CHAPTER THREEDIFFERENT KINDS OF OBLIGATIONS

Sec. 1. - Pure and Conditional Obligations

Art. 1179. Every obligation whose performance does not dependupon a future or uncertain event, or upon a past event unknownto the parties, is demandable at once.Every obligation which contains a resolutory condition shallalso be demandable, without prejudice to the effects of thehappening of the event.

Pure Obligation- one whose effectivity or extinguishment does notdepend upon the fulfillment or non-fulfillment of a condition or uponthe expiration of a term or period.

Elements: a) Not subject to a conditionb) Not subject to a term

Characterized by the quality of immediate demandability,but there must be a reasonable period of grace.

*Immediate demandability: It does not mean outright butspeaks of a reasonable time; depends on the nature andcomplexity of the obligation.

Simple Obligation does not equal to pure Obligation.Former speaks of an obligation with only one prestation,while the latter speaks of an obligation that does notdepend on a condition or period.

Obligations that are immediately demandable: 1. Pure obligations (Art 1179)2. Obligations with resolutory condition (Art. 1179, par.2)3. Obligations with resolutory period (Art. 1193, par.2) 4. Obligations with a condition not to do an impossible thing

(Art. 1183, par.2)

2 Types of Events:

1. Condition – a future and uncertain event upon which theacquisition and resolution of rights is made to depend by those whoexecute the juridical act

Characteristics: Future Uncertain – may or may not happen Possibility

2. Term/Period – an interval of time, which, exerting an influence onan influence on an obligation as a consequence of a juridical act,either suspends its demandability or produces its extinguishment. Characteristics:

Future Certain although not known when it will happen

**Suspensive Condition and Term – Happening of which will arise toacquisition of rights**Resolutory Condition and Term – Happening of which will result tothe extinguishment of an obligation

Conditional Obligation - one whose effectivity is subordinated to thefulfillment or non-fulfillment of a future and uncertain act or event.

Is a past event unknown to the parties be considered as a condition?According to Sir Ulan, quoting Tolentino, a past event

cannot be “future and uncertain”, which are the elements of acondition, and thus cannot be one. What can be a condition is thefuture knowledge or proof of a past event unknown to the parties, butNOT the event itself. Thus the contract or obligation arises, not whenthe event happened or the fact came into existence, which would bein the past, but when the proof of such fact or event is presented,which would be in the future.

Example: I will give you P50,000 if you could prove that Rizalreturned to the Catholic Church before he died.

Classification of Conditions:

1. Suspensive or Resolutory Suspensive – when the fulfillment of the condition results in

the acquisition of rights arising out of the obligations. Resolutory – when the fulfillment of the condition results in

the extinguishment of rights arising out of the obligation.2. Potestative, Casual, or Mixed

Potestative – when the fulfillment of the condition dependsupon the will of a party to the obligation.

Casual – when the fulfillment of the condition dependsupon chance and/or upon the will of a third person

Mixed – when the fulfillment of the condition depends partlyupon the will of a party to the obligation and partly uponchance and/or will of a third person

3. Possible or Impossible Possible – when the condition is capable of realization

according to nature, law, public policy or good customs Impossible – when the condition is not capable of

realization according to nature, law, public policy or goodcustoms

4. Positive or Negative Positive – when the condition involves the performance of

an act Negative – when the condition involves the omission of an

act.5. Divisible or Indivisible

Divisible – when the condition is susceptible of partialrealization

Indivisible – when the condition is not susceptible of partialrealization

6. Conjunctive or Alternative Conjunctive – when there are several conditions, all of

which must be realized Alternative – when there are several conditions, but only

one must be realized7. Express or Implied

Express – when the condition is stated expressly Implied – when the condition is tacit

Art. 1180. When the debtor binds himself to pay when his meanspermit him to do so, the obligation shall be deemed to be onewith a period, subject to the provisions of Article 1197.

Should the debtor bind himself to pay when his meanspermit him to do so, the obligation is one with a period andnot subject to a condition

Since the duration of the period is left to the discretion ofthe debtor, it is subject to 1197 or where the courts shall fixthe duration of the period by which he shall pay theobligation. Thus in cases falling under this article, creditorshould file an action to fix a period for the payment of theobligation.

Indications of a term or period: When the debtor binds himself to pay –

when his means permit him to do so little by little as soon as possible from time to time as soon as I have the money in partial payment when in the position to pay

Art. 1181. In conditional obligations, the acquisition of rights, aswell as the extinguishment or loss of those already acquired,shall depend upon the happening of the event which constitutesthe condition.

Suspensive Resolutory

Condition precedent Condition subsequent

Results in the acquisition ofrights arising out of theobligations

Results in the extinguishment ofrights arising out of theobligations

The happening of the conditiongives birth to the obligation.

The happening of the conditionextinguishes obligation

not demandable until thehappening of the event whichconstitutes the condition

immediately effective anddemandable, without prejudiceto the happening of theresolutory condition

If the condition is not fulfilled,no juridical tie is created.

If the condition is not fulfilled,juridical relation is consolidated.

What is acquired by theobligee in the constitution ofthe obligation is only merehope and expectancy,protected by law.

What is acquired by the obligeein the constitution of theobligation are rights that aresubject to threat or danger ofextinction.

Art.1182.Whenthe

fulfillment of the condition depends upon the sole will of thedebtor, the conditional obligation shall be void. If it dependsupon chance or upon the will of a third person, the obligationshall take effect in conformity with the provisions of this Code.

2 kinds of Potestative: simple potestative condition – presupposes not only a

manifestation of will but also the realization of an externalact

e.g. “if you sell your house”; “If I go to Madrid, I promise to sell youmy house”.

purely potestative condition1 – depends solely andexclusively upon the will

e.g. “if I like it” or “if I deem it proper”; “I promise to sell you my houseon such date if I deem it convenient.”

Note: Simple potestative condition approaches very well the nature of amixed condition. (Caguioa) Hence, it is valid. Purely or strict potestative condition on the other hand destroys theefficacy of the legal tie. Note that it is only when the potestativecondition depends exclusively upon the will of the debtor that theconditional obligation is void. (Tolentino)

Simple potestative – valid; purely potestative (creditor)– valid; purely potestative

(debtor) - void

a) Potestative on the part of the Creditor - if the fulfillment of the condition is dependent upon the sole will ofthe creditor the obligation is VALID

Example: I will give you a car on the condition that you go to Baguioon or before Dec 10, 1965.

b) Potestative on the part of the Debtor

i) Suspensive condition: - If a suspensive condition is solely dependent upon the will of thedebtor, the obligation is VOID.

Example: I’ll give you a diamond ring if I go to Tokyo this year.

ii) Resolutory condition: -A condition which is both potestative and resolutory is VALID, eventhough the fulfillment of the condition is dependent upon the will ofthe debtor

Example: I’ll give you a car until I return from Baguio.

Art. 1183. Impossible conditions, those contrary to goodcustoms or public policy and those prohibited by law shallannul the obligation which depends upon them. If the obligationis divisible, that part thereof which is not affected by theimpossible or unlawful condition shall be valid.

The condition not to do an impossible thing shall beconsidered as not having been agreed upon.

1 Referred to by Caguioa as strict potestative

Potestative Casual Mixed

fulfillment of theobligation dependsupon the will of aparty to theobligations

fulfillment of thecondition dependsupon chance/orupon the will of athird person

fulfillment of theobligation dependsupon the will of a partyto the obligation andpartly upon chanceand/or will of a thirdperson.

E f f e c t s

dependent on thecreditor: - condition and

obligation,VALID

dependent on thedebtor: - condition and obligation, VOID(suspensive)Exception:- condition and obligation, VOID(resolutory)

The obligationand the conditionshall take effect.(valid andenforceable)

The obligation and thecondition shall takeeffect. (valid andenforceable)

Possible conditions – those which are valid and allowed by law;proper conditions.

Impossible conditions – contrary to good customs or public policyor prohibited by law.

2 kinds:1. Physically impossible – when the realization of the eventconstituting the condition is incompatible with or contrary to nature.2. Juridically impossible – when contrary to law, morals, goodcustoms, and public policy.

* Illicit conditions – those which tend to restrain or fetter the exerciseof those rights or powers arising from the natural or civil liberties ofman * Immoral conditions – those which tend to compel a person toexecute an act contrary to good customs.

Note: In the case of illicit and immoral conditions, the illicit actprovided for in the contract must refer to that of one of the parties butnot where the illicit act is the act of a third person. The illicit characterof the act is not determined by the act or fact in itself, but by itseffects upon one of the parties.

Applicability: The article applies only to contracts. It has no application togratuitous obligation (simple and remuneratory donations andtestamentary dispositions).

Effects: 1. Impossible condition on obligation to give/to do(positive & suspensive)

obligation is annulled

Example: I’ll give you P40,000 if you go to the moon this year.

2. Impossible condition on obligation not to do obligation is void (deemed not having been agreed upon);

hence obligation remains valid & subsequent => becomespure and simple

Example: D obliged himself to give C P40,000 if C does not go to themoon this year.

*Impossible condition imposed on gratuitous obligation: condition is deemed not imposed; hence obligation is valid

and becomes pure and simple

Requisites for the nullity of an obligation with impossibleconditions:1. Conditions are positive and suspensive2. Obligation is a contract3. Impossibility exists at the time of the creation of theobligation

Art. 1184. The condition that some event happen at adeterminate time shall extinguish the obligation as soon as thetime expires or if it has become indubitable that the event willnot take place.

Art. 1185. The condition that some event will not happen at adeterminate time shall render the obligation effective from themoment the time indicated has elapsed, or if it has becomeevident that the event cannot occur.

If no time has been fixed, the condition shall bedeemed fulfilled at such time as may have probably beencontemplated, bearing in mind the nature of the obligation.

Positive conditions – those that depend on the fulfillment of anevent.

Negative conditions – those which depend on the non-happening ofan event.

If the condition is positive (that an event should occurwithin a determinate period, the obligation is extinguishedfrom the moment the period lapses or it has becomeindubitable that the event will not take place. Example: I’ll give you a car if you marry X on or before Dec10, 1992. My obligation to give the car is extinguished if onDec 11, 1992 X is still single or if before Dec 10, 1992 Xdies, because by then it is evident that you can no longermarry X.

If the condition is negative (that some event would nothappen within a determinate time), the obligation becomeseffective from the moment the period lapses, or if it hasbecome evident that the event cannot occur.

Example: I’ll give you my car if you do not marry X on orbefore Dec 10, 1992. If on Dec 11, 1992 you have notmarried X, you can demand delivery of the car. If X diesbefore Dec 11, 1992 you can, on the death of X demanddelivery of the car without waiting for Dec 11, 1992,because it is evident that you can no longer marry X.

Art. 1186. The condition shall be deemed fulfilled when theobligor voluntarily prevents its fulfillment.

