UNIT 1 - CIVIL CODE OF THE PHILIPPINES (PDF)

UNIT 1: CIVIL CODE OF THE PHILIPPINES  ARTICLE 3 Ignorance of the law excuses no one from compliance therewith. LAW ON OBLIGATIONS WHAT IS AN OBLIGATION?  ARTICLE 1156 An obligation is a juridical necessity to give, to do or not to do. WHY IS AN...

UNIT 1: CIVIL CODE OF THE PHILIPPINES  ARTICLE 3 Ignorance of the law excuses no one from compliance therewith. LAW ON OBLIGATIONS WHAT IS AN OBLIGATION?  ARTICLE 1156 An obligation is a juridical necessity to give, to do or not to do. WHY IS AN OBLIGATION A JURIDICAL NECESSITY? NATURE OF OBLIGATIONS  ARTICLE 1423 Article 1423. Obligations are civil or natural. Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. Some natural obligations are set forth in the following articles.  KINDS OF OBLIGATION A. ACCORDING TO NATURE. CIVIL OBLIGATION – based on positive law and give a right of action to compel performance NATURAL OBLIGATION – based on equity and natural law and which do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof  ESSENTIAL ELEMENTS OF AN OBLIGATION JURIDICAL TIE OR VINCULUM JURIS OBJECT ACTIVE SUBJECT (OBLIGEE OR CREDITOR) PASSIVE SUBJECT (OBLIGOR OR DEBTOR) Under the Service Agreement involving performance in CTHM event, A, the guest speaker, is bound to deliver an inspirational speech as paid for by the UST CTHM SECTION A for a total consideration of Php 50,000.00. Identify the essential requisites in the given example. passive subject: A (GUEST SPEAKER) – bound to the fulfillment of the obligation active subject: UST CTHM SECTION A – can demand the fulfillment of the obligation Object/prestation: to deliver inspirational speech Juridical tie: Service Agreement  KINDS OF OBLIGATION B. ACCORDING TO SUBJECT MATTER. REAL OBLIGATION – obligation to give or deliver Determinate or Specific Obligation Indeterminate or Generic Obligation PERSONAL OBLIGATION – obligation to do or not to do Positive – obligation to do Negative – obligation not to do WHAT ARE THE SOURCES OF OBLIGATIONS?  SOURCES OF OBLIGATION: ARTICLE 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts. ARE THESE SOURCES EXCLUSIVE?  ARTICLE 1158 (LEGAL OBLIGATIONS OR OBLIGATIONS ARISING FROM LAW) Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. X, of legal age, bought and reserved two seats for a dinner buffet from B, the owner of the restaurant, the purchase price being paid by C, X’s father. Subsequently, differences arose between X and C. The latter brought action to recover the price of the seats, he having paid the purchase price.  WHETHER OR NOT THERE IS AN OBLIGATION ON THE PART OF C TO RECOVER THE PURCHASE PRICE FROM X. If any such obligation was ever created on the part of X, said obligation must arise from law. But obligations derived from law are not presumed. Only those expressly determined in the Civil Code or in special laws are demandable.  ARTICLE 1159 (CONTRACTS) Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. WHAT IS A CONTRACT? DO ALL CONTRACTS HAVE OBLIGATORY FORCE? WHEN IS A CONTRACT CONSIDERED VALID?  ARTICLE 1160 (QUASI-CONTRACTS) Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book.  QUASI-CONTRACT ARTICLE 2142. It is a juridical relation arising from certain lawful, voluntary and unilateral acts with the objective of preventing unjust enrichment or benefit at the expense of another.  KINDS OF QUASI-CONTRACT NEGOTIORUM GESTIO SOLUTIO INDEBITI  NEGOTIORUM GESTIO A juridical relation which arises when a person voluntarily takes charge of the agency or management of another’s abandoned or neglected business or property without the owner’s authority  NEGOTIORUM GESTIO Through the efforts of X, a neighbor, Y’s house was saved from being burned. Is Y bound to reimburse X for the expenses he incurred?  EXCEPTIONS 1. When the property or business is not neglected or abandoned – governed by provisions on unauthorized contracts; 2. If the manager has been tacitly authorized by the owner – governed by the rules on Agency  SOLUTIO INDEBITI A juridical relation which arises when something is received when there is no right to demand it, and it was unduly delivered through mistake.  SOLUTIO INDEBITI 1. When payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and 2. The payment is made through mistake and not through liberality or some other cause.  UST COOPERATIVE STORE vs CITY OF MANILA X, a tax-preempt cooperative store, paid taxes to the City of Manila, believing that it was liable. May X recover the payment? UST COOPERATIVE STORE vs CITY OF MANILA YES, as it was made under mistake.  CITY OF CEBU vs PICCIO AND CABALLERO X, an employee of Cebu City, sued certain officials of the City for claim of backwages. May the City of Cebu successfully recover the payment later made by it to X on the ground that it was not made a party to the case?  CITY OF CEBU vs PICCIO AND CABALLERO NO, because a judgment against a municipal officer in his official capacity binds the city. The City was under obligation to make the payment. It cannot, therefore, be said that the payment was made by reason of mistake.  ARTICLE 1161 (CIVIL LIABILITY ARISING FROM CRIMES OR DELICTS) Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages.  ARTICLE 1161 (CIVIL LIABILITY ARISING FROM CRIMES OR DELICTS) Two-pronged effects: 1. Breach of social order 2. Upon the private victim as it causes personal sufferings or injury EVERY PERSON CRIMINALLY LIABLE FOR A FELONY IS ALSO CIVILLY LIABLE FOR DAMAGES  CRIMINAL LIABILITY WITHOUT CIVIL LIABILITY - When crimes cause no material damage (like contempt, insults to a person in authority, gambling, or violation of traffic regulations), there is no civil liability to be enforced.  RIGHT TO RECOVER CIVIL LIABILITY The injured party may enforce his claim for damages based on civil liability arising from the crime under Article 100 of of the RPC or opt to file independent civil action for damages under the Civil Code SCOPE OF CIVIL LIABILITY ARISING FROM CRIMES 1. Restitution 2. Reparation for the damage caused 3. Indemnification for consequential damages X stole the car of Y. If X is convicted, the court will order X: 1. To return the car (or to pay its value if it was lost or destroyed); 2. To pay for any damage caused to the car; and 3. To pay such other damages suffered by Y as a consequence of the crime  ARTICLE 1162 (QUASI-DELICTS OR TORTS) Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws. WHAT IS QUASI-DELICT  QUASI-DELICT ARTICLE 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre- existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. RECAP/EXERCISES WHAT IS AN OBLIGATION? A entered into a service agreement with B where the latter would secure permits and/or licenses for the restaurant business of the former for a total consideration of 25,000.00  Passive subject? Active subject? Juridical tie? Object? Give example and identify the requisites of an obligation.  WHAT ARE THE 2 KINDS OF OBLIGATIONS ACCORDING TO NATURE?  WHAT ARE THE 2 KINDS OF OBLIGATIONS ACCORDING TO NATURE?  WHAT ARE THE 2 KINDS OF OBLIGATIONS ACCORDING TO SUBJECT MATTER? WHAT ARE THE SOURCES OF OBLIGATIONS? OTHER KINDS OF OBLIGATIONS  KINDS OF OBLIGATIONS ØPURE AND CONDITIONAL OBLIGATIONS ØOBLIGATIONS WITH A PERIOD ØALTERNATIVE OBLIGATIONS ØJOINT AND SOLIDARY OBLIGATIONS ØDIVISIBLE AND INDIVISIBLE OBLIGATIONS ØOBLIGATIONS WITH A PENAL CLAUSE PURE AND CONDITIONAL OBLIGATIONS Article 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event.  WHAT IS A PURE OBLIGATION?  PURE OBLIGATION One in which is not subject to any condition and no specific date is mentioned for this fulfillment and is, therefore, immediately demandable. D obliges to pay C P10,000,00. D promises to pay C the amount of Php 10,000.00 upon receipt by D of his share from the estate of X or upon demand by C. WHAT IS A CONDITIONAL OBLIGATION?  CONDITIONAL OBLIGATION One whose consequences are subject in one way or another to the fulfillment of a condition WHAT IS A CONDITION?  CONDITION is a future and uncertain event, upon the happening of which, the effectivity or extinguishment of an obligation (or rights) subject to it depends. CHARACTERISTICS OF CONDITION: 1. Future and uncertain 2. Past but unknown 3. Must not be impossible 2 PRINCIPAL KINDS OF CONDITION 1. Suspensive condition (condition precedent or condition antecedent) 2. Resolutory condition (condition subsequent) WHAT IS A SUSPENSIVE CONDITION?  SUSPENSIVE CONDITION The fulfillment of which will give rise to an obligation (or right). WHAT IS THE EFFECT IF THE CONDITION DOES NOT TAKE PLACE?  EFFECT IF THE CONDITION DOES NOT TAKE PLACE The parties would stand as if the conditional obligation had never existed No rescission of an obligation that is still non-existent, the suspensive condition not having been fulfilled.  I will give you a car if you’ll marry her. I will give you a Taylor Swift Eras Tour ticket if you pass your preliminary examination. A promises to give a condominium unit to B if she will graduate Magna Cum Laude in UST CTHM.  ROMAN vs GRIMALT O, owner, and P, purchaser, agreed upon the sale of a vessel provided that the title papers to the same were in proper form. The title was in the name of another and O promised to perfect his title to the vessel. Before compliance by O with the condition, and while the vessel was in O’s possession, it sank due to a severe storm.  ROMAN vs GRIMALT WHETHER OR NOT P IS UNDER OBLIGATION TO PAY THE PRICE OF THE VESSEL.  ROMAN vs GRIMALT NO. The sale of the vessel was not perfected, because of the non-compliance by O a condition precedent to its perfection – the production of the proper papers showing that he was, in fact, the owner of the vessel in question. Consequently, the loss of the vessel must be borne by O, the owner, and not by P who is only interested to purchase it and was unable to do so because of failure of O to comply with the said condition. WHAT IS A RESOLUTORY CONDITION?  RESOLUTORY CONDITION The fulfillment of which will extinguish an obligation (or right) already existing.  