impossible. A day certain is understood to be that which must EXAMPLE: In the previous example, if Y has chosen the necessarily come, although it may not be known when. fulfilment of the obligation, but X can no longer deliver If the uncertainty consists in whether the day will come the car because it was lost through his fault, B may still or not, the obligation is conditional, and it shall be ask for rescission plus damages. regulated by the rules of the preceding Section. Article 1192 – In case both parties have committed a MEANING: An obligation with a period is one whose breach of the obligation, the liability of the first infractor demandability or extinguishment is subject to the shall be equitably tempered by the courts. If it cannot be expiration of the period which must necessarily come. determined which of the parties first violated the Here, there is a day certain when the obligation will arise contract, the same shall be deemed extinguished, and or cease. each shall bear his own damages Suspensive Period (ex die) A situation where both parties are guilty of violating the terms of their contract A suspensive period is one the expiration of which causes the obligation to arise. This means that The effect would be different if: until the expiration of the period, the obligation cannot 1. The party who first violated the contract can be yet be demanded. determined. EXAMPLE: On August 1, 2022, D obliged himself Here, the liability of the first violator to give his ring to C on December 1, 2022. On December shall be reduced equitably because the second 1, 2022, the obligation becomes demandable by reason violator also derives some benefit by his own of the expiration of the period. violation Resolutory Period (in diem) EXAMPLE: X sold his computer to B for P1m. The parties agreed that the delivery of the computer would be made A resolutory period is one the expiration of on August 15 and the payment of the purchase price on which causes the extinguishment of the obligation. Here, August 17 without need of demand by either party. X the obligation, just like a pure one, is demandable at failed to deliver the computer on August 15 but he once but it will be terminated once the period expires. delivered it on August 17. Y failed to pay the price on August 17 but he paid it on August 19. X will be liable for EXAMPLE: On August 1, 2022, D allowed the use damages because he was the first to violate the terms of of his car by C until December 1, 2022. D’s obligation to the contract. However, since Y likewise committed allow the use of his car by C is demandable on Augst 1, breach, the liability of X shall be equitably reduced by the 2022 but will be extinguished upon the expiration of the court. resolutory period. 2. The party who first violated cannot be Period is a space of time which determines the effectivity determined. or extinguishment of an obligation. Here, the contract shall be extinguished on the A day certain is that which must necessarily come assumption that both parties, in violating the terms of although it may not be known when. the contract, tried to derive some benefit or advantage. Condition versus Period 1. As distinguished from condition which is an uncertain event, a period is an event which is ARTICLE 1193-1198 certain to happen, although the exact date and Article 1193. Obligations for whose fulfillment a day time cannot be determined. certain has been fixed, shall be demandable only when that day comes.  2. A period always refers to an event in the future, from the tenor of the same or other circumstances it while a condition may be a past event unknown should appear that the period has been established in to the parties favor of one or of the other 3. A condition gives rise to or terminates an GENERAL RULE: a period is presumed to have been obligation, while a period merely fixes the time established for the benefit of both parties. When the when the obligation will be demandable or period is for the benefit of both parties, the debtor extinguished. cannot compel the creditor to accept payment, and the 4. A condition that depends upon the exclusive will creditor cannot demand payment from the debtor, of the debtor which is also suspensive is void, before the expiration of the period. while a period that depends upon the will of the debtor authorizes the court to fix its duration EXAMPLE: On January 1, 2022, D obtained a loan of P100,000.00 from C. The debt bears interest at 12% As to source, a period may either be: per annum and is due on December 31, 2022 1. Legal – fixed by law EXCEPTION: when from the tenor of the obligation or 2. Voluntary/Conventional- fixed