Constructive Fulfillment of ConditionsIf the debtor prevents the creditor from fulfilling the condition of theobligation, the condition is deemed fulfilled and the obligationdemandable.

It is essential that the obligor must have actually prevented theobligee from complying and that it must have been voluntary andwillful.

Requisites:1. Condition is suspensive2. Debtor actually prevents the fulfillment of the condition3. He acts voluntary/intention

Example: Dean Ulan will give Anjo P50,000 if Dean Ulan and DeanJara will run around the campus. If only Dean Jara only ran, Art 1186will apply UNLESS if it was not Dean Ulan’s intention and fault not torun.

*Underlying principle: A party to a contract may not be excused fromperforming his promise by the non-occurrence of an event which hehimself prevented.

Exception:• If in preventing the fulfillment of the condition the debtoracts pursuant to a right, the condition will NOT be deemed fulfilled.

Applicable to:• Suspensive and potestative (creditor)• Suspensive and casual• Suspensive and mixed

ART.1187. The effects of a conditional obligation to give, oncethe condition has been fulfilled, shall retroact to the day of theconstitution of the obligation. Nevertheless, when the obligationimposes reciprocal prestations upon the parties, the fruits andinterests during the pendency of the condition shall be deemedto have been mutually recompensated. If the obligation isunilateral, the debtor shall appropriate the fruits and interestsreceived, unless from the nature and circumstances of theobligation it should be inferred that the intention of the personconstituting the same was different.

In obligations to do and not to do, the courts shalldetermine , in each case, the retroactive effect of the conditionthat has been complied with.

Retroactive effects of fulfillment of suspensive condition(1) In obligations to give- An obligation to give subject to asuspensive condition becomes demandable only upon the fulfillmentof the condition. However, once the condition is fulfilled, its effectsshall retroact to the day when the obligation was constituted.

When is an obligation constituted?When the essential elements which give rise thereto concur.Condition is not an essential element; it is only an accidental elementof the obligation.

The reason is because the condition is only accidental element of acontract. An obligation can exist without being subject to a condition.Consequently, once the event which constitutes the condition isfulfilled thus resulting in the effectivity of the obligation, its effectsmust logically retroact to the moment when the essential elementswhich gave birth to the obligation have taken place and not to themoment when the accidental element was fulfilled.*Note:applicable only to consensual contracts (perfected uponmeeting of the minds) and not to real contracts(perfected by delivery)

(2) In obligations to do or not to do- No definite rule. The courtsare empowered by the use of sound discretion and bearing in mindthe intent of the parties, to determine in each case, the retroactiveeffect of the suspensive condition that has been complied with. Itincludes the power to decide that the fulfillment of the condition shallhave no retroactive effect or from what date such retroactive effectshall take effect.

Retroactive effects as to fruits and interests in obligations togive• In reciprocal obligations-No retroactivity since the fruits andinterests are deemed to have been mutually compensated.

Example: On Jan 10, 1992 D obliged himself to give C a certainricefield and C agreed to give D a certain fishpond provided X passesthe CPA examinations. If X passes the CPA exam on Aug 10, 1992, Cis obliged to deliver the fishpond to D and D is obliged to deliver thericefield to C. However D is not obliged to deliver the fruit of thericefield to C. Neither is C required to give the fruits of the fishpond toD.

• In unilateral obligations- There is usually no retroactiveeffect because they are gratuitous. The debtor receives nothing fromthe creditor. Thus, fruits and interests belong to the debtor unlessfrom the nature and other circumstances of the obligation it should beinferred that the intention of the person constituting the same wasdifferent.

Example: On Jan 10, 1992 D obliged himself to give C a certainricefield provided C passes the CPA exams. If on Aug 10, 1992 Cpasses the CPA exams, D obliged to deliver the ricefield to C but notthe fruits received from Jan 10, 1992

Exceptions to the rule of retroactivity:1. Real contracts2. Successive contracts (those contracts whose fulfillment isrealized within a period of time; e.g. contract of lease, contract oflabor, life annuities)

Reason for retroactivity: The condition is only accidental, notessential element of the obligation.

Limitation of Retroactivity Effect: If thing is lost through fortuitous event, debtor suffers the

loss because he is still the rightful owner. (basis: Art. 1164-- ownership or personal right is only vested upon delivery)

Art.1188. The creditor may, before the fulfillment of thecondition, bring the appropriate actions for the preservation ofhis right.

The debtor may recover what during the same time hehas paid by mistake in case of a suspensive condition.

Rights pending fulfillment of suspensive condition(1) Rights of creditor- He may take or bring appropriate actions

for the preservation of his right, as the debtor may rendernugatory the obligation upon the happening of the condition.

Action for prohibition restraining the alienation ofthe thing pending the happening of thesuspensive condition;

Action to demand security if the debtor hasbecome insolvent;

Action to set aside alienations made by thedebtor in fraud of creditors;

Actions against adeverse possessors to interruptthe running prescriptive period;

To have the rights annotated in the registry.

(2) Rights of the debtor- He is entitled to recover what he haspaid by “mistake” prior to the happening of the suspensivecondition.

Art. 1188, par. 1- Protection for the creditor– file an injunction to stop the debtor– does not necessarily always involves court action in spitethe wordings of the law.

i.e. registration

Art. 1188, par. 2- protection for the debtorObligation subject tosuspensive condition

Obligation subject toperiod/term

There is no certainty if theobligation will be fulfilled

It is certain that theobligation will be fullydemandable andenforceable.

Interests and fruits shall alsobe delivered when the debtorpaid/delivered by mistake.

Interests and fruits shall alsobe delivered when thedebtor paid/delivered bymistake.

Art. 1189. When the conditions have been imposed with theintention of suspending the efficacy of an obligationimprovement, loss or deterioration of the thing during thependency of the condition:

(1) If the thing is lost without the fault of the debtor, theobligation shall be extinguished;

(2) If the thing is lost through the fault of the debtor, heshall be obliged to pay damages; it is understood thatthe thing is lost when it perishes, or goes out ofcommerce, or disappears in such a way that itsexistence is unknown or it cannot be recovered;

(3) When the thing deteriorates without fault of the debtor,the impairment is to be borne by the creditor.

(4) If it deteriorates through the fault of the debtor, thecreditor may choose between the rescission of theobligation and its fulfillment, with indemnity fordamages in either case;

(5) If the thing is improved by its nature, or by time, theimprovement shall inure to the benefit of the creditor;

(6) If the thing is improved at the expense of the debtor, heshall have no right that that granted to theusufructuary.

Requisites:(1) The obligation is a real obligation (to give);(2) The object is a specific or determinate thing;(3) The obligation is subject to a suspensive condition(resolutory is also applicable accdg to ULAN)(4) The condition is fulfilled; and(5) There is loss, deterioration, or improvement of the thingduring the pendency of the condition

Application: The loss, deterioration or improvement should takeplace after the obligation is perfected and before the condition isfulfilled.

LOSSES

When is a thing lost?a) When it perishesb) When it goes out of commercec) When it disappears in such a way that its existence is unknown orit cannot be recovered.

Loss without debtor’s fault- The debtor’s obligation is extinguished if the thing is lost without

his faultLoss due to debtor’s fault- The debtor’s is obliged to pay damages if the thing is lost due

to his fault

DETERIORATION

What is deterioration?A thing deteriorates when its value is reduced or impaired without thefault of the debtor

Without debtor’s fault - Impairment to be borne by the creditor

With debtor’s fault - Obligation is converted into one of indemnity for damages - The creditor can choose between:

a) Rescission plus damages, orb) Fulfillment of the obligation plus damages

IMPROVEMENT

What is improvement?- A thing is improved when its value is increased or enhanced bynature or by time

a) By nature or by time - shall inure to the benefit of the creditor

b) At the debtor’s expense- debtor shall have no other right than that granted to a usurfructory

Art. 1190. When the conditions have for their purpose theextinguishment of an obligation to give, the parties, upon thefulfillment of said conditions, shall return to each other whatthey have received.

In case of the loss, deterioration or improvement of thething, the provisions which, with respect to the debtor, are laiddown in the preceding article shall be applied to the party whois bound to return.

As for obligations to do and not to do, the provisionsof the second paragraph of Article 1187 shall be observed asregards the effect of the extinguishment of the obligation.Effect of Resolutory Obligation BEFORE fulfillment

Obligor/debtor has hope or expectancy during thependency of the condition

If resolutory condition happens, debtor will reacquirewhatever he may have paid or delivered to theobligee/creditor

Example: I’ll give you a car until you should pass the CPA exams.

Effect of Resolutory Obligation AFTER fulfillment If resolutory condition is not fulfilled, such rights are

consolidated – absolute

Retroactivity of Effect Effect of signifying the non-existence of the obligation and

what is non-existent must not give rise to any effectwhatsoever

Return to each other what they have received Right to demand reimbursement for all expenses which he

may have incurred in the production, gathering, andpreservation of the said fruits.

Art. 1191. The power to rescind obligations is implied inreciprocal ones, in case one of the obligors should not complywith what is incumbent upon him.

The injured party may choose between the fulfillmentand the rescission of the obligation, with the payment ofdamages in either case. He may also seek rescission, even afterhe has chosen fulfillment, if the latter should becomeimpossible.

The court shall decree the rescission claimed, unlessthere be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rightsof third persons who have acquired the thing, in accordancewith articles 1385 and 1388 and the Mortgage Law.

Reciprocal Obligations are those which arise from the same cause and in which each

party is a debtor and creditor of the other, such that theperformance of one is designed to be the equivalent and thecondition for the performance of the other

Effect: When an obligation has been rescinded or resolved, it isthe duty of the court to require the parties to surrender whatevermay have received from the other; in other words, the partiesmust be placed as far as practicable in their original situation.

Tacit Resolutory Condition (Par.1)Principle: If one of the parties fails to comply with what is imcumbentupon him, there is a right on the part of the other to rescind or“resolve” the obligation.

Remedies:(1) Action for specific performance (fulfillment) of the obligation

with damages; or(2) Action for rescission of the obligation also with damages.

*Should be invoked judicially (par 3) except whenstipulated in the contract

Limitations on right to demand rescission:(1) Resort to the courts- The injured party has to resort to the

courts to assert his rights judicially

(2) Power of court to fix period- The court has discretionarypower to allow a period within which a person in defaultmay be permitted to perform his obligation if there is a justcause for giving time to the debtor, as where the default

incurred was not willful or could be excused in view of thesurrounding circumstances.

(3) Right of third person (par 4)- If the thing subject matter ofthe obligation is in the hands of a third person who acted ingood faith, rescission is not available as a remedy

(4) Substantial violation- The general rule is that rescission willnot be granted for slight breaches of contract; the violationshould be substantial as to defeat the object of the partiesin making the agreement.

(5) Waiver of right- The right to rescind may be waived,expressly or impliedly.