I promise to support you in the amount of Php 3,000.00 per month until such time that you get a job. A binds herself to lend B a car until B passes the Bar Exams. D, in payment of his debt to C, binds himself to give C PhP 3,000 monthly allowance until C graduates from college. SUSPENSIVE CONDITION vs. RESOLUTORY CONDITION  SUSPENSIVE vs. RESOLUTORY 1. If suspensive condition is fulfilled, the obligation arises; if resolutory condition is fulfilled, the obligation is extinguished. 2. If the first does not take place, the tie of law (juridical or legal tie) does not appear, while if it is the other, the tie of law is consolidated; and 3. Until the first place , the existence of the obligation is a mere hope , while in the second , its effects flow, but over it hovers the possibility of termination. (8 Manresa 130-131)  CONDITION IMPOSED UPON PERFECTION OF A CONTRACT vs CONDITION IMPOSED UPON PERFORMANCE OF OBLIGATION Failure to comply with the first condition results in the failure of a contract Failure to comply second condition, only gives the other party the option either to refuse to proceed with the contract or to waive performance of the condition.  WHEN OBLIGATION DEMANDABLE AT ONCE. 1. When it is PURE; 2. When it is subject to a RESOLUTORY CONDITION; 3. When it subject to resolutory period. (Art. 1193, par. 2)  PAST EVENT UNKNOWN TO THE PARTIES Knowledge to be acquired in the future of a past event which at the moment is unknown to the parties interested, for it is only in that sense that the event can be deemed uncertain.  PAST EVENT UNKNOWN TO THE PARTIES S is the owner of a parcel of land which is being claimed by X. Last week, the Supreme Court has rendered a final decision upholding the right of S. However, S has not yet received the notice that he had won the case. Now, S obliged himself to sell the land to B for a definite price should he win the case against X.  PAST EVENT UNKNOWN TO THE PARTIES Under the facts, S would be bound to sell the land to B upon receipt of the notice that he had won the case.  ARTICLE 1180 Article 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of article 1197. WHAT IS A PERIOD?  PERIOD A period is a future and certain event upon the arrival of which the obligation subject to it either arises or is extinguished. DEBTOR PROMISES TO PAY WHEN HIS MEANS PERMIT HIM TO DO SO. -Obligation with a period -What is left only to his will is the duration of the period and not whether he should pay or not for indeed he binds himself to pay.  “Little by little” “As soon as possible” ”From time to time” ”As soon as I have the money” ”At anytime I have the money” “In partial payments” “When I am in position to pay”  ARTICLE 1181 Article 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. SUSPENSIVE CONDITION vs. RESOLUTORY CONDITION In an obligation subject to a suspensive condition, the acquisition of rights by the creditor depends upon the happening of the event which constitutes the condition. The efficacy or obligatory force is subordinated to the happening of a future and uncertain event; so if the suspensive condition does not take place, the parties would stand as if the conditional obligation never existed; Before the suspensive condition has taken place, what is acquired by the creditor is a mere hope or expectancy of acquiring a right.  ARTICLE 1182 Article 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. WHAT IS A POTESTATIVE CONDITION?  POTESTATIVE CONDITION A condition suspensive in nature and which depends upon the sole will of one of the contracting parties.  POTESTATIVE CONDITION 1. CONDITIONAL OBLIGATION VOID: Where the potestative condition depends solely upon the will of the debtor, the conditional obligation shall be void because its validity and compliance left to the will of the debtor, and it cannot, therefore be legally demanded.  “I will pay you If I want” ”I will pay you after I receive a loan from a bank” “I will pay you after I recover what D owes me” “I will pay you after I have harvested fish” “I will pay you upon the sale of the house in which I live”  LIEBNOW vs. PHIL VEGETABLE OIL CO. On the basis of the stipulation inserted in the contract of employment that E would be entitled to such further amount in the way of bonus as the board of directors might see it fit to grant, E contends that he is entitled to a bonus to be fixed by the court as a reasonable participation in the increased profits of the factory under his case. WHAT IS THE LEGAL EFFECT OF THE STIPULATION?  LIEBNOW vs. PHIL VEGETABLE OIL CO. A promise of this character creates a legal obligation binding upon the promissor, although in its actual results, it may not infrequently prove to be illusory. Such promise is not nugatory, under Article 1182, as embodying a condition dependent exclusively upon the will of the obligor. Nor it can be held invalid under Article 1308 which declares the validity and performance of a contract cannot be left to the will of one of the contracting parties.  LIEBNOW vs. PHIL VEGETABLE OIL CO. The uncertainty of the amount to be paid by way of bonus is also no obstacle to the validity of the contract (see Article 1349) since the contract itself specifies the manner in which the amount payable is to be determined, namely by the exercise of the judgment and discretion of the employer.  BERG vs. MAGDALENA ESTATE S offered to sell his undivided share in a property to B who accepted the offer. It was agreed that the purchase price shall be paid by B after he has obtained a loan from a bank or funds from other resources. IS THE FULFILLMENT OF THE CONDITION FOR PAYMENT DEPENDENT SOLELY UPON B’S EXCLUSIVE WILL?  BERG vs. MAGDALENA ESTATE YES. Consequently, S’s obligation to sell did not arise. Under the terms of the agreement, there is no legal way by which S could be compelled to carry out his agreement to sell.  POTESTATIVE CONDITION 2. ONLY THE CONDITION IS VOID: If the obligation is a pre-existing one, and therefore, does not depend for its existence upon the fulfillment by the debtor of the potestative condition, only condition is void leaving unaffected the obligation itself.  POTESTATIVE CONDITION A borrowed Php 20,000 from B payable within 3 months. Subsequently, A promised to pay B after A sells his car to which B agreed. Here, only the condition is void but not the pre- existing obligation of A to pay B. WHERE SUSPENSIVE CONDITION DEPENDS UPON THE WILL OF THE CREDITOR - VALID. WHY IS IT VALID? “I WILL PAY YOU MY INDEBTEDNESS UPON YOUR DEMAND” WHERE RESOLUTORY CONDITION DEPENDS UPON THE WILL OF THE DEBTOR - VALID. WHY IS IT VALID? A lends his car to B provided that if A decides to sell the car, B shall return the same. WHAT IS A CASUAL CONDITION?  CASUAL CONDITION 1. If the suspensive condition depends upon chance or upon the will of the third person – VALID.  CASUAL CONDITION X, building contractor, obliges himself in favor of Y, owner, to repair at X’s expense any damage that may be caused to the building by any earthquake occurring within ten (10) years from the date of the completion of construction. Where S binds himself to sell his land to X if he wins a case which is pending before the Supreme Court. Where B (buyer) binds himself to pay the balance of the purchase price when S (seller) has successfully ejected the informal settlers occupying the subject property.  CASUAL CONDITION 2. When the fulfillment of the condition does not depend on the will of the obligor, but on a third person who can in no way be compelled to carry it out, and it is found by the court that the obligor has done all in his power to comply with his obligation, his part of the contract is deemed complied with and he has a right to demand performance of the contract by the other party. WHAT IS A MIXED CONDITION?  MIXED CONDITION The obligation is valid if the suspensive condition depends partly upon chance and partly upon the will of the third parties. X, the building contractor, obliges himself in favor of Y, the owner, to repair at X’s expense, any damage to the building taking place after an earthquake if found by a panel of arbitrators that construction defects contributed in any way to the damage.  HERMOSA vs. LONGARA D promised to pay C certain credit advances made to him by C as soon as he received funds derived from the sale of his property in Spain. The Court of Appeals held that the payment of the advances did not become due until the administratrix received the purchase price from the buyer of the property.  IS THE CONDITION SUBJECT TO A CONDITION EXCLUSIVELY DEPENDENT UPON THE WILL OF D?  HERMOSA vs. LONGARA NO. The condition also depends upon other circumstances beyond the control or power of D. If the condition were “if he decides to sell his house,” or “if he likes to pay the sums advanced,” or any other condition of similar import implying that upon him (debtor) alone payment would depend, the condition would be potestative dependent exclusively upon his will or discretion.  HERMOSA vs. LONGARA The condition, as stated above, implies that the obligor had already decided to sell his house, or at least that he had made his creditors believe that he had done so, and all that was needed to make the obligation demandable is that the sale be consummated, and the price thereof remitted to the Philippines.  IS THE CONDITION A POTESTATIVE OR A MIXED ONE?  HERMOSA vs. LONGARA The condition is a mixed one, depending partly upon the will of the obligor and partly upon chance. i.e. the presence of a buyer of the property for the price and under the conditions desired by the obligor.  ARTICLE 1183 Article 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. The condition not to do an impossible thing shall be considered as not having been agreed upon. WHAT ARE THE TWO (2) KINDS OF IMPOSSIBLE CONDITIONS?  TWO KINDS OF IMPOSSIBLE CONDITIONS 1. PHYSICALLY IMPOSSIBLE CONDITIONS 2. LEGALLY IMPOSSIBLE CONDITIONS  EFFECT OF IMPOSSIBLE CONDITIONS 1. CONDITIONAL OBLIGATIONS VOID. Impossible conditions annul the obligation which depends upon them. Both the obligation and the condition are void. 2. CONDITIONAL OBLIGATION VALID. If the condition is negative, that is not to do an impossible thing, it is disregarded and the obligation is rendered pure and valid.  EFFECT OF IMPOSSIBLE CONDITIONS 3. ONLY THE AFFECTED OBLIGATION VOID. If the obligation is divisible, the part thereof not affected by the impossible condition shall be valid. ”I will give you Php 10,000 if you sell my land, and a car, if you kill Pedro.”  EFFECT OF IMPOSSIBLE CONDITIONS 3. ONLY THE CONDITION VOID. If the obligation is a pre-existing obligation, and, therefore, does not depend upon the fulfillment of the condition which is impossible, for its existence, only the condition is void. A promises to pay B in the amount of Php 10,000 for his indebtedness. Thereafter, A promises to pay B an additional Php 15,000 if he would kill C.  ARTICLE 1184 Article 1184. The condition that some event happen at a 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. This refers to a positive (suspensive) condition – the happening of an event at a determinate time. The obligation is extinguished: 1. As soon as the time expires without the event taking place; 2. As soon as it has become indubitable that the event will not take place although the time specified has not yet expired. X obliges himself to give Y Php 10,000.00 if Y will marry W before Y reaches the age of 23.” 1. X is liable if Y marries W before he reaches the age of 23. 2. X is not liable if Y marries W at the age of 23 or after he reaches the age of 23. 3. If Y dies at the age of 23 without having married W, the obligation is extinguished because it has become indubitable that the condition will not take place.  ARTICLE 1185 Article 1185. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur. If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated, bearing in mind the nature of the obligation. The above provision speaks of a negative condition that an event will not happen at a determinate time. The obligation shall become effective and binding: 1. From the moment the time indicated has elapsed without the event taking place; or 2. From the moment it has become evident that the event can not occur, although the time indicated has not yet elapsed. X binds himself to give Y P10,000 if Y is not yet married to W on December 30. 1. X is not liable to give Y if Y marries W on December 30 or prior thereto. 2. X is liable to Y if on December 30 Y is not married to W or if Y marries W after December 30. 3. Supposed W dies on November 20 without having been married to Y. The obligation is rendered effective because it is certain that the condition not to marry W will be fulfilled.  ARTICLE 1186 Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.  3 REQUISITES: 1. The condition is suspensive; 2. The obligor actually prevents the fulfillment of the condition; and 3. He acts voluntarily or intentionally X agreed to give Y a 5% commission if the latter could reach X’s business quota of having 20 groups for its Asian cruise tour. Y already found 20 groups of tourists who are definitely decided to join the Asian cruise tour. To evade the payment of the commission agreed upon, X himself directly coordinated with these groups at a lower price without the aid of Y. Article 1186 applies to an obligation subject to a resolutory condition with respect to the debtor who is bound to return what he has received upon fulfillment of the condition. X obliges himself to allow Y to occupy the former’s house in Manila as long as X is assigned by their company in the province. When Y learned that X would be transferred to Manila, he was able to induce the president of the company to assign another person in place of X. The obligation of X is extinguished because the fulfillment of the resolutory condition was voluntarily prevented by Y. Hence, Y must vacate the house.  ARTICLE 1187 Article 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with.  OBLIGATION TO GIVE (subject to a suspensive condition) - Demandable only upon fulfillment of the condition - Once the condition is fulfilled, its effect shall retroact to the day when the obligation was constituted - It would seem that the rule on retroactivity has no application to real contracts as they are perfected only by delivery of the object to the obligation  OBLIGATION TO GIVE (subject to a suspensive condition) On 20 January 2022, S agreed to sell his parcel of land to B for 15M should B lose a case involving the recovery of another parcel of land. On 10 April 2022, S sold his restaurant business to C. B lost the case on 04 December 2022.  OBLIGATION TO GIVE (subject to a suspensive condition) Before 04 DEC 2022, B had no right to demand the sale of land by S. When the condition, however, was fulfilled on 04 DEC 2022, it is as if B was entitled to the land beginning 20 JANUARY 2022. Hence, as between B and C, B will have a better right over the land, subject to the requirements under the Property Registration Decree that the promise of S be annotated on the back of the certificate of title of the property to be binding against third persons like C. If the land was sold by B to D on 15 May 2022, D would still have a better right as against C since the sale by B will be considered valid.  OBLIGATION TO DO and NOT TO DO (subject to a suspensive condition) - No fixed rule but does not mean that the principle of retroactivity is not applicable - Courts are empowered by the use of sound discretion and bearing in mind the intent of the parties, to determine, in each case, the retroactive effect of the suspensive condition that has been complied with. It includes power to decide that the fulfillment of the condition shall have no retroactive effect or from what date such retroactive effect shall be reckoned.  OBLIGATION TO DO and NOT TO DO (subject to a suspensive condition) C obliged himself to condone the debt of D, his lawyer, should the latter win C’s case in the Supreme Court. In this case, upon fulfillment of the condition, C shall not be entitled, unless the contrary has been stipulated, to the earned interests of the capital during the pendency of the condition as the intention of C is to extinguish the debt. Here, the fulfillment of the obligation has a retroactive effect.  OBLIGATION TO DO and NOT TO DO (subject to a suspensive condition) Suppose, in the preceding example, the obligation contracted by C was to construct gratis the house of D upon fulfillment of the condition. In this case, unless the contrary appears, there is no retroactive effect if the condition is fulfilled, taking into consideration the nature of the obligation and the intent of the parties. C is not liable to pay interest on the money value of the obligation for the intervening period.  RETROACTIVE EFFECTS AS TO FRUITS AND INTERESTS (OBLIGATION TO GIVE) 1. RECIPROCAL OBLIGATIONS - no retroactivity because the fruits and interests received during the pendency of the condition are deemed to have mutually compensated. 2. UNILATERAL OBLIGATIONS – no retroactivity because they are gratuitous. The debtor receives nothing from the creditor. Thus, fruits and interests belong to the debtor unless from the nature and other circumstances, it should be inferred that the intention of the person constituting the same was different.  RETROACTIVE EFFECTS AS TO FRUITS AND INTERESTS (OBLIGATION TO GIVE) 1. RECIPROCAL OBLIGATIONS : In the preceding example, when B lost the case in court on 04 DEC 2022, S must deliver the land and B must pay Php 15M. S does not have to give the fruits received from the land before 04 DEC 2022 and B is not obliged to pay legal interests on the price since the fruits and interests are deemed to have mutually compensated.  RETROACTIVE EFFECTS AS TO FRUITS AND INTERESTS (OBLIGATION TO GIVE) 2. UNILATERAL OBLIGATIONS : Suppose that the promise of S was to donate the parcel of land to B. Upon fulfillment of the condition, S has to deliver the land but he has the right to keep himself all the fruits and interests he may have received during the pendency of the condition, that is, from 20 JAN 2022 to 04 DEC 2022, unless a contrary intention by S may be inferred, as when it is stipulated that once the condition is fulfilled, S shall render an accounting of fruits received during its pendency.  ARTICLE 1188 Article 1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. WHAT ARE THE RIGHTS OF THE CREDITOR UNDER THIS ARTICLE?  RIGHTS OF CREDITOR He/She may take or bring appropriate actions for the preservation of his right as the debtor may render nugatory the obligation upon the happening of the condition. HOW CAN THEY BRING APPROPRIATE ACTION FOR PRESENTATION OF HIS/HER RIGHT? - May go to court to prevent the alienation or concealment of the property the debtor bound himself/herself to deliver; or - To have his/her right annotated in the registry of property WHAT ARE THE RIGHTS OF THE DEBTOR UNDER THIS ARTICLE?  RIGHTS OF DEBTOR He/She is entitled to recover what he has paid by mistake prior to the happening of the suspensive condition based on solutio indebiti. The payment before the fulfillment of the condition must be “by mistake”; otherwise, the debtor is deemed to have impliedly waived the condition. In any case, he cannot recover what he has prematurely paid once the suspensive condition is fulfilled. But if the condition is not fulfilled, the debtor should be allowed to recover any payment made even if the debtor has paid not by mistake.  ARTICLE 1189 Article 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished; (2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered; (3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;  ARTICLE 1189 (4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case; (5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; (6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.  REQUISITES FOR APPLICATION OF ARTICLE 1189: 1. The object is a real obligation; 2. The object is a specific or determinate thing; 3. The obligation is subject to a suspensive condition; 4. The condition is fulfilled; and 5. There is loss, deterioration, or improvement of the thing during the pendency of the happening on one condition.  