*Note: Where the contract itself contains stipulations regardingautomatic rescission without judicial interbention upon violation of theterms of the contract, the right to rescind is not implied but expresslystated then judicial permission to cancel or rescind the contract is nolonger necessary. The injured party should give notice to the otherparty of the rescission and his chosen remedy.

Art. 1192. In case both the parties have committed a breach ofthe obligation, the liability of the first infractor shall be equitablytempered by the courts. If it cannot be determined which of theparties first violated the contract, the same shall be deemedextinguished, and each shall bear his own damages.

Rules:

1. the liability of the first infractor shall be equitably tempered by thecourts.

fair to both parties because the second infractor alsoderived, or thought he would derive, some advantage forhis own act or neglect

2. If it cannot be determined which of the parties first violated thecontract, the same shall be deemed extinguished, and each shallbear his own damages

it is presumed that both at about the same time tried toreap some benefit

Sec. 2 – Obligations with a Period

Art. 1193. Obligations for whose fulfillment a day certain hasbeen fixed, shall be demandable only when that day comes.

Obligations with a resolutory period take effect once,but terminate upon arrival of the day certain.

A day certain is understood to be that which mustnecessarily come, although it may not be known when.

If the uncertainty consists in whether the day will comeor not, the obligation is conditional, and it shall be regulated bythe rules of the preceding Section.

Term or Period- interval of time, which exerting an influence on anobligation as a consequence of a juridical act, either suspends itsdemandability or produces its extinguishment.

Obligations with a period- obligations whosedemandability or extinguishment is subject to the expiration of a termor a period.

Requisites:

1. Future2. Certain3. Possible, legally and physically

A day certain – understood to be that which must necessarily come,although it may not be known when

Certainty of event may be either:a) absolutely known (e.g.: May 23, 2010)b) relatively known (e.g.: fixing a period several days after

May 23, 2010)c) totally unknown (day when a person dies)

Classification of Term/Period

A. According to source1. Voluntary/ conventional – fixed by the will of the parties2. Legal – fixed by law3. Judicial – fixed by the courts

B. According to effect1. Suspensive (ex die or dies a quo) – when the obligation isdemandable only when the day comes2. Resolutory (in diem or dies ad quem) – when the obligation takeseffect at once but terminates upon the arrival of the day certain

C. According to definiteness1. Definite – when the period is fixed2. Indefinite – when the term or period is not fixed

D. According to expression 1. Express – when the period is stipulated in the obligation2. Tacit – when from the nature or circumstances, it can be inferredthat a period was intended

E. According to nature1. Ordinary – that which would not prevent the obligation from beingfulfilled despite the lapse of the same in accordance with the rulesgoverning delay or mora.2. Essential – which requires that the obligation be performedprecisely and exclusively at the time stipulated without there being apossibility of its being fulfilled

Effect of Term or Period Suspensive – demandable only upon the arrival of the day

certain or expiration of the term Resolutory – fulfillment is demandable at once but it is

extinguished or terminated upon the arrival of the daycertain or expiration of the term

Effect of Fortuitous EventThe stipulation that in the event of force majeure, the contract shallbe deemed suspended during the said period does not mean that thehappening of any of those events stops the running of the period thecontract agreed upon to run.

Art. 1194. In case of loss, deterioration or improvement of thething before the arrival of the day certain, the rules in article1189 shall be observed.

This is only applicable to obligations to give a determinate thing

Term/Period Condition

Interval of time whichis future and certain

requisites Refers to a fact orevent which is futureand uncertain

Interval of time thatmust necessarilycome, although it maynot be known when

fulfillment A future and uncertainfact or event that mayor may not happen.

Merely exerts aninfluence upon thetime of thedemandability orextinguishment of anobligation.

Influence onobligation

Exerts an influenceupon the veryexistence of theobligation itself.

No retroactive effectsunless there is anagreement to thecontrary.

Retroactiveeffects

Has retroactive effects

When a term or aperiod is leftexclusively to the willof the debtor, theexistence of theobligation is notaffected(potestative term orperiod)

Effect of will ofthe debtor

When a condition isleft on the exclusivewill of the debtor, theexistence of theobligation is affected(Void)(potestative condition)

Art. 1195. Anything paid or delivered before the arrival of theperiod, the obligor being unaware of the period or believingthat the obligation has become due and demandable, may berecovered, with the fruits and interests.

Effect of Advance Payment or Delivery-If obligor is unaware or believing that payment is due anddemandable, paid, or delivered something before the arrival of theperiod, he may recover what he has paid or delivered with fruits andinterest.

-apply on “to give”-If it is voluntary done or done with knowledge that it is not yet due,there can be no right to recover.-This is construed in relation to Solutio indebiti or payment of whatis not due.- This pertains to the recovery of thing or money itself, plus the fruitsor interest accruing from the moment of payment to the date ofrecovery

There is no recovery (Tolentino)1. When the obligation is reciprocal, and there has been premature

performance on both sides2. When the obligation is a loan on which the debtor bound to payinterest3. When the period is exclusively for the benefit of the creditor,because the debtor by paying in advance loses nothing

Art. 1196. Whenever in an obligation a period is designated, it ispresumed to have been established for the benefit of both thecreditor and the debtor, unless from the tenor of the same orother circumstances it should appear that the period has beenestablished in favor of one of the other.

Benefit of Term or Period

General Rule: When a period is designated for the performance orfulfillment of an obligation, it is presumed to have been established forthe benefit of both the creditor and the doctor. Presumption

Exception: If it be proved that either from the tenor of the obligation orfrom other circumstances that term has been established in favor ofthe creditor of the debtor

Term is for the benefit of both parties (Presumption)The creditor cannot demand payment and the debtor cannot make aneffective tender and consignation of payment before the periodstipulated.

Term is for benefit of creditor only (Exception)- Creditor may demand payment anytime, but the debtor cannotcompel him to accept payment before the period expires (e.g.:contract of loan where interest is stipulated)- Right to refuse any payment before the expiration of the term couldbe waived by acceptance of full or partial payment

Term is for benefit of debtor only (Exception)Debtor may oppose premature demand for payment, but may validlypay at any time before the period expires (e.g. contract of loan whereno interest is stipulated)

Why a creditor cannot be compelled to accept payment1. Tax avoidance

2. Interest income3. Safe investment (e.g. Protection against the sudden decline inthe purchasing power of the currency loaned)

Art. 1197. If the obligation does not fix a period, but from itsnature and the circumstances it can be inferred that a period wasintended, the courts may fix the duration thereof.The courts shall also fix the duration of the period when itdepends upon the will of the debtor.In every case, the courts shall determine such period as mayunder the circumstances have been probably contemplated bythe parties. Once fixed by the courts, the period cannot bechanged by them

Judicial term or period - when fixed by a competent court, the periodcan no longer be judicially changed (Art. 1197, par. 3). It becomes alaw governing the contract between the party.

General Rule: Courts are without power to fix period

Exceptions: When the Court may fix a period1. When the obligation does not fix a period, but from its nature andthe circumstances it can be inferred that a period was intended bythe parties2. If the duration of the period depends upon the will of the debtor3. If the debtor binds himself to pay when his means permit him todo so period.

Cannot be applied to:- Contracts for services in which no period was fixed by the

parties- Pure obligations

Steps/Nature of the Action1. Ask the court to fix the duration of the term or period2. If time elapsed, compel.

Effect of TermOnce the period has been fixed by the court, it becomes part of thecontract, and it cannot be subsequently changed or extended by thecourt without the consent of both the parties.

Two Ultimate Facts:1. Facts showing that a contract was entered into imposing on one ofthe parties an obligation in favor of the other2. Facts showing that the performance of the obligation was left tothe will of the obligor, or clearly showing or from which an inferencecan be reasonably drawn that a period was intended.

Art. 1198. The debtor shall lose every right to make use of theperiod: [IGIVA]

(1) When after the obligation has been contracted, hebecomes insolvent, unless he gives a guarantee orsecurity for the debt;

(2) When he does not furnish to the creditor theguaranties and securities which he has promised;

(3) When by his own acts he has impaired said guarantiesand securities after their establishment, and when

through a fortuitous event they disappear2, unless heimmediately gives new ones equally satisfactory;

(4) When the debtor violates any undertaking, inconsideration of which the creditor agreed to theperiod;

(5) When the debtor attempts to abscond.

Extinguishment of debtor’s Right to Period(1) When after the obligation has been contracted, hebecomes insolvent, unless he gives a guaranty or security for thedebt; insolvency needs no judicial declaration includes any case in which it would be impossible financially for

the debtor to comply with his obligations such insolvency must not be pre-existing; arose after the

constitution of the obligation if there is a guaranty or security for the debt, the debtor, in spite

of insolvency, does not lose his right to the period.

(2) When he does not furnish to the creditor the guaranties orsecurities which he has promised;

such failure renders the original obligation pure and withoutany condition, and consequently, the loan become due anddemandable.

(3) When by his own acts he has impaired said guaranties orsecurities after their establishment, and when through a fortuitousevent they disappear, unless he immediately gives new ones equallysatisfactory;

There is a difference between effects of impairment and effects ofdisappearance1. if the guaranty or security is impaired through the fault ofthe debtor, he shall lose his right to the benefit of the period;2. if it is impaired without his fault, he shall retain his right;3. if the guaranty or security disappears through any cause,even without the fault of the debtor, he shall lose his right to thebenefit of the period4. in either case of impairment or disappearance, the debtorwill not lose his right to period if he gives a new guaranty or securitywhich is equally satisfactory.

(4) When the debtor violates any undertaking, in considerationof which the creditor agreed to the period;

(5) When the debtor attempts to abscond. Mere attempt of the debtor disappear or run away from his

obligation.

Section 3 – Alternative and Facultative Obligations

Art. 1199. A person alternatively bound by different prestationsshall completely perform one of them. The creditor cannot be

2 Not grammatical or ordinary meaning but sense of “loss” as defined by law (Tolentino)

compelled to receive part of one and part of the otherundertaking. (1131)

Classification (CDAF)1. Conjunctive – all prestations must be performed to extinguish

obligation 2. Disjunctive – one or some prestations must be performed to

extinguish obligation 3. Alternative – debtor must perform one of several alternatives,

choice belongs to debtor UNLESS expressly given to creditor4. Facultative – one principal prestation but one or more

substitutes, choice belongs to DEBTOR ONLY*Absent the indication that it is facultative, the presumption isthat it is ALTERNATIVE because creditor would be at adisadvantage if the obligation is facultative. Facultative is neverpresumed.

Art. 1200. The right of choice belongs to the debtor, unless ithas been expressly granted to the creditor.The debtor shall have no right to choose those prestationswhich are impossible, unlawful or which could not have beenthe object of the obligation. (1132)

Concept:Alternative Obligation - obligation wherein various things are due,but the payment of one of them is sufficient, determined by thechoice which as a general rule belongs to the debtor (Luna)

Election by Debtor In alternative obligations, the debtor has the right to choose

the method of meeting the obligation, unless the creditor has expressly reserved that right to himself.