KINDS OF LOSS 1. Physical loss – when a thing perishes 2. Legal Loss – when a thing goes put of commerce 3. Civil loss – when a thing disappears in such a way that its existence is unknown. RULES: 1. LOSS OF THING WITHOUT THE FAULT OF DEBTOR: D obliged himself to give C his car worth P100,000 if C sells D’s property.The car was lost without the fault of the D. = Obligation is extinguished and D is not liable to C even if C sells his property. 2. LOSS OF THING THROUGH DEBTOR’S FAULT: = Same example. If loss occurred because of negligence of D, C will be entitled to demand damages. (i.e. P100,000 plus incidental damages, if any.) RULES: 3. DETERIORATION OF THING WITHOUT DEBTOR’S FAULT. = If the car figured in an accident, as a result of which its windshield was broken and some of its paints were scratched away without the fault of D, thereby reducing its value to P80,000.00, C will have to suffer the deterioration of impairment in the amount of P20,000. RULES: 4. DETERIORATION OF THING THROUGH DEBTOR’S FAULT. = In this case, C may choose between: a) RESCISSION (OR CANCELLATION) of the obligation with DAMAGES – D is liable to pay P100,000, value of the car before its deterioration plus incidental damages, if any; b) FULFILLMENT OF THE OBLIGATION WITH DAMAGES – D is bound to C to give the car and pay P20,000 plus incidental damages, if any. RULES: 4. IMPROVEMENT OF THING BY NATURE OR BY TIME. Suppose the market value of the car increased, the improvement of the benefit shall inure to the benefit of C. Inasmuch as C would suffer in case of deterioration of the car through a fortuitous event, it is fair that he should be compensated in case of improvement of the car instead. RULES: 5. IMPROVEMENT OF THING AT THE EXPENSE OF THE DEBTOR. During the pendency of the condition, D had the car painted and its seat cover changed at his expense. = D will have the right granted to a usufructuary with respect to improvements made on the thing held in usufruct.  ARTICLE 1190 Article 1190. When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received. In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return. As for the obligations to do and not to do, the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation.  EFFECTS OF RESOLUTORY CONDITIONS A return to the status quo; The obligation of mutual restitution is absolute as it applies not only to the things received but also to the fruits and interests; In case the thing to be returned is “legally in the possession of a third person who did not act on bad faith”, the remedy of the party entitled to restitution is against the other; If the condition is not fulfilled, the rights acquired by a party become vested. D obliges himself to allow C to use the former’s car until D returns from the province. Upon the return of D from the province, C must give back the car. The effect of the happening of the condition is to annul the obligation as if it had never been constituted at all. In this case, the parties intend to return the car.  ARTICLE 1191 Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.  KINDS OF OBLIGATIONS ACCORDING TO THE PERSON OBLIGED: UNILATERAL BILATERAL WHAT IS A UNILATERAL OBLIGATION? WHAT IS A BILATERAL OBLIGATION?  BILATERAL OBLIGATIONS MAY BE RECIPROCAL OR NON-RECIPROCAL.  WHAT IS A RECIPROCAL OBLIGATION?  RECIPROCAL OBLIGATIONS Arise from the same cause, and in which each party is a debtor and creditor of the other, such that performance by one party of his obligation is designed to be the equivalent and the condition for the performance by the other of his own obligation. As a general rule, RECIPROCAL OBLIGATIONS are to be performed simultaneously or at the same time such that each party may treat the fulfillment of what is incumbent upon the other as a suspensive condition to his obligation, and its non-fulfillment, as a tacit or implied resolutory condition, giving him the right to demand the rescission of the contract. In a contract of sale in the absence of any stipulation, the delivery of the thing sold by the seller is conditioned upon the simultaneous payment of the purchase price by the buyer, and vice versa. The seller is the creditor as to the price and debtor as to the thing, while the buyer is the creditor as to the thing and the debtor as to the price.  WHAT IS A NON-RECIPROCAL OBLIGATION?  NON-RECIPROCAL OBLIGATIONS are those which do not impose simultaneous and correlative performance on both parties. The performance of one party is not dependent upon the simultaneous performance by the other.  D borrowed from C Php 50,000. C, on the other hand, borrowed D’s car. The contract between S and B states: “In the event S exercises the right to repurchase [land sold by S to B] x x x and becomes the owner of the premises, he shall be obliged to give B the right of lease and execute a lease contract.”  CHOICE OF REMEDY IN RECIPROCAL OBLIGATIONS: Ø Action for rescission with a right to claim damages; or ØAction for specific performance (fulfillment) with a right to claim damages The choice of remedy granted is predicated on a breach of obligation by the other party that violates the reciprocity between them. As a general rule, previous demand by the obligee for the fulfillment of the obligation is necessary before the obligor can be considered in default. In the absence of demand, the oblige has no cause of action as the obligor would not yet be considered in breach of his contractual obligation.  REMEDY OF RESCISSION Art. 1191 vs. Art. 1380 When a party asks for the rescission of a contract, he impliedly recognizes its existence. The effect of rescission is to put an end to the contract in all parts as though it never were. In a contract of sale of a car between S and B, it was agreed that S, the owner, would deliver the car and the necessary document duly signed by him to B at the house of C on December 1, and B would deliver the payment at the same place and on the same date. If S does not comply with his obligations, B may: ØIn an action for specific performance with damages, demand the delivery of the car with damages; or Ø Demand from the court the rescission of the contract also with damages. If after such delivery of the car by S, it is B who failed to make good of the price, such failure, in the absence of stipulation that “ownership of the thing shall not pass to the purchaser until he has fully paid the price” (Art. 1478), does not cause the ownership to revest to S, unless the bilateral contract of sale is first rescinded pursuant to Article 1191. Non-payment only creates likewise a right to demand the fulfillment of the obligation or, in case of a substantial breach, to rescind the contract under Article 1191l When a party demands rescission in reciprocal obligations, he, in effect, treats the non-fulfillment by the other party of his obligation as a resolutory condition. WHEN IS THERE A BREACH OF OBLIGATION?  BREACH OF OBLIGATION Occurs when there is a failure or refusal by a party without legal reason or excuse to perform, in whole or in part, the obligation or undertaking which is incumbent upon him.  BREACH OF OBLIGATION ON THE PART OF THE PLAINTIFF Where the plaintiff is the party who did not perform his part of the undertaking which he was bound to perform by the terms of the contract, he has no right to insist upon its performance by the defendant or recover damages by reason of his own breach. AN INJURED PARTY IS ENTITLED TO RESCIND EVEN IN THE ABSENCE OF STIPULATION In reciprocal obligations, a party incurs in delay once the other party fulfilled his part of the contract. The right to rescind may be exercised by a party even in the absence of any stipulation giving the right should the other party fail to comply with his obligation.  EFFECTS OF RECISSION 1. Contract abrogated from its inception; 2. Mutual Restitution of benefits received by each party required; E bound himself not to make any improvements upon the property leased, for purposes of restaurant business, without the permission of R (lessor), and in case he should do so, “it shall be for the benefit of the property, without any right to ask for reimbursement for its cost.” The parties did not expressly provide for rescission in case of breach of this stipulation.  WHETHER OR NOT R HAS THE RIGHT TO ASK FOR RESCISSION OF THE CONTRACT OF LEASE FOR VIOLATION OF THE CLAUSE IN QUESTION. YES. Obligations arising from a contract of lease being reciprocal, such obligations are governed by Article 1191, which declares that in this kind of obligation, the power to rescind it in case one of the obligors should not fulfill his part is implied. R could have asked for the fulfillment of the obligation not to construct any improvements upon his property leased without his permission, and in such case, it would have been necessary to undo all that was done, in order to lease the property in its original condition; but as he made use of the right of rescission granted him by law, the court must decree the resolution asked, unless there be causes justifying to fix a term.  E.Y. YUCHENGCO vs. VELAYO S sold to B shares of stock of a corporation engaged in tourism, without prior approval of the Ministry of Tourism as required by its Rules and Regulations promulgated pursuant to Presidential Decree No. 189 creating the former department of Tourism. The purpose of the requirement is to ensure that only those persons and entities who are fit and responsible should engage in tour operation business.  IS THE SALE VOID AB INITIO OR MERELY RESCISSIBLE FOR LACK OF THE REQUIRED APPROVAL?  E.Y. YUCHENGCO vs. VELAYO Pursuant to Article 1409 (7), the sale is inexistent and null and void from the beginning. For it is well-settled that any contract entered into must be in accordance with and not repugnant to an applicable statute whose terms are deemed embodied therein and without need of the parties expressly making reference to it.  E.Y. YUCHENGCO vs. VELAYO Aquino, J. concurring in the result: The sale is a rescissible contract under Articles 1191, 1547 (2) and 1599 (4) of the Civil code because S failed to comply with his representation and warranty in the contract of sale. It was incumbent upon S to deliver to B the approval of the Ministry of Tourism of the sale and of the concomitant transfer of the tour operator’s license to B. COURT MAY GRANT GUILTY PARTY TERM FOR PERFORMANCE The court shall decree the rescission claimed unless there should be just cause for granting the party in default a term for the performance of his obligation. This exception applies only where the guilty party is willing to comply with his obligation but needs time to do so and not where he refuses to perform. REMEDIES ARE ALTERNATIVE AND NOT CUMULATIVE. An injured/aggrieved party is privileged to choose only one of the remedies and not both, subject only to the XPN in par 2 – he may seek rescission even after he has chosen fulfillment if the latter should become impossible. But after choosing rescission, he cannot thereafter demand its compliance, nor seek partial fulfillment under the guise of recovering damages. DAMAGES RECOVERABLE Damages that would only be consistent with the conception of specific performance cannot be awarded in an action where rescission is sought, and vice versa. LIMITATIONS ON THE RIGHT TO DEMAND RESCISSION IS THE RIGHT TO DEMAND RESCISSION ABSOLUTE? The rescission contemplated by Article 1191 is a judicial rescission. The court has discretionary power to allow a period within which a person in default may be permitted to perform his obligation if there is a just cause for giving time to the debtor as where the default incurred was not willful or could be excused in view of the surrounding circumstances. In the absence of any just cause for the court to determine the period of compliance, the court shall decree the rescission. A party to a contract cannot demand performance of the other party’s obligation unless he is in a position to comply with his own obligations. Similarly, the right to rescind a contract can be demanded only if a party thereto is ready, willing, and able to comply with own obligations thereunder. Rescission creates the obligation of mutual restitution. However, if the thing, the subject matter of the obligation is in the hands of a third person who acted in good faith, rescission is not available as a remedy. In such case, the injured party may recover damages from the person responsible for the transfer. As a general rule, rescission will not be granted for slight or casual breaches of contract, The violation should be substantial and fundamental as to defeat the object of the parties in making the agreement. The question of whether a breach is slight or substantial largely depends upon the attendant circumstances and not merely on the percentage of the amount not paid. The right to rescind reciprocal obligations is implied. Nevertheless, the right may be waived, expressly or impliedly.  The acceptance by the seller of the land sold as security for the balance of the price is an implied waiver of the right to rescind in case of non-payment by the buyer. His remedy is to recover the balance. (Roman vs. Blas, [C.A.] 51 O.G. 1920, April, 1955) Where the seller, instead of availing of the right to rescind, has accepted delayed payments of installments posterior to the grace periods provided in the contract, he is deemed to have waived and is estopped from exercising the right to rescind normally conferred by article 1191. (Tayag vs,. CA)  IN CONTRACT TO SELL/OF SALE: The breach contemplated in Article 1191 is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. (Odyssey Park Inc. vs. CA, 280 SCRA 253, 1997; Cheng vs. Genato, 300 SCRA 722 ).  IN CONTRACT TO SELL In a contract to sell, the payment of the purchase price is a positive suspensive condition (see Art. 1181), the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. The title remains with the vendor and does not pass on to the vendee until the full payment of the purchase price.  IN CONTRACT OF SALE In a contract of sale, the non-payment of the price is a resolutory condition that extinguishes the transaction that for a time existed and discharges the obligations created thereunder. The remedy of the unpaid seller is to seek either specific performance or rescission.  WHEN AUTOMATIC RESCISSION IS EXPRESSLY STIPULATED: The resolution of reciprocal contracts may be made extrajudicially unless impugned in court. In the absence of stipulation to the contrary, the right to rescind a contract must be invoked judicially. It cannot be exercised solely on a party’s own judgment that the other has committed a breach of the obligation. However, although there is no performance yet by both parties, but one is ready and willing to comply with what is incumbent upon him, and the other is not (see Art. 1169, last par.), the willing party, may, by his own declaration rescind the contract without a previous judicial decree of rescission. In the absence of stipulation to the contrary, the right to rescind a contract must be invoked judicially. It cannot be exercised solely on a party’s own judgment that the other has committed a breach of the obligation. However, although there is no performance yet by both parties, but one is ready and willing to comply with what is incumbent upon him, and the other is not (see Art. 1169, last par.), the willing party, may, by his own declaration rescind the contract without a previous judicial decree of rescission. ACTION FOR RESCISSION IS NOT REQUIRED UPON BREACH OF COMPROMISE AGREEMENT WHAT IS A COMPROMISE AGREEMENT? A compromise is an agreement between two or more persons who, for preventing or putting an end to a lawsuit, adjust their respective positions by mutual consent in the way they can live with. Reciprocal concessions are the very heart and life of every compromise agreement where each party approximates and concedes in the hope of gaining balance by the danger of losing. The party aggrieved by the breach of a compromise agreement (see Art. 2028) may, enforce or, if he chooses, bring the suit contemplated or involved in his original demand, as if there had never been any compromise agreement, without bringing an action for rescission thereof. RESCISSION OF A CONTRACT IS NOT EQUIVALENT TO ITS TERMINATION  RESCISSION TERMINATION Unmaking of a contract or undoing from End in time or existence; a close, cessation the beginning or conclusion When rescinded, it is deemed inexistent When terminated, it is deemed valid at its and parties are returned to their status inception. Prior to termination, the quo ante; hence, there is mutual contract binds the parties who are thus restitution of benefits obliged to observe its provisions.  ARTICLE 1192 Article 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages.  STUDY GUIDE: 1. PURE OBLIGATION 2. CONDITIONAL OBLIGATION 3. CONDITION 4. SUSPENSIVE OR RESOLUTORY 5. POTESTATIVE CONDITION 6. IMPOSSIBLE CONDITION (PHYSICALLY IMPOSSIBLE/LEGALLY IMPOSSIBLE) and EFFECTS OBLIGATION WITH A PERIOD  ARTICLE 1193 Article 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to be that which must necessarily come, although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section. WHAT IS A PERIOD? A future and certain event upon arrival of which the obligation (or right) subject to it either arises or is terminated. PERIOD VS. CONDITION  PERIOD CONDITION Fulfillment Certain event which must happen sooner or Uncertain event later at a date known beforehand, or at a time which cannot be determined Time future Past event unknown to parties Merely fixes the time for its efficaciousness Causes an obligation either to arise to cease Influence empowers the court to fix the duration invalidates the obligation When left to the will of the debtor Retroactivity Unless there is an agreement, no retroactive Upon the happening of the condition, there effect is a retroactive effect WHAT ARE THE KINDS OF PERIOD?  SUSPENSIVE PERIOD The obligation begins only at a day certain upon the happening of the period  RESOLUTORY PERIOD The obligation is valid up to a day certain and terminates upon the arrival of the period  I will pay you 30 days from today – S or R? I will support you from the time your father dies – S or R? I will pay you when my means permit me to do so – S or R? I will support you until you die – S or R? I will let you use my book until the end of the month – S or R?  I will pay you 30 days from today – S I will support you from the time your father dies – S I will pay you when my means permit me to do so –S I will support you until you die – R I will let you use my book until the end of the month – R On 01 January 2023, A borrowed from B P10,000 payable on 31 December 2023 at 15% interest.  ARTICLE 1194 Article 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in article 1189 shall be observed.  ARTICLE 1195 Article 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests.  ARTICLE 1196 Article 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit 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 one or of the other.  EXCEPTIONS TO THE GENERAL RULE Term is for the benefit of the debtor alone: - debtor cannot be compelled to pay prematurely but he can pay if he desires to do so Ex. X borrowed from Y P500 payable within one (1) year without interest. Term is for the benefit of the creditor: - Creditor may demand fulfillment even before the arrival of the term but the debtor cannot require him to accept payment before the expiration of the stipulated period. Ex. X borrowed from Y P500 with the stipulation that D cannot make payment before the lapse of the period but C may demand fulfillment even before the said date.  ARTICLE 1197 Article 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. The courts shall also fix the duration of the period when it depends upon the will of the debtor. In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. (1128a)  GR: IF THE OBLIGATION DOES NOT STATE A PERIOD, THE COURT IS NOT AUTHORIZED TO FIX A PERIOD.  