Election by Others The right to choose may be granted to the creditor. The choice may also be entrusted by the parties to a third

person.- Although this has not been expressly recognized, there is

no reason why it should not be allowed, since it is not contraryto law, morals, good customs, public order or public policy.

The grant must be expressed, it cannot be implied.

Exceptions/ Limitations on the Right to Choose by the Debtor (I-Ex-IOU-OP-PFB)

1. The debtor cannot choose part of one and part of the other undertaking.

a. The creditor cannot be compelled to receive part of one and part of the other undertaking. [Article 1199, paragraph 2 in relation to Article 1248]

b. There is a presumption of indivisibility 2. He loses the right to choose when the right of choice is

expressly granted to the creditor.c. The right of choice belongs to the debtor, unless

it has been expressly granted to the creditor.[Article 1200]

3. The debtor shall have no right to choose those prestationswhich are impossible, unlawful or which could not havebeen the object of the obligation. [Article 1200, paragraph

2]d. The presence of such undertaking does not

annul the obligation, it as an alternative one ifthere are other lawful and possible subjects.

e. Prestations which could not have been theobjects of the obligation refers to: prestations which turn out to be

different from what the parties supposed andwhich do not serve the purpose for which theobligation was contracted; prestations which are not yet due and

demandable; prestations which, by reason of

accident or some other cause, have acquireda new character distinct or different from thatcontemplated by the parties when theobligation was constituted.

4. The debtor shall lose the right of choice when among theprestations whereby he is alternatively bound, only one ispracticable. [Article 1202]

f. Applies to specific things onlyg. The obligation ceases to be alternative, and is

converted into a simple obligation to perform theonly practicable prestation.

h. The impossibility of the other prestations,however, must not be due to the creditor’s acts.For in such case article 1203 applies.

i. This article applies only when debtor has theright to choose.

j. In cases where creditor is granted the right tochoose, article 1205 will apply.

5. The debtor loses the right to choose if the period is fixed solely for the benefit of the creditor and that period has not arrived yet. (According to Sir Ulan )

k. 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. [Article 1196]

Art. 1201. The choice shall produce no effect except from thetime it has been communicated. (1133)

Notice of Selection or Choice (OWUT) - Maybe in any form provided it is sufficient to make the otherparty know that the election has been made. It is not subject toany form and may be made:

1. orally;2. in writing;3. tacitly;4. other unequivocal means

Tacit declaration may be seen (PAS):1. in the performance of the debtor who has the right tochoose; 2. in the acceptance of a prestation by a creditor when he hasthe right of selection; or3. when the creditor sues for the performance of theprestation.

N.B.1. When the debtor, to whom the right of choice pertains,performs one of the prestations with the intent to discharge theobligation, he is released because the selection made may beimplied in the fact of performance.2. Once the choice is made by the debtor (or by the creditor orby a third person as the case may be), the obligation ceases tobe alternative from the moment the selection has beencommunicated to the other party. From that moment, bothdebtor and creditor are bound by the selection. 3. A selection once made is binding on the person who makes it,and he will not therefore be permitted to renounce his choiceand take an alternative which was first opened to him.

Creditor’s Consent The law does not require the other party to consent to the

choice made by the party entitled to choose. A mere declaration of the choice, communicated to the

other party, is sufficient; it is a unilateral declaration of will.

Plurality of Subjects When there are various debtors or creditors, and the

obligation is joint, the consent of all is necessary to make theselection effective, because none of them can extinguish theentre obligation. If the obligation is solidary, and there is no stipulation to the

contrary, the choice by one will be binding personally upon him,but not as to the others.

Condition or Term The selection made by one party cannot be subjected by

him to a condition or term unless the other party consentsthereto.

When Choice is EffectiveThe choice made by the debtor shall produce legal effect only

from the time it is communicated to the creditor. Once the choice iscommunicated to the creditor, the debtor will no longer be permittedto renounce his choice and take an alternative whcih was first opento him (Reyes vs. Martinez, 55 Phil. 492).

N.B. 1. choice is made by the:

a. debtor - debtor shall communicate the choice to the creditor(D ----> C)b. creditor - creditor shall communicate the choice to the debtor(C ----> D)c. third person - third person shall communicate the choice toboth the debtor and the creditor (T ---> D and C)2. The making of a choice is NOT a right, but a DUTY. (Jurado)

Effect of Choice (LCI) The effect of notice of choice is to limit the obligation to the

object or prestation selected, with all the consequences which the law provides. The obligation is converted to a simple obligation to

perform the prestation chosen. Once the selection has been communicated, it becomes

irrevocable. Rationale: To allow a change in the selection after it has been communicated to the other party, is to expose the latter to damages arising from preparations he may make on the

assumption that the prestation selected is the one to be performed

Error as to the Obligation When the debtor performs one of the prestations, believing

that he has a simple obligation (an ignorance of thealternatives and on his right to choose), there is nodeclaration of the selection, nor a binding performance ofthe obligation. There is payment of what is not due, and thedebtor can recover the se, in accordance with theprovisions of the law on Quasi-Contracts.

Delay in the Making of ChoiceWho will make a selection when the entitled party to choose

delays in making his selection? The German Doctrine stated that the right to choose

passes automatically to the other party when there is delayon the part of the party entitled to choose. (according toTolentino, this is acceptable under our law)

Can the creditor enforce the obligation if the debtor has not yetmade his choice?

It is the debtor’s duty to select at the time when theperformance should be effected. If he does not do so, thecreditor cannot enforce the obligation. However, the choicecan be made by him (creditor) by applying the principle ofArticle 1167 on obligations to do. When the obligation consists of not doing, and

the obligor does what has been forbidden him, it shall be undone at his expense. [Article 1167]

The debtor in such case should be deemed to have waived his right to choose in favor of the creditor who may exercise such right.

Article 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one is practicable.

Obligation Becomes Simple

Debtor cannot choose impossible or unlawful prestations. Ifall the prestations, except one, are impossible or unlawful, it followsthat the debtor can choose and perform only that one. The obligationceases to be alternative, and is converted into a simple obligation toperform the only feasible or practicable prestation. Impossibility of theprestations must not be due to the creditor's acts, for in such case,Article 1203 shall apply. (Tolentino)

According to Luna, alternative obligation is converted into a simple obligation when (Cc-Cd-Op):

a. when the choice is made by the debtor is communicated to the creditor (8 Manresa 181)

b. when the choice has been given to the creditor and the latter's choice is communicated to the debtor (Article 1205)

c. when among the prestations whereby the debtor is alternatively bound, only one Is practicable (Article 1202)

Where Creditor may Choose

The article applies only when the debtor has the right to

choose. When the creditor is granted the right to choose, Article 1205will apply when only one prestation remains practicable, either through fortuitous event or due to the fault of the debtor.

Art. 1203. If through the creditor's acts the debtor cannot make achoice according to the terms of the obligation, the latter mayrescind the contract with damages.

Impossibility Due to the Creditor This article is based on the principles of justice. If through the creditor’s act the debtor cannot make a choice,

he may (RPR): rescind the contract with damages elect to perform that which remains if there is only one

prestation possible (Tolentino) elect those still remaining if several are still possible

(Tolentino) Reason for 2nd and 3rd: The rescission does not take place

automatically but at his option.

Example1. A contractor, for the consideration of P50,000, agreed to eitherbuild a house for X on the latter's residential lot, or construct a roadto his hacienda. X sells his residencial lot. Because of theimpossibility of the prestation to build the house, the contractor mayeither construct the road to the hacienda, or rescind the contract; inthe latter case, he may recoveras damages whatever profits he couldhave realized if he had constructed the house and received theconsideration of P50,000.

2. D obliged himself to paint the house of C or to paint C's car. Ifbefore the due date of the obligation, C sells his car, D can rescindthe obligation plus damages.

Art. 1204. The creditor shall have a right to indemnity fordamages when, through the fault of the debtor, all the thingswhich are alternatively the object of the obligation have beenlost, or the compliance of the obligation has becomeimpossible.

The indemnity shall be fixed taking as a basis the value of thelast thing which disappeared, or that of the service which lastbecame impossible.

Damages other than the value of the last thing or service mayalso be awarded. (1135a)

Effect of Loss of ObjectThis article applies to cases in which the debtor has the right to

choose (this is the General Rule). Article 1205 is applicable only when the right of choice belongs to creditor (exception).

Loss by Fault of the DebtorHe (debtor) will become liable for damages under the terms of this

article only when all the prestations become impossible through his fault.

a. Loss of all - The debtor shall pay the value of the thing lost, plusdamages. However, if all the things disappear at the same time, the debtor may choose the value of any of them, plus damages.

(Luna)b. Loss of some - The debtor may, without incurring any liability to

pay damages, deliver any of the remainder, or that which remains if only one subsists. (Luna)

Effect of Fortuitous Eventa. If all the prestations become impossible - the obligation is

extinguished, the debtor is not liable for damagesb. If one of the things is lost or one of the prestations cannot be

performed - the debtor must still comply with the obligation bydelivering or performing that which he shall choose from among the remainder

c. If all the things are lost except one - the debtor must still comply with delivering or performing that which remains

d. If one or more prestations due become impossible, leaving onlyone prestation which becomes impossible by fault of the debtor - debtor will be liable for damages, with the value of the last prestation as the basis.

Loss of some due to debtor's fault and the last thing due to fortuitous event

a. If some of the prestations become impossible by fault of debtor,and then the remaining prestation become impossible by fortuitous event - the debtor is liable under this article, but the basis of the damages will be the value of the last prestation which become impossible through the debtor’s fault.

N.B. From and after the loss except one of the various things, whether due to fortuitous event or the debtor's fault, the debtor shall lose the right of choice (Article 1202) and the obligation converted into a simple obligation. Hence, the loss of the last subsisting prestation due to a fortuitous event extinguishes the obligation. (Luna)

Example: D obliged himslef to give C a specific ring or a specific watch, or a specific radio. a. the ring, watch or radio are all lost due to fire and without the fault of D = obligation is extinguishb. the ring, watch and radio are lost in that order due to the fault ofD = D is obliged to pay the value of the radio plus damages

Art. 1205. When the choice has been expressly given to thecreditor, the obligation shall cease to be alternative from the daywhen the selection has been communicated to the debtor.Until then the responsibility of the debtor shall be governed bythe following rules:

(1) If one of the things is lost through a fortuitous event, heshall perform the obligation by delivering that which thecreditor should choose from among the remainder, orthat which remains if only one subsists;

(2) If the loss of one of the things occurs through the faultof the debtor, the creditor may claim any of thosesubsisting, or the price of that which, through the faultof 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 ofany one of them, also with indemnity for damages.

The same rules shall be applied to obligations to do or not to doin case one, some or all of the prestations should becomeimpossible.

Selection by the Creditor When the creditor has the right to choose, his selection

takes effect from the moment it is communicated to the debtor. Selection can be express or tacitThere is tacit selection when the creditor accepts a

prestation offered by the debtor, or brings an action for the enforcement of the prestations.

Effect of Creditor’s Delay The debtor will not incur delay in the performance of the

obligation, even if there is a definite period fixed.- Creditor is considered to have waived the period. There will be delay on the part of the debtor only

when the obligation has become a simple one by exercise of the creditor of his right to choose.

Creditor does not make his selection before the period fixed - debtor's duty to perform does not arise because the

particular prestation to be performed has not been determined

- creditor in such case must be considered in his own inactionto have waived the period

Art. 1206. When only one prestation has been agreed upon, butthe obligor may render another in substitution, the obligation iscalled facultative.

The loss or deterioration of the thing intended as a substitute,through the negligence of the obligor, does not render himliable. But once the substitution has been made, the obligor isliable for the loss of the substitute on account of his delay,negligence or fraud. (n)

Distinguished From Facultative

AS TO ALTERNATIVE FACULTATIVE

Contents ofthe obligation

There are various prestations all of which constitute parts of the obligation

Only the principal constitutes the obligation , the accessory being only a means to facilitate payment

As to compliance

May be complied with by the delivery of one of the objects or by the performance of one of the prestations which are alternatively due

May be complied with by the delivery of another object or by the performance of another prestation in substitution to that which is due.\

Nullity of prestation

The nullity of one prestation does not invalidate the obligation which is still in force with respect to those which have no vice.

The nullity of the principal prestation (i.e. when the object is unlawful or outside the commerce of man) invalidates the obligation.

Creditor can choose from the remainder

Creditor cannot demand the substitute even when this is valid.

Choice The right to choose may be given to the creditor

Only the debtor can choose the substitute prestation

Effect of Loss (fortuitous event)

Only the IMPOSSIBILITY OF ALL the prestations due without fault of the debtor extinguishes the obligation

Impossibility of the principal prestation is sufficient to extinguish the obligation, even if the substitute is possible.

Loss of substitute does not make debtor liable, unless substitution has been made

Effect of Loss (through fault)

The debtor is not liable if other prestations are still available.

If choice belongs to creditor, loss of one alternative gives rise to liability.

The debtor is liable

Loss of the substitute before substation does not render debtor liable

Nature of Facultative Obligation Defined as an obligation wherein only one object or prestation

has been agreed upon by the parties of the obligation, butwhich may be complied with by delivery of another prestationin substitution.

Characteristic feature- only one prestation is due,- But if the obligor fails to deliver such object or to

perform such prestation, he can still comply with thisobligation by delivering another object or performing anotherprestation in substitution.

Example: D obliged himself to give C a specific Rolex watchwith the understanding that D could give his diamond ring as asubstitute.

Loss of the Principal Thing Due to fortuitous event - the obligation is extinguished and the

debtor is not obliged to give the substitute Due to the debtor's fault - the debtor shall answer for the loss

of the thing due to his fault

Loss of Substitute Before the substitution is effected, it is not the prestation that

is due; only the principal prestation is due and enforceable bythe creditor at that time.

- whether due to fortuitous event of fault of the debtor:does not affect the debtor's liability to deliver theprincipal thing (Luna)

-If the substitute prestation becomes impossible dueto the fault or negligence of the debtor, the obligationis not affected and he cannot be held liable fordamages. (Tolentino)- Whatever may be the cause of impossibility of thesubstitute prestation is immaterial.

After the substitutiona. due to fortuitous event - obligation is extinguishedb. due to the debtor's fault - debtor shall be liable for theloss or deterioration of the substitute (on the account of hisdelay, negligence or fraud)

Simple Obligation a. concept - A simple obligation is anobligation where only oneprestation has been agreed upon (Luna)b. example - D obliged himslef to give C a specific car onOctober 4, 1976.

Compound or Conuctive Obligationa. concept - A compound or conuctive obligation is an obligationwherein various things are due and is extinguished only by theperformance of all of them (Luna)b. example - D obliged himself to give C on Oct. 4, 1976 a radioand a piano. To be able to extinguish his obligation D is obligedto give C on Oct. 4, 1976 both the radio and the piano.

When Substitution Takes Effect The rule with respect to alternative obligations can be applied

by analogy; that is, from the time the debtor communicates tothe creditor that he elects to perform the substitute prestation.

- From this moment, the substitute prestation is the onlyone that is due.

If the principal prestation thereafter becomes impossible,even by fortuitous event, the debtor would not be relieved butwould still be obliged to perform the substitute prestation thathe has chosen.

- His obligation has become a simple one to perform thesubstitute prestation, and he will be liable for damagesfor his delay, neglect or bad faith in the performance.

Section 4 – Joint and Solidary Obligations

Art. 1207. The concurrence of two or more creditors or of two ormore debtors in one and the same obligation does not implythat each one of the former has a right to demand, or that eachone of the latter is bound to render, entire compliance with theprestation. There is a solidary liability only when the obligationexpressly so states, or when the law or the nature of theobligation requires solidarity. (1137a)

Joint Obligation (mancomunada simple/ pro rata)- one in which each of the debtors is liable only for a proportionate part of the debt, and each debtor is entitled to only a proportionate part of the credit*example: A, B, and C jointly executed a promissory note worded as follows:

"We promise to pay to the order of X P9,000.(Sgd.) A, B, and C."

-A is liable for P3,000, B for P3,000 and C for P3,000.

Solidary Obligation (mancomunada solidaria/ joint and several or in solidum)- one in which each debtor is liable for the entire obligation, and eachcreditor is entitled to demand the whole obligation.

When Solidary ExistsGeneral Rule: The mere concurrence of two or more creditors or

two or more debtors in one and the same obligation does NOT imply solidarity.

Kinds of Solidarity (APM)a. Active - solidarity among creditors

*example: A obliged himself to pay P30,000 to solidary creditors B, C, anf D. Each of the creditors is entitled to demand

payment of the whole P30,000. Thus, B, or C, or D can demand payment of P30,000 from A.b. Passive - solidarity among debtors

*example: A, B and C executed a promissory note worded as follows:

"I promise to pay X or order the sum of P30,000.(Sgd.) A, B, and C."

- X is entitled to demand payment to demand the payment of P30,000 from A, or from B, or from C.c. Mixed - solidarity on the part of the creditors and debtors

*example: A, B, and C executed a promissory note worded as follows:

"We do hereby slidarily promise to pay to the order of solidary creditors L, M, and N the sum of P30,000.

(Sgd.) A, B, and C- L, or M, or N shall be entitled to demand payment of the whole P30,000 from A, or from B or from C.

Joint debtors - solidary creditors*example: A and B executed a promissory note worded as follows: "We promise to pay to solidary creditors C and D P10,000.

(Sgd.) A, B"- C or D as solidary creditors shall be entitles to demand payment of the whole P10,000 . But since t he debtors are bound jointly, C or D shall be entitled to demand payment of no more than P5,000 from A and another P5,000 from B.

Solidary debtors - joint creditors*example: A and B executed a promisory note worded as follows: "We do hereby solidarily promise to pay to the order of C and D P10,000.

(Sgd.) A, B"- As solidary debtors, A or B may be compelled to pay the whole P10,000. But since the creditors are bound jointly, C is entitled to demand the payment of P5,000 from A, or B and D is entitled to demand payment of the other P5,000 from A or B.

Art. 1208. If from the law, or the nature or the wording of theobligations to which the preceding article refers the contrarydoes not appear, the credit or debt shall be presumed to bedivided 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.(1138a)

Joint Obligationa. The debt shall be divided into as many equal shares as there are creditors or debtors, the credits on the debts being considered disticnt from each other. (Luna)b. In case of non-payment, only one action should be files in court. (Luna)

Presumption of Joint CharacterWhen two persons are liable under a contract or under

judgment, and no words appear in the contract or the judgment to make each liable for the entire obligation, the presumption is that their obligation is joint.3 Exceptions to the presumption (ELN):a. when the obligation expressly states that there is solidarityb. when the law requires solidarity

c. when the nature of the obligation requires solidarity

Effect of Joint Liabilitya. the demand by one creditor upon one debtor, produces the effects of default only with respect to the creditor who demanded and the debtor on whom the demand was made, but not with respect to others.

b. the interruption of prescription by the judicial demand of one creditor upon a debtor does not benefit the other creditors nor interrupt the prescription as to the other debtors. Similarly, partial payment or acknowledgment made by one of several joint debtors does not stop the running of the statute of limitations as to the others.

c. the vices of each obligation arising from personal defect of a particular creditor or debtor does not affect the obligation or rights of the others.

d. the insolvency of a debtor does not increase the responsibilityof his co-debtors, nor does it authorize a creditor to demand anything from his co-creditors.

e. in Joint Divisible Obligation (JDO)- the defense of res judicata is not extended from one

debtor to another. - nature of the obligation is susceptible to partial fulfillment

(Dean Ulan)- example: A and B jointly obliged themselves to give C the

sum of P60.00.

Art. 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt canbe enforced only by proceeding against all the debtors. If one ofthe latter should be insolvent, the others shall not be liable for his share. (1139)

Joint Indivisible Obligations (JIO) - Several debtors and creditors, but the prestation is indivisible, the obligation is joint, unless solidarity has been stipulated.- preserves the two characteristics of the joint obligation, in that no creditor can do an act prejudicial to others, and no debtor can be made to answer for the others. However, its fulfillment requires the concurrence of all the debtors although each for hispart. On the side of the creditors, collective action is expressly required for acts which may be prejudicial. - example: A and B jointly obliged themselves to give C a specific cow.

Effects on Creditors (according to Luna)a. To be able to compel performance of th eobligation, all the creditors should act collectively. A demand by one or some but less than all the creditors is not effective.

b. The right of the creditors may be prejudiced only by their collective acts.

- all creditors renounce the obligation: extinguished- renunciation made by one creditor w/o consent of the other: only the share of the former is extinguished; other creditors can no longer demand the delivery of the thing; obligation is converted into an obligation to pay its value

Effects on Debtors (according to Luna)a. The debt can be enforced only on proceedings against all the creditors. A demand against one or some but less than all the debtor/debtors against whom the demand has been made are not obliged to deliver the thing.

b. extinguish the obligation - payment should be made to all the creditors

c. if any of the debtors is insolvent - the other shall not be liable for his share

d. any of the debtors refuses to deliver the thing - obligation is converted into an obligation to pay the value of the thing

the value of the thing shall be shared by all debtors whole damages shall be borne by the debtor who

does not comply with this undertaking

Effect of breach - if one of the joint debtors fails to comply with his undertaking the obligation can no longer be fulfilled or performed. The obligation now is converted into one of indemnity for damages.

Effect of insolvency of a debtor - if one of the joint debtors shall beinsolvent, the others shall not be liable for his share.