EXCEPTIONS: 1. NO PERIOD IS FIXED BUT A PERIOD WAS INTENDED 2. DURATION OF THE PERIOD DEPENDS UPON THE WILL OF THE DEBTOR  ARTICLE 1198 (IFIVA) Article 1198. The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; (2) When he does not furnish to the creditor the guaranties or securities which he has promised; (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory; (4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; (5) When the debtor attempts to abscond. (1129a) GR: OBLIGATION IS NOT DEMANDABLE BEFORE THE LAPSE OF THE PERIOD XPNS: IFIVA (ART. 1198) (1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; D owes C P5000 due and payable in December. If D becomes insolvent, say on September 28, C can demand immediate payment from D even before maturity unless give sufficient guaranty or security (2) When he does not furnish to the creditor the guaranties or securities which he has promised; In the same example, D promised to mortgage his house to secure the debt. If he fails to furnish said security as promised, he shall lose his right to the period. (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory; If the debt is secured by a mortgage on the house of D but the house was burned through his fault, the obligation becomes demandable unless D gives security equally satisfactory (4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; Supposed that C agreed to the period in consideration of the promise of D to repair the piano of C. (5) When the debtor attempts to abscond. Before the due date of obligation, D changed his address without informing C and with the intention of escaping from his obligation. RECAP/EXERCISES WHAT IS AN OBLIGATION WITH A PERIOD? WHAT IS A PERIOD? A future and certain event upon arrival of which the obligation (or right) subject to it either arises or is terminated. DIFFERENTIATE PERIOD VS. CONDITION  CONDITION PERIOD Fulfillment Certain event which must happen sooner or Uncertain event later at a date known beforehand, or at a time which cannot be determined Time future Past event unknown to parties Merely fixes the time for its efficaciousness Causes an obligation either to arise to cease Influence empowers the court to fix the duration invalidates the obligation When left to the will of the debtor Retroactivity Unless there is an agreement, no retroactive Upon the happening of the condition, there effect is a retroactive effect HAS THE DEBTOR THE RIGHT TO RECOVER WHAT HE HAS PAID TO THE CREDITOR BEFORE THE ARRIVAL OF THE PERIOD AGREED UPON? EXPLAIN. Article 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests. IF AN OBLIGATION DOES NOT STATE A PERIOD FOR ITS PERFORMANCE, HAS A PARTY THE RIGHT TO ASK A COURT TO FIX A PERIOD OR DURATION THEREOF?  GR: IF THE OBLIGATION DOES NOT STATE A PERIOD, THE COURT IS NOT AUTHORIZED TO FIX A PERIOD.  EXCEPTIONS: 1. NO PERIOD IS FIXED BUT A PERIOD WAS INTENDED 2. DURATION OF THE PERIOD DEPENDS UPON THE WILL OF THE DEBTOR  GIVE CASES WHEN THE OBLIGEE CAN DEMAND THE PERFORMANCE OF AN OBLIGATION EVEN BEFORE THE ARRIVAL OF THE PERIOD AGREED UPON. ALTERNATIVE OBLIGATIONS  ARTICLE 1199 ARTICLE 1199. A person alternatively bound by different prestations shall completely perform one of them. The creditor cannot be compelled to receive part of one and part of the other undertaking. WHAT IS AN ALTERNATIVE OBLIGATION?  ALTERNATIVE OBLIGATIONS is one wherein various prestations are due but the performance of one of them is sufficient as determined by the choice, which, as a general rule, belongs to the debtor. A borrowed from B 1,000. It was agreed that A could comply with his obligation by giving B P1000, a television set, or by painting the house of B.  ARTICLE 1200 Article 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor. The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the object of the obligation. D insured the house with C an insurance company. Parties agreed that if the house is destroyed or damaged D may either pay the damage or loss or reinstate or rebuild the house.  M binds himself to deliver item A or item B to N and to communicate his choice on or before September 28.  LIMITATIONS ON THE RIGHT OF CHOICE OF THE DEBTOR A. IMPOSSIBLE B. UNLAWFUL C. WHICH COULD NOT HAVE BEEN THE OBJECT OF THE OBLIGATION S promised to deliver to B 10 sacks of rice, a wrist watch, or a soil from the moon. S obliged himself to deliver a dangerous drug, a parcel of land, a gold necklace rice. D borrowed from C P30,000. It was agreed that D would give C his horse, or P30,000, or his piano. Now, D has 2 horses – a race horse worth 30,000 and a horse for calesa as it could not have been the object of the obligation. The debtor cannot choose part of one prestation and part of another prestation.  ARTICLE 1201 Article 1201. The choice shall produce no effect except from the time it has been communicated.  IS THE CONCURRENCE OF THE CREDITOR TO THE CHOICE MADE BY THE DEBTOR REQUIRED? S obliged himself to deliver to B his car or his race horse. S chose the car and communicated to B of his choice.  ARTICLE 1202 Article 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one is practicable.  ARTICLE 1203 Article 1203. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages. WHAT IS A RECISSION?  RESCISSION Creates the obligation to return the things which were the object of the contract together with their fruits, and the price with its interest. D borrowed from C P10,000. It was agreed that instead of P10,000, D could deliver item 1, or item 2, or item 3. If item 1 is destroyed through the fault of C, D may rescind the contract. In rescission, the amount of 10,000 must be returned by D and C must pay D the value of the item 1 plus damages. D, instead of rescinding the contract, may choose item 2 or 3 with a right to recover the value of item 1 with damages. If D chooses item 1, his obligation is extinguished. C is not liable for damages.  ARTICLE 1204 Article 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the compliance of the obligation has become impossible. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service which last became impossible. Damages other than the value of the last thing or service may also be awarded.  EFFECTS OF LOSS OF OBLIGATIONS: When some of the objects were lost – debtor is not liable. When all of the objects were lost – creditor shall have the right to indemnity for damages since the obligation can no longer be complied with. Q: S agreed to deliver item 1, item 2, or item 3. 1. If item 1 is lost through the fault of S, what is the effect of the obligation? 2. If all items are lost through his fault, what is the effect? 3. If all items are lost through a fortuitous event, what is the effect? WHAT IS THE BASIS OF INDEMNITY? Q: S agreed to deliver item 1, item 2, or item 3. Item 1 and 2 are lost through the fault of S. Subsequently, item 3 is lost through his fault. 1. What is the basis of indemnity? 2. If item 3 was lost without his fault, what is the effect? 3. Let’s say, items 1 and 2 were lost through his fault. But item 3 remains. Can S be held liable?  ARTICLE 1205 Article 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. Until then the responsibility of the debtor shall be governed by the following rules: (1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that which the creditor should choose from among the remainder, or that which remains if only one subsists; (2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the former, has disappeared, with a right to damages; (3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any one of them, also with indemnity for damages. The same rules shall be applied to obligations to do or not to do in case one, some or all of the prestations should become impossible. (1136a) Q: S OBLIGED HIMSELF TO DELIVER TO B ITEM 1, ITEM 2, ITEM 3, OR ITEM 4. THE RIGHT OF CHOICE WAS EXPRESSLY GRANTED TO B. 1. Supposing item 1 is lost before B makes the choice, the lost is without the fault of S or through fortuitous event. What is the effect? 2. Supposing item 1 is lost before B makes the choice, the lost is through the fault of S? What is the effect? 3. Supposing all items are lost through the fault of S and before B makes his choice? What is the effect?  ARTICLE 1206 Article 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative. The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence, or fraud. WHAT IS A FACULTATIVE OBLIGATION?  FACULTATIVE OBLIGATIONS is one where only one prestation has been agreed upon but the obligor may render another in substitution. “I will give you my piano but I may give my guitar as a substitute.”  EFFECTS OF LOSS 1. BEFORE SUBSTITUTION – if the principal thing is lost through a fortuitous event, the obligation is extinguished; otherwise, the debtor is liable for damages. The loss of the thing intended as a substitute with or without the fault of the debtor does not render him liable.  EFFECTS OF LOSS 2. AFTER SUBSTITUTION – if the principal thing is lost, the debtor is not liable whatever may be the cause of the loss, because it is no longer due. If the substitute is lost, the liability of the debtor depends upon whether or not the loss is due to his fault. ALTERNATIVE vs FACULTATIVE CONJUNCTIVE OBLIGATIONS vs. DISTRIBUTIVE OBLIGATIONS ALTERNATIVE OBLIGATIONS vs. FACULTATIVE OBLIGATIONS D (DEBTOR) borrowed P10,000 from C (CREDITOR). It was agreed that D could pay P10,000 or deliver his piano on September 28. On September 26, D informed C that D will deliver his piano. Can D still change his period considering that he was given the right of choice? Under a contract, O (OBLIGOR) promised to deliver to B (OBLIGEE) item 1, item 2, or item 3. B was given the right of choice. Before B makes his choice, what is the liability of O in case, through his fault: 1. Item 2 is lost or destroyed? 2. All the item are lost or destroyed? D (DEBTOR) borrowed P10,000 from C (CREDITOR). It was agreed that D could deliver item 1, item 2, or item 3. 1. Let’s say, item 1 is lost, through C’s own acts. What is the effect? 2. Let’s suppose that item 1 is lost through the fault of the D? What is the effect? 3. Let’s suppose that the right of choice expressly granted to C. And before he makes the choice, item 1 is lost. What is the effect? JOINT AND SOLIDARY OBLIGATIONS  ARTICLE 1207 Article 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity  ARTICLE 1208 Article 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits.  