N.B. Absence of stipulation of how much is the actual share of the debtors, the presumption is equal. (Dean Ulan)

Art. 1210. The indivisibility of an obligation does not necessarilygive rise to solidarity. Nor does solidarity of itself implyindivisibility. (n)

Indivisibility SolidarityAs to nature Prestation which

constitutes the objectof the obligation

Legal tie or vinculum to the subjects of the obligation

As to requisites Plurality of subjects isnot required

Plurality of subjects is indispensable

As to effect of breach

When the obligation is converted into one of indemnity for damages because of the breach, indivisibility of the obligation is terminated

When there is liability on the partof the debtors because of breach, the solidarity among the debtors remains

N.B. 1. according to Luna:a. solidarity does NOT imply indivisibility (An obligation may be divisible even if it is solidum) b. indivisibility does NOT imply solidarity (mere fact that the object of the obligation is not susceptible of partial performance does not mean that each of the debtor is liable for the entire obligation.)c. example of:

solidary divisible obligation: A and B solidarily obliged themselves to give C P50,000 on March 15,2011 and P50,000 on May 1, 2011.

solidary indivisible obligation: A and B solidarily

obliged themselves to give C a specific horse2. according to Dean Ulan

a. if one of the debtors refuses to deliver the thing, the other debtors cannot enforce the delivery (the obligation becomes divisible)b. refusal of the debtor to deliver the thing without just cause - liable for damages

Art. 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. (1140)

Kinds of solidarity (APM):a. Active solidarity - one that exists among creditors.Creation of a relationship of mutual agency among the solidary creditors by virtue of which each debtor is empowered to exercise against the debtor or debtors not only the rights which correspond to him, but also all the rights which correspond to the other creditors, with the consequent obligation to render an accounting of his acts to such creditor.

Juridical Effects:1. Since it is a reciprocal agency, the death of a solidary creditor doesnot transmit the solidary to each of his heirs but to all of them taken together.2. Each creditor represents the others in the act of receiving payment, and in all other acts which tend to secure the credit or make it more advantageous. Hence, if he receives only a partial payment, he must divide it among the other creditors. He can interrupt the period of prescription or render the debtor in default, for the benefit of all other creditors.3. One creditor, however, does not represent the others in such acts as novation, compensation and remission. In these cases, even if thedebtor is released, the other creditors can still enforce their rights against the creditor who made the novation, compensation or remission.4. The credit and its benefits are divided equally among them to divide differently. Hence, once the credit is collected, an accounting and distribution of the amount collected should follow.5. The debtor may pay to any solidary creditor, but if a judicial demand is made on him, he must pay only to the plaintiff.6. Each creditor may renounce his right even against the will of the debtor, and the latter need not thereafter pay the obligation to the former.

b. Passive solidarity - one that exists among debtors.Each debtor can be made to answer for the others, with the right on the part of the debtor-payor to recover from the others their respective shares. Similar to mutual guaranty.

Juridical Effects:1. Each debtor can be required to pay the entire obligation; but after payment, he can recover from the co-debtors their respective shares.2. The debtor who is required to pay may set up by way of compensation his own claim against the creditor, in this case, the effect is the same as that of payment.3. The total remission of debt in favor of a debtor releases all the debtors; but when remission affects only the share of one debtor, the other debtors are still liable for the balance of the obligation.4. All the debtors are liable for the loss of the thing due even if such loss is caused by the fault of only one of them, or by fortuitous event after one of the debtors has incurred delay.

5. The interruption of prescription as to one debtor affects all the others; but renunciation by one debtor of prescription already had does not prejudice the others, because the extinguishment of the obligation by prescription extinguishes also the mutual representationamong the solidary debtors.6. The interests due by reason of the delay of one of the debtors are borne by all of them.

c. Mixed solidarity- on the part of both creditors and debtors

N.B. According to Luna:Solidarity does NOT require that the parties be bound in the same manner. An obligation is solidary if the parties agreed or the law intended it to be in solidum. *example:

X, Y and Z solidarily onliged themselves to give C P15,000 according to the following terms:

X to pay on demand;Y, in 2012;Z, if C passes the CPA exam.

- Today, C can demand payment of P5,000, the share of X out of the P15,000, against X or Z. This is so because the shares of Y and Z have not yet matured. In 2012, C can demand P5,000, the share of Y against X and Z. The moment C passes the CPA exams, C may demand P5,000,the share of Z against any of the three debtors.

Art. 1212. Each one of the solidary creditors may do whatevermay be useful to others, but not anything which may beprejudicial to the latter.- consequence of the relationship of mutual agency existing among solidary creditors

Beneficial acts of the creditor (DIDS): may demand the obligation to one, some or all debtors; may interrupt prescription; constitute the debtor in default; or bring suit so that the obligation may produce interest.

Effect of beneficial act: if obligation has been performed, the other creditors will have the right to demand from the creditor who receivedthe payment the shares corresponding to them.

Prejudicial acts of the creditor:Remission is an act that is literally prejudice to the creditors, but it is authorized under Article 1215, along with novation, compensation, and merger or confusion.To harmonize:Art. 1212 = effect of the prejudicial acts among the creditors themselvesArt 1215 = effect of the prejudicial acts among the creditors and the debtor/s. *which are valid**Creditors have rights that subsist and can be enforced against the creditor who performed the act alone. (Tolentino)Effect of prejudicial act: indemnifying the other creditors for damages.

Mutual AgencySolidary obligation implies mutual agency. Hence, each one of the creditors may, even without the knowledge of the other, do whatever may be useful to them. Although prejudicial acts will produce legal effect and extinguish the obligation of the debtor, the same will not,

however, be valid against the creditors who did not give their consent. *example: D is indebted to solidary creditors A dn B for P10,000. Amay, even without the knowledge of B, demand the payment ofP10,000 because each one of the solidary creditors may do whatevermay be useful to the other creditors may do whatever may be usefulto the other creditors even without the knowledge of the latter. If w/othe knowledge of A, B remits the obligation, the obligation of D wouldbe extinguished, but B is obliged to give to A his share of P5,000.

Art. 1213. A solidary creditor cannot assign his rights without the consent of the others.- solidary creditor is an agent of the other creditors- mutual agency implies mutual confidence which may take into account the personal qualifications of each creditor

Effects of Unauthorized transfer:It is implied, that such cannot be made, and the co-creditors and debtors are not bound to recognize the assignment, and the assignee is not regarded as a solidary creditor.- payment to that assignee is considered a payment to a third person and will not extinguish the obligation- a suit filed by such assignee will not interrupt the prescription- the creditor-assignor still has a liability to his co-creditors for damages which may have been incurred by them as a result of the assignmentIf the assignment is made to a co-creditor, consent is not necessary because the mutual confidence from the other creditors already exist.

Art. 1214. The debtor may pay any one of the solidary creditors;but if any demand, judicial or extrajudicial, has been made byone of them, payment should be made to him.

Judicial Demand:Generally, each solidary creditor is a tacit mutual representative of each other in demanding payment. But, if one creditor sues the debtor/s, the tacit representation by the other creditors is considered revoked.

Creditors who did not sue will lose their representation of the others

A payment to the creditor/s who did not sue will be considered as payment to a third person, in so far as the shares of the others in the credit are concerned.

If payee did not turn the shares of the other creditors who demanded, the debtor can still be required to pay the creditor-plaintiff minus the share of the payee

The action, however, does not definitely eliminate the other creditors,but only during the time the effect of the actions exist. If action is dismissed, the other creditors may in turn sue the debtor.

Extrajudicial Demand:Demand made extrajudicial has the same effect as judicial demand interminating the mutual representation of among the solidary creditorsand making the creditor who demanded as the agency alone.Tolentino: If one creditor should make an extrajudicial demand, andthen takes no further step to enforce collection in court, all the othercreditors are barred forever from filing an action to demand paymentjudicially, and the debt may never be collected. In this case, suchsame effect is juridically erroneous and impractical.

If all or several creditors demand payment separately, the debtorshould pay the first one who notified him.

If they demand at the same time, or in a single action or written demand, the debtor preserves his right to choose whomever payment will be made by him

If partial payment has been made before the demand arises, thedebtor can pay the creditor the full obligation minus the obligation he already performed. To not do so will result in unjustenrichment.

In mixed solidarity, the debtors who were not demanded by the creditor to pay him can still pay the other creditors who did not make the demand.

Payment of Solidary ObligationGeneral Rule: payment to any one of the solidary creditor

extinguishes the obligation. If any demand has been made by any of the creditors, the debtor against whom the demand was made shouldpay only to that creditor. If he pays to any other creditor, the payment is not valid.

ExampleA and B are solidary indebted to solidary creditors C and D in

the amount of P10,000. A may pay P10,000 to C or D. However, if a demand is made only to A

Art. 1215. Novation, compensation, confusion or remission ofthe debt, made by any of the solidary creditors or with any ofthe solidary debtors, shall extinguish the obligation, withoutprejudice to the provisions of Article 1219.The creditor who may have executed the any of these acts, aswell as he who collects the debt, shall be liable to the others forthe share in the obligation corresponding to them.

Novation – extinguishment of an obligation by the substitution or change of the obligation by a subsequent which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the third rights of the creditor.

The solidary debtor may release the others by binding himself alone in their place in favor of the creditor. The debtor who effects the novation cannot, by himself, bind the other to a new debt without their consent.

Mere extension of time for payment given by the creditor to a solidarydebtor does not release the others from the obligation.*In suretyship: as sureties are bound in solidum, material alteration made by the creditor and the principal debtor, without the knowledge and consent of the sureties, completely discharges the sureties from all liability in the contract of suretyship.

An extension of time granted to the debtor by the creditor extinguishes the liability of the others, but where the sureties are liable for different payments, an extension of time with one or more will not affect the liability of the sureties for the others.

Dation in payment – the delivery of a specific object as a substitute for the performance of the obligation

if in a form of a promise, it amounts to a novation it should be treated as a payment, as it is essentially so

Compensation – a mode of extinguishment to the concurrent amount, the obligation of those persons who in their own right are reciprocally debtors and creditors of each other

Confusion – merger of qualities of creditor and debtor in one and thesame person with respect to one and the same obligationIf the compensation or confusion is partial, and there is doubt as to what part of the debt it should be applied, the rules on application of payments shall govern. If it is total, the obligation is extinguished, leaving the liability for reimbursement within each group.

Remission – is an act of pure liberality by virtue of which, the creditor, without having received any compensation or equivalent, renounces his right to enforce the obligation, thereby extinguishing the same either in its entirety or in the part or aspect thereof to which the remission refers.

When one creditor makes the remission = extinguishes the obligation to the extent which is made, but the creditor shall be liable to his co-creditors for their shares When several of the creditors make the remission = all will be liable for the shares of the creditors who did not remit, and if one is insolvent, his share shall be made up by the others who concurred in the remission. Remission covers the entire obligation = obligation is totallyextinguished, the entire juridical relation among the debtors is terminated altogether Remission in favor of the debtor, if partial = character as solidary debtor still remains Remission in favor of the debtor, if full = ceases to have any relation with the creditors, unless the continuation of his solidary relation has been expressly reserved. However he is still bound with respect to his co-debtors, in case of insolvency of one debtor, the released debtor still has to pay his share in the portion of the insolvent. He also cannot recover anything from his co-debtor, since remission is a gratuitous act.

* Rules with regards to the debtors shall not apply when the debt wasfully paid by anyone of the debtors before the remission was made.

Effects of the Acts: Between creditors and debtors – any of the acts will extinguish

the obligation, therefore no creditor may sue the debtor after such act

Between co-creditors – any act of them in extinguishing the obligation shall not prejudice the rights of the other creditors to recover their shares in the obligation to the creditor who effectedany of the acts mentioned.

Between co-debtors – the debtor whose obligation was extinguished cannot recover from his other co-debtors more than their respective shares in whatever he may have given up or lost as the consideration for the extinguishment of the obligation In total compensation, he can recover from the others their

respective shares in the obligation, since he has given his own credit to extinguish the obligation

In merger, if one co-debtor acquires the whole credit, he can still demand from the other debtors their respective shares

In remission, the debtor whose remission was made cannotrecover anything from the other debtors since he gives or loses nothing.

Art. 1216. The creditor may proceed against any one of thesolidary debtors or some or all of them simultaneously. Thedemand made against one of them shall not be an obstacle tothose which may subsequently be directed against the others,so long as the debt has not been fully collected.- the solidary debtors may be sued simultaneously in one suit or successively in different actions.- this article is not of public interest, therefore the parties may validly stipulate that the solidary debtors can only be sued simultaneously orprovide for the order in which the debtors may be sued individually.

Passive Solidarity and Suretyship:Similarities:

1. stands for some person2. after payment, may require that they be reimbursed

Distinctions:Solidary Debtor Surety

Liable not only for his co-debtor’s obligation, but also for his own

Liable only for his debtor’s obligation

Responsibility to co-debtor is primary

Responsibility to co-debtor is subsidiary

Extension of time given by the creditor would not release the solidary debtor

Extension of time given by the creditor would release a surety or solidary guarantor

Liability of Solidary Debtors: the creditors may bring an action against the debtors and

sureties, either alone or together with the principal debtor, even if the surety is not included in the first suit.

If the principal debtor is held in default, the surety is also held in default, since his obligation is as the same as the principal

Solidary co-debtor is not released from his liability even if the creditor brought an action against a co-debtor first, caused execution on the properties of such co-debtor, which was latervoluntarily relinquished due to a valid third-party claim

Judgment as Regards Creditors: If it is favorable to the creditor, it inures to the benefit of co-

creditors. If it is adverse to the creditor-plaintiff, it can be set up against

the other co-creditors in subsequent actions, unless it is foundedon a cause personal to the creditor-plaintiff in the first action.

Judgment as Regards Debtors: If it is favorable to the creditor-plaintiff, but the defendant-debtor

is insolvent, the other debtors can still be sued until the debt is fully paid. Judgment against one debtor cannot be enforced against the others; a new action is needed. A judgment renderedagainst several defendants can be revived against only one of them.

If it is favorable to the defendant-debtor, it amounts to an extinguishment of the obligation with respect to him, and it must necessarily inure to the benefit of the other co-debtors, except when the cause is personal to the defendant-debtor.

Art. 1217. Payment made by one of the solidary debtorsextinguishes the obligation. If two or more solidary debtors offerto pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors onlythe share which corresponds to each, with the interest for thepayment already made. If the payment is made before the debtis due, no interest for the intervening period may be demanded.When one of the solidary debtors cannot, because of hisinsolvency, reimburse his share to the debtor paying theobligation, such share shall be borne by all his co-debtors, inproportion to the debt of each.

*Payment – consists in the delivery of the thing or the rendition (rendering) of the service whish is the object of the obligation.*Interest – compensation for the use of borrowed money

Payment by a Solidary Debtor:- results in the release from liability of the other debtors to the creditor.- Where one of several persons who are sued upon a joint and several liability elects to pay the whole, such person may be properly substituted in the same action as plaintiff for the purpose of enforcingcontribution from his forme associates.- Gives birth to a right in favor of the paying debtor, and imposes on the other co-debtors the duty to pay him their shares in the discharged obligation.- The right of the paying co-debtor to be reimbursed is not based on the original obligation but upon the payment made by him, hence he is only entitled to claim from his co-debtors the share pertaining to each with interest on the amount advanced.

If partial payment has been made, the solidary debtor can only recover reimbursement from the co-debtor only in so far as hi payment exceeded his share of the obligation.

In reimbursement, when the solidary debtor pays the total obligation, the resulting obligation of the other co-debtors to reimburse him becomes joint.

If one, by insolvency, cannot pay his share in the reimbursement, the others, including the one who paid, shall bear such share proportionately.

Note: Kat and our other classmates said that since the article stated“in proportion to the debt of each”, the share of the insolvent shouldnot be divided equally among the remaining co-debtors, but shouldbe dependent in their share, in cases when each debtor is requiredto pay different amounts of debt. To get this, according to Rayn, weshould first add the shares of the remaining co-debtors, and after getthe proportion of each debtor based on the sum. For example, A, B,and C are solidary debtors to pay a total of $900,000. A will pay$400,000, B will pay $300,000, and C will pay $200,000. A paid thewhole amount already but B became insolvent. So add A and C’sshare first = 400,000+200,000=600,000. Then divide the shares fromthe sum, A=4/6 or 2/3 and C=3/6 or 1/3. Then apply it to B’s share,which is $300,000. A’s share=(2x300,000)/3=.200,000 and C’sshare=(1x300,000)/3=100,000. I’m not sure if this is really right but Ihope it helps. =)Art. 1218. Payment by a solidary debtor shall notentitle him to reimbursement from his co-debtors if such payment ismade after the obligation has prescribed or become illegal. (n) No reimbursement if:

Obligation PRESCRIBES Obligation becomes ILLEGAL (Law has been

passed, making such prestation illegal)

Prescriptive period of actions: Within 10 years (upon a written contract, upon an

obligation created by law) Within 6 years (upon an oral contract, upon a

quasi-contract) Within 4 years (upon an injury to the rights of the

plaintiff, upon a quasi-delict) The statute of limitations, however, may be

superseded or modified by a contract betweenparties.

Neither can a solidary debtor who pays the obligation which hasalready prescribed recover from the creditor has been paid by him

In other cases, where the obligation no longer exists, he canrecover from the creditor the amount paid, under the rules on quasi-contract.

Art. 1219. The remission made by the creditor of the sharewhich affects one of the solidary debtors does not release thelatter from his responsibility towards the co-debtors, in case thedebt had been totally paid by anyone of them before theremission was effected. (1146a)

To exempt the co-debtor whose part is thus subsequently remittedwill give way to fraud.

Any belated (delayed) remission by the creditor of the share of anyof the debtor has no effect on the internal relationships of the co-debtors.

A, B, C solidarily owe D P1,500.00. B paid the entireobligation. After which, D remitted the share of C. B cancollect P500.00 each from A and C even if the share of C inthe obligation had been remitted.

After the prior payment of the entire obligation, there is nothing toremit because the obligation has been extinguished.

A, B, C solidarily owe D P1,500.00. D remitted theshare of C. Thereafter, B paid the entire obligation. B cancollect P500.00 from A but not from C. However, B may askD to give back P500 which is the supposed-to-be share ofC.

What is the effect of the insolvency of anyone of the remainingdebtors?

In the above case, there are three views: The creditor should bear the loss due to insolvency. Thus, in theexample given the share of the insolvent debtor is P2,000, and eachof the other four debtors should contribute P500 to cover it. The P500due from the debtor whose share was remitted, is considered asincluded in the remission; hence, the debtor who paid the full balanceof P8,000 can recover the P500 from the creditor as a payment ofwhat is not true.

Tolentino: This view presumes that the creditor hasremitted more than the share of the debtor he hasfavoured; it is juridically unsound to consider a gratuitousact as extending beyond the intent of the grantor-creditor.The rule is that gratuitous acts should be restrictively

construed as to permit the least transmission of rights.

The remission of the share of the one of the debtors does notaffect his obligation to contribute to the share of an insolvent co-debtor. In other words, in the given example the debtor whose sharewas remitted must pay P500 to the debtor who paid the entirebalance of P8,000.

Tolentino: This view is justified by: In every solidarity, there is adual relationship—(1) the relation between the creditor and thedebtors; (2) the relation among the debtors themselves. When acreditor remits the share of any debtor, he can affect only the firstrelation, because he is totally a stranger to the second relation. Thisrelationship among the debtors is expressly governed by law in thelast paragraph of Art. 1217, which imposes on every co-debtor theduty of contributing to the share of the insolvent debtor. This is aprovision that does not affect the creditor, and no act of the creditorshould affect the relation to the debtors under it. the credit cannottherefore, by his act exempt any debtor from the obligation imposedby it.

The share of the insolvent must be divided only among the otherco-debtors, excluding the one whose share has been remitted. Inother words, the debtor who paid the whole obligation of P8,000, inthe example given, can recover only from the other two solventdebtors who shall reimburse one-third each of the amount paid to thecreditor

Tolentino: Like the first, this is also unacceptablebecause it makes the remission of the share ofone debtor increase the burden of the otherdebtors without their consent.

Art. 1220. The remission of the whole obligation, obtained byone of the solidary debtors, does not entitle him toreimbursement from his co-debtors. (n) There is nothing to be reimbursed because he did not not spendany money, the remission being a gratuitous act.

Art. 1221. If the thing has been lost or if the prestation hasbecome impossible without the fault of the solidary debtors, theobligation shall be extinguished.If there was fault on the part of any one of them, all shall beresponsible to the creditor, for the price and the payment ofdamages and interest, without prejudice to their action againstthe guilty or negligent debtor.If through a fortuitous event, the thing is lost or the performancehas become impossible after one of the solidary debtors hasincurred in delay through the judicial or extrajudicial demandupon him by the creditor, the provisions of the precedingparagraph shall apply. (1147a)

Application is limited to the case of non-performance because ofthe loss of the thing or impossibility of the prestation that is due—

Fortuitous event (debtor has no fault or delay)—obligation is extinguished

Fault of any of the debtor—all are liable becauseof their mutual agency

Fortuitous event (after a debtor has incurred in delay)—obligation is converted into obligation to pay indemnity,consisting of the price, damages and interest. The creditorcan recover such to any of the debtors, guilty or not. In theevent that the innocent debtor pays the indemnity, the guiltyshould reimburse him. The guilty debtor shoulders all theconsequences of the loss because of his fault and delay;hence, he cannot reimburse from the innocent ones theindemnity.