JOINT OBLIGATION One where the whole obligation is to be paid or fulfilled proportionately by the different debtors and/or is to be demanded proportionately by the different creditors.  SOLIDARY OBLIGATION One where each one of the debtors is bound to render, and/or each one of the creditors has a right to demand from any of the debtors, entire compliance with the prestation. COLLECTIVE OBLIGATIONS ARE PRESUMED TO BE JOINT ILLUSTRATION: 1. If A is liable to B for P9,000. 2. If A, B, and C are liable to D in the amount of P9,000 and it is stated that the corresponding share of each debtor is P3,000 (it may be in unequal amounts); In the same obligation, the share of each debtor (or the share of each creditor, if there are two or more creditors) is not specified. What is the extent of the liability of A, B, and C? The presumption is that the obligation is JOINT. As a consequence: a. There are as many debts as there are debtors; b. There are as many credits as there are creditors; c. The debts and/or credits are considered distinct and separate from one another; d. Each debtor is liable only for a proportionate part of the debt; and e. Each creditor is entitled only to a proportionate part of the credit. The presumption established in Article 1208 is, however, rebuttable. A, B, and C borrowed P9,000 from D. - The presumption is that A, B, and C are joint liable. - Here, there are three (3) debts and one (1) credit. D can demand only P3,000 each from A, B, and C. - Since the debts are distinct and separate from each other, the insolvency of one of the debtors shall not make the others liable. A borrowed from B, C, and D P9,000. - Unless the contrary appears, the obligation is prime facie a joint one. - Here, there is one (1) debt and three (3) credits. Each creditor can demand only P3,000. A and B are liable to C and D for P9,000. - Same presumption applies. - There are two (2) debts and two (2) credits. - Each creditor can demand only P4,500 from either debtor. - The total liability of A or B, and the total collection of C or D, cannot exceed P4500.  WORDS USED TO INDICATE JOINT LIABILITY mancomunada; mancomunadamente; pro rata; Proportionately; We promise to pay signed by two or more persons  WHEN OBLIGATION SOLIDARY 1. The obligation expressly so states; 2. The law requires solidarity; or 3. The nature of the obligation requires solidarity. Solidary liability also exists when it is imposed in a final judgment against several defendants.  WORDS USED TO INDICATE SOLIDARITY Jointly and/or severally; Solidaria; In solidum; Together and/or separately; Individually and/or collectively; Juntos o separadamente; I promise to pay signed by two or more persons  KINDS OF SOLIDARITY (according to the parties bound) PASSIVE SOLIDARITY ACTIVE SOLIDARITY MIXED SOLIDARITY  PASSIVE SOLIDARITY Solidarity on the part of the debtors, where any one of them can be made liable for the fulfillment of the entire obligation. It is in the nature of mutual guaranty.  A and B are solidary debtors of C in the amount of P10,000. A or B will pay C 10,000.  ACTIVE SOLIDARITY Solidarity on the part of the creditors, where any one of them can demand the fulfillment of the entire obligation. Its essential feature is that of mutual representation among the solidary creditors with powers to exercise the rights of others in the same manner as their rights.  A is liable for P10,000 in favor of B and C who are solidary debtors.  MIXED SOLIDARITY Solidarity on the part of the debtors and creditors, where each one of the debtors is liable to render, and each one of the creditors has a right to demand, entire compliance with the obligation.  A and B, solidary debtors, are solidarily liable to C and D, solidary creditors, in the amount of P10,000. SOLIDARITY NOT PRESUMED.  ARTICLE 1209 Article 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share. JOINT INDIVISIBLE OBLIGATION  Why JOINT? Why INDIVISIBLE? A, B, and C are jointly liable to give D a car valued at P240,000. On the date of delivery, A and B are willing to deliver but C is not. Discuss the liability of joint debtors to creditor.  A and B are liable in the amount of P80,000 each. C is liable in the amount of P80,000 + damages. If any of the debtors is insolvent, can the other debtors be liable for the share of an insolvent debtor? NO. (ART. 1209) A is obliged to give B and C a car valued at P240,000. On the date of delivery, B refused to accept the car. Discuss the liability of debtor to joint creditors.  A may legally refuse to deliver the car. He may deposit the car in court by way of consignation.  ARTICLE 1210 Article 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. INDIVISIBILITY vs. SOLIDARITY  INDIVISIBILITY vs. SOLIDARITY 1. INDIVISIBILITY refers to the prestation, while SOLIDARITY refers to the juridical or legal tie that binds ties; 2. In INDIVISIBLE OBLIGATIONS, only the debtor guilty of breach of obligation is liable for damages. While in SOLIDARY OBLIGATIONS, all of the debtors are liable for the breach of the obligation committed by a debtor. 3. INDIVISIBILITY can exist although there is only one debtor and one creditor, while in SOLIDARITY, there must be at least two debtors or two creditors; 4. In INDIVISIBLE OBLIGATIONS, the others are not liable in case of insolvency of one debtor, while in SOLIDARY OBLIGATIONS, the other debtors are proportionately liable.  A and B are jointly liable to give C a car. A and B are solidarily liable to give C a car. A and B are jointly liable to pay C P3,000.  A and B are jointly liable to give C a car. [JOINT INDIVISIBLE] A and B are solidarily liable to give C a car. [SOLIDARY INDIVISIBLE] A and B are jointly liable to pay C P3,000. [JOINT DIVISIBLE]  ARTICLE 1211 Article 1211. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions  ARTICLE 1211 Article 1211. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions A, B, C, and D obliged themselves solidarily to pay E P20,000 as follows: A to pay by installment at the rate of P1,000 a month to start in July; B to pay in September; C to pay in December; D to pay after he graduates from UST CTHM  ARTICLE 1212 Article 1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter. Based on MUTUAL AGENCY  ARTICLE 1213 Article 1213. A solidary creditor cannot assign his rights without the consent of the others.  ARTICLE 1214 Article 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him A is liable to pay B and C, solidary creditors, P10,000.00. In this case, A may pay either B or C. But, if a demand, judicial or extrajudicial, is made by B, payment should be made to B. If A, nevertheless, paid C P10,000.00, B is still entitled to his share from A in case C does not turn over to B the latter’s share. If B and C demanded payment at the same time, A may pay either of them.  ARTICLE 1215 Article 1215. Novation, compensation, confusion, or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of Article 1219. The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them A is liable to B, C, and D solidarily in the amount of P30,000. If B validly condones the debt in the amount of P30,000, he shall be liable for P6,000 share to C and D. If B collects P15,000 from A, B must account for the P5,000 share of C and D. WHERE OBLIGATION IS JOINT, WHAT IS THE EFFECT OF NOVATION, COMPENSATION, REMISSION, PRESCRIPTION, OR ANY OTHER CAUSES OF MODIFICATION?  It does not extinguish or modify the obligations except with respect to the creditor or debtor affected, without extending its operation to any other part of the debtor or of the credit. In the above example, if the obligation of A is JOINT, the condonation will affect only the share of B in the amount of P18,000. Hence, A is still indebted to C and D in the amount of 12,000.  ARTICLE 1216 Article 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.  ARTICLE 1217 Article 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each. A, B, and C are JOINTLY AND SEVERALLY LIABLE to D and E in the amount of P3,000 due on January 5. If both A and B offer to pay D, on January 5, the latter may choose which offer to accept. If A pays the entire obligation on January 5, the obligation is extinguished, The payment by A gives him the right to demand reimbursement from B and C P1,000 with interest from the date of payment.  But A is not entitled to reimbursement nor to interest for any payment made before January 5. The obligation of B and C to reimburse him with the interest will arise only from January 5. If C is insolvent, both A and B shall bear his insolvency in proportion to their shares. Hence, A can still ask B to pay an additional sum of P500. Of course, A and B can later recover from C should the latter’s finances improve. D has the obligation to give E his corresponding share in the credit.  ARTICLE 1218 Article 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal.  ARTICLE 1219 Article 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected. A and B are liable in solidum to C in the amount of P1000. C remitted A’s share. Subsequently, B paid C P1000. a) Can B reimbursed from A the total of P1000? b) If payment by B was before the remission, Is A liable to B? a) Can B reimbursed from A the total of P1000? NO. B is not entitled to reimbursement from A since the remission extinguished the obligation with respect to A’s share. However, B can demand return of P500 from C under the principle of solutio indebiti. b) If payment by B was before the remission, is A liable to B? YES. The remission is without effect having extinguished already by payment.  ARTICLE 1220 Article 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors. A and B executed jointly and severally a promissory note for P2000 in favor of C. C remitted the whole obligation out of regard for A. A is not entitled to reimbursement from B since A did not pay anything to C. If only P1,300 is remitted, B is still liable to C for P700. B has no obligation to reimburse A for the 300 of B’s share affected by the remission for the same reason that no payment was made by A.  ARTICLE 1221 Article 1221. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors, the obligation shall be extinguished. If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor. If through a fortuitous event, the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor, the provisions of the preceding paragraph shall apply. A, B. and C promised solidarily to deliver to D a particular car valued at 100,000. (1) LOSS IS WITHOUT FAULT AND BEFORE DELAY - OBLIGATION IS EXTINGUISHED. (2) LOSS IS DUE TO FAULT ON THE PART OF SOLIDARY DEBTOR - If lost through the fault of C, A and B ARE ALSO RESPONSIBLE FOR THE PRICE OF THE CAR AND DAMAGES even if they are not at fault. However, they can recover from C, the guilty and negligent debtor the full amount of the price and damages if A and B have already contributed to the price of the car. (3) LOSS IS WITHOUT FAULT BUT AFTER DELAY - If the car was lost through a fortuitous event but after a demand was made upon C, D can still recover from A or B or both of them without prejudice to the right of action of the latter against C following the same rule in No. 2.  ARTICLE 1222 Article 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible. DIVISIBLE AND INDIVISIBLE OBLIGATIONS  ARTICLE 1223 Article 1223. The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title.  DIVISIBLE OBLIGATION is one the object of which, in its delivery or performance, is capable of partial fulfillment.  INDIVISIBLE OBLIGATION is one the object of which, in its delivery or performance, is NOT capable of partial fulfillment. TEST FOR DISTINCTION OF WHETHER OR NOT THE OBLIGATION IS DIVISIBLE OR INDIVISIBLE: - NOT THE POSSIBILITY OR IMPOSSIBILITY OF PARTIAL PERFORMANCE BUT THE PURPOSE OR THE INTENTION OF THE PARTIES. However, if the object is not physically divisible or the service is not susceptible of partial performance, the obligation is always indivisible, the intention of the parties to the contrary notwithstanding. This rule is ABSOLUTE. D agreed to pay C P10,000.00 in four (4) equal monthly installments. The obligation of D is divisible because it’s capable of partial performance. But if the agreement is that D will pay C on a certain date the full amount of P10,000.00, the obligation is indivisible although money is physically divisible because the intention of the parties is that the obligation must be fulfilled one time and as a whole. The divisibility of an obligation should not, therefore, be confused with the divisibility of the thing which is the object thereof. S obliged himself to deliver to B a specific car on November 15. This obligation is indivisible because it is not capable of partial performance. The car must be delivered at one time and as a whole. An obligation is presumed indivisible where there is only one creditor and only one debtor. (Art. 1248)  ARTICLE 1224 Article 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists.  ARTICLE 1225 Article 1225. For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible. However, even though the object or service may be physically divisible, an obligation is indivisible if so provided by law or intended by the parties. In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each particular case. OBLIGATIONS WITH A PENAL CLAUSE  ARTICLE 1226 Article 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.  PRINCIPAL OBLIGATION is one which can stand by itself and does not depend for its validity and existence upon another obligation.  ACCESSORY OBLIGATION is one which is attached to a principal obligation and, therefore, cannot stand alone. WHAT IS AN OBLIGATION WITH A PENAL CLAUSE? OBLIGATION WITH A PENAL CLAUSE is one which contains an accessory undertaking to pay a previously stipulated indemnity in case of breach of the principal prestation intended to induce its fulfillment.  PENAL CLAUSE An accessory undertaking attached to an obligation to assume greater liability in case of breach.  PURPOSES OF PENAL CLAUSE 1. To ensure their performance by creating an effective deterrent against breach, making the consequences of such breach as onerous as it may be possible; and 2. To substitute a penalty for the indemnity for damages and the payment of interests in case of non-compliance; or to punish the debtor for the non-fulfillment or violation of his obligation As a general rule, in an obligation with a penal clause, the penalty takes the place of the indemnity for damages and the payment of interests in case of non-compliance. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be enforced.  WHEN CREDITOR MAY RECOVER DAMAGES. 1. When so stipulated by the parties; 2. When the obligor refuses to pay the penalty, in which case the creditor may recover legal interest thereon; or 3. When the obligor is guilty of fraud in the fulfillment of the obligation, in which case the creditor may recover damages caused by such fraud. X promised to construct a house for Y. The contract carried a penal clause that in case of non-compliance, X would have to pay a penalty of P100,000. X did not construct the house, and as a consequence, Y suffered damage in the amount of P40,000. The penalty of P100,000 shall be paid. Y cannot recover more than P100,000, the penalty stipulated, even if it proves that the damages suffered by Y is only P40,000. The penalty substitutes the indemnity for the damage of P40,000 unless there is a stipulation to the contrary, in which case Y may also recover the damages proved by him.  If X is guilty of fraud (not mere fault) in the fulfillment of his obligation, he is also liable for the damages caused thereby in conformity with Article 1171. Proof of the fraud and the existence and amount of damages is incumbent upon Y. But Y need not prove fraud to recover the penalty. WHEN MAY A PENALTY BE ENFORCED? Only when it is demandable in accordance with the provisions of the Civil Code. Hence, the penalty, as a stipulation in a contract, is demandable only if there is a breach of the obligation and it is not contrary to law, morals, good customs, public order, or public policy.  ARTICLE 1227 Article 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time, unless this right has been clearly granted him. However, if after the creditor has decided to require the fulfillment of the obligation, the performance thereof should become impossible without his fault, the penalty may be enforced. GR: the debtor cannot just pay the penalty instead of performing the obligation. XPN: When such right has been expressly reserved for him. S is required to deliver to B certain products; otherwise, he shall pay a penalty in the amount of P10,000.00 S cannot just pay the penalty as a substitute for non-compliance of the principal obligation except when he is expressly given the right by B to do so. As a general rule, the creditor cannot demand the fulfillment of the obligation and the satisfaction of the penalty at the same time. Once the obligation is fulfilled, there is no need for demanding the penalty. The exception arises when ”this right has been clearly granted” the creditor. Hence, under Article 1227, the general rule is that a penal clause is subsidiary and not joint. In case of non-compliance, the creditor may ask for the penalty or require specific performance. The remedies are alternative and not cumulative nor successive, subject to the exception that the penalty may be enforced if after the creditor has decided to require fulfillment, the same should become impossible without his fault. If there was fraud on the part of the debtor, the creditor may recover the penalty as well as damages for non-fulfillment. Same example: If S did not comply with his obligation: B can choose between requiring fulfillment of the principal obligation or satisfaction of the penalty. a. If B has selected fulfillment, he may not subsequently demand the payment of penalty, unless fulfillment becomes impossible without his fault (i.e., through S’s fault.) b. If B has chosen and received the penalty, he may not subsequently require the fulfillment of the obligations which is deemed repudiated by both of them. However, he may still demand fulfillment should S not pay the penalty. c. If the non-fulfillment of the obligation is attributable to the fraud committed by S, both the stipulated penalty and the damages suffered by B may be recovered by him. The debtor has the right to pay penalty in lieu of performance only when this right has been EXPRESSLY RESERVED for him. With respect to the creditor, he has the right to demand performance and payment of penalty jointly when this right has been clearly granted him.  ARTICLE 1228 Article 1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded.  ARTICLE 1229 Article 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.  ARTICLE 1230 Article 1230. The nullity of the penal clause does not carry with it that of the principal obligation. The nullity of the principal obligation carries with it that of the penal clause. ACCESSORY FOLLOWS THE PRINCIPAL AND NOT VICE VERSA. EXTINGUISHMENT OF OBLIGATIONS PAYMENT OR PERFORMANCE REQUISITES: 1. Payment must be complete and regular; 2. Payment must be tendered by the proper person; 3. Person paying must have the capacity to make payment; 4. Payment should be made to the proper person; 5. Person to whom payment is made must have the capacity to receive it 6. Identity of prestation must be preserved; and 7. Payment must be tendered in proper places.  LEGAL TENDER The currency which has been made suitable by law for the purpose of a tender in the payment of debts  What is considered as ”LEGAL TENDER” in the Philippines? All notes and coins issued by the Bangko Sentral ng Pilipinas and guaranteed by the Republic of the Philippines are considered legal tender for all debts, both public and private. With respect to coins, however, they shall be considered as legal tender: a) Up to the maximum amount of P1,000.00 only – for denominations of 1-Piso, 5-Piso, and 1—Piso coins; and b) Up to the maximum of P100.00 only – for denom