If the thing due was not lost, but there is merely a delay, fraud ornegligence on the part of one of the solidary debtors, all (includingthe innocent) debtors will share in the payment of the PRINCIPALprestation. The damages and interest imposed will be borne by theguilty debtor.

Art. 1222. A solidary debtor may, in actions filed by the creditor,avail himself of all defenses which are derived from the natureof the obligation and of those which are personal to him, orpertain to his own share. With respect to those which personallybelong to the others, he may avail himself thereof only asregards that part of the debt for which the latter are responsible.(1148a) Defenses available to a solidary debtor when sued by the creditor:

Defenses derived from the nature of theobligation—those which may contribute toweaken or destroy the vinculum juris existingbetween the debtor and creditor such aspayment, prescription, remission, statute offrauds, presence of vices of consent, etc.

Defenses personal to the debtor-defendant—maybe either total or partial; such as minority, insanityand others purely personal to him; if the personaltakes the form of special terms or conditionsaffecting his part of the obligation, he may utilizethem only with respect to his part, but he can stillbe sued for the portions not subject to the termsor conditions because he is solidary liable.

Defenses personal to the other solidary debtors—the debtor being sued may also set updefenses which are personal to the other solidarydebtors, whether such defenses affect thecapacity or consent of such debtors or only referto terms or conditions affecting their shares.

SECTION 5. - Divisible and Indivisible Obligations

Art. 1223. The divisibility or indivisibility of the things thatare the object of obligations in which there is only onedebtor and only one creditor does not alter or modify theprovisions of Chapter 2 of this Title. (1149)

A thing is considered indivisible when if divided intoparts, its value is diminished disproportionately. A thing isdivisible is when each one of the parts into which it isdivided forms a homogenous and analogous object tothe other parts as well as to the thing itself Kinds of division—

1. Qualitative - thing is not entirelyhomogenous ex. A and B are heirs of C.They agreed to divide their inheritanceas follows: to A – a house and lot homeappliances and to B – a rice field, a carand P10,000 cash.

2. Quantitative-thing divided ishomogenous; the parts themselves maybe separated ex. If the inheritance is arice field, the partition is by metes andbounds into equal parts.

3. Ideal—when the parts are not separatedin a material way, but there are assignedto several persons the undividedportions pertaining to them, as in co-ownership ex. suppose the car and therice field, in the first example, wereinherited by both A and B. As co-owners,their one-half shares in the car are notseparable in a material way but onlymentally. Similarly, before the land isactually divided between A and B, theyare merely co-owners, and neither oneof them can say that he is the absoluteowner of a specific portion thereof.

Divisible obligation—one which is susceptible ofperformance; the debtor can legally perform theobligation by parts and the creditor cannot demand asingle performance of the entire obligation Indivisible obligation—when it cannot be performed inparts Divisibility or indivisibility of the obligation—refers tothe performance of the prestation and not to the thingwhich is object thereof; it should not be confused withthe divisibility of the thing. The thing may be divisible, yetthe obligation may be indivisible.

Example: D obliged himself to deliver to B a specificcar on November 15. This obligation is indivisiblebecause it is not capable of partial performance. The carmust be delivered at one time as a whole.

Kinds of Indivisibility:

(1) Legal indivisibility – where a specific provision of law declares as indivisible, obligations which, by their nature, are divisible (Art. 1225, par.3)

(2) Conventional indivisibility – where the will of the parties makes as indivisible, obligations which, by their nature, are divisible (Art. 1225, par.3)

(3) Natural indivisibility – where the nature of the object or prestation does not admit of division, e.g., to give a particular car, to sing a song etc.

Where there is only one creditor and one debtor,the latter has to perform the obligation in its totality,whether or not the prestation is divisible. Unlessthere is an express stipulation to that effect, saysArticle 1248, the creditor cannot be compelledpartially to receive the prestations in which theobligation consists; and in accordance with Article1232, an obligation is not deemed paid unless thething or service in which the obligation consists hasbeen completely delivered or rendered, as the casemay be.

Art. 1224. A joint indivisible obligation gives rise toindemnity for damages from the time anyone of thedebtors does not comply with his undertaking. Thedebtors who may have been ready to fulfill theirpromises shall not contribute to the indemnity beyondthe corresponding portion of the price of the thing or ofthe value of the service in which the obligation consists.(1150)

Indivisible joint obligation—the object is indivisible butthe liabilities of the parties is joint

4. To enforce it, Article 1209 hasestablished the necessity of collectivefulfilment and the action must be againstall the debtors

Solidarity and indivisibility in obligations are NOTidentical; neither does one imply the other.

Solidarity IndivisibilityRefers to the vinculum andtherefore principally to the subjects of the obligation

Refers to the prestation of the object of the obligation

Requires plurality of subjects

Not required

Such solidarity remains even when there has been non-performance and the debtors become liable for damages

When the indivisible obligation is converted into one to pay damages, the reason for the indivisibility ceases to exist, and each debtor becomes liable for his part of the indemnity

The death of the debtor terminates the solidarity, which is not transmitted to the heirs

Affects the heirs of the debtor in that they remain bound to perform the sameprestation

If the obligation is solidary and indivisible, every debtoris liable for losses and damages, although those ready toperform can later recover from the guilty one.

Art. 1225. For the purposes of the preceding articles,obligations to give definite things and those whichare not susceptible of partial performance shall bedeemed to be indivisible.When the obligation has for its object the execution of acertain number of days of work, the accomplishment ofwork by metrical units, or analogous things which bytheir nature are susceptible of partial performance, itshall be divisible.

However, even though the object or service may bephysically divisible, an obligation is indivisible if soprovided by law or intended by the parties.

In obligations not to do, divisibility or indivisibility shall bedetermined by the character of the prestation in eachparticular case. (1151a)

True test of divisibility: whether the obligation issusceptible of partial compliance or not. Factors which determine whether an obligation isdivisible or not:

5. Will or intention of the parties(expressed or implied)

6. Objective or purpose of the stipulatedprestation

7. Nature of the thing8. Provisions of law affecting the prestation

In indivisible obligations, partial performance isequivalent to non-performance as confirmed by Article12333, which requires complete performance of theobligation, and Art. 12484, which forbids partial fulfilment,except—

9. Where the obligation has beensubstantially performed in good faith,the debtor may recover as is there hadbeen complete performance, minus thedamages suffered by the creditor (Art.1234)

10. When the creditor accepts performance,knowing its completeness, and withoutprotest, the obligation is deemed fullyperformed (Art. 1235)

Severable and Entire Obligations11.Divisible and indivisible obligations are

not necessarily identical to severableand entire contracts, respectively.Whether the contract is severable andentire depends in general upon the

3 Art. 1233. A debt shall not be understood to have been paidunless the thing or service in which the obligation consists hasbeen completely delivered or rendered, as the case may be.(1157)4 Art. 1248. Unless there is an express stipulation to thateffect, the creditor cannot be compelled partially to receivethe prestations in which the obligation consists. Neither maythe debtor be required to make partial payments.

However, when the debt is in part liquidated and inpart unliquidated, the creditor may demand and the debtormay effect the payment of the former without waiting for theliquidation of the latter. (1169a)

consideration to be paid, not upon itsobject

Severable EntireFeatures the consideration

is expressly or byimplication apportioned; the part to be performed by oneparty consists in several distinct and separate items, and the price is apportioned to each of them

consideration is single; when the consideration is entire and single, thecontract must be held to be entire, although the subject matter may be distinct and independent items

Effect ofIllegality

If one part is illegal, the part which is illegal is void and cannot be enforced, but that part which is legal is enforceable.

If a part is illegal, the whole contract is unenforceable. If, however, the parties have apportioned thedifferent considerations among the respective covenants, and such legal reciprocal considerations and covenants can be separated from the illegal, the legal onescan be enforced.

Effect ofnullity

If one of the undertakings is void becauseof its subject matter, but it is not illegal, then the valid covenants may be enforced, whether the contract is severable or not.

Statute offrauds5

- contractof sale ofchattels

Each sale for a price below the statutory limit is notaffected by the statute

The contract is affected by the statute and must be in writing

Statute offrauds-partial

delivery orpartial

payment

A part payment or part delivery of each item removesthat item from the statute, but the rest, if above the statutory limit of price, are still within the statute.

A part payment or part delivery will besufficient to removethe whole contract from the operation of the law.

Obligations deemed indivisible:1. Obligations to give definite things

Example: To give a particular electric fan; todeliver a specific house. Here, the obligation is

5

indivisible because of the nature of the subjectmatter.

2. Obligations which are not susceptible to partialperformanceExamples: To sing a song; to dance the tinikling.Here, the obligation is indivisible by reason of itspurpose which requires the performance of allthe parts. Is the obligation still indivisible if thereare more than one participant? The obligationbecomes divisible as far as the participants areconcerned, because it is capable of partialperformance.

3. Obligations provided by law to be indivisibleeven if thing or service is physically divisible.Examples: Under the law, taxes should be paidwithin a definite period. Although money isphysically divisible, the amount of tax payablemust be delivered in toto, not partially.

4. Obligations intended by the parties to beindivisible even if thing or service is physicallydivisible.Examples: The obligation of D to give P1,000.00to C on a certain date. Money is physicallydivisible but the clear intention here is for D todeliver P1,000.00 at one time and as a whole.

Obligations deemed divisible:1. Obligations which have for their object the

execution of a certain number of days of workExample: The obligation of D to paint the houseof C, the painting to be finished in 10 days.Here, the obligation need not be fulfilled at onetime.

2. Obligations which have for their object theaccomplishment of work by metrical units.Example: The obligation of D to make a table, 3feet wide and 5 feet long; the obligation of D andB to deliver 20 cubic meters of sand. But theobligation of D alone to deliver 20 cubic metersof sand is indivisible.

3. Obligations which by their nature are susceptibleof partial performanceExample: The obligation of D to teach“Obligations and Contracts” for one year in auniversity; the obligation of E to render 3 songnumbers in a program; the obligation of F to paya debt of P1,200.00 in 12 monthly installmentsof P100.00 but each prestation to pay P100.00is indivisible as it is to be delivered at one timeand in its totality.

Divisibility or indivisibility in obligations not to doIn negative obligations not to do, the character

of the prestation in each particular case shall determinetheir divisibility or invisibility.

Obligations to do and not to do are generallyinvisible. Obligations to do stated in paragraph 2 ofArticle 1225 of are divisible.

Obligations and Contracts ReviewerF-r-1-e-n-d-s (1-E, 2010-2011)

24

Section 6- Obligations with a Penal Clause

Principal Obligations- one which can stand byitself and does not depend for its validity andexistence upon another Obligation.

Accessory Obligation- one which is attached to aprincipal obligation and, therefore, cannot standalone.

Example: X promises to deliver to Y a specifichorse. (Principal Obligation) In case of non-fulfillment, X shall pay a penalty of 100,000.00php. (Accessory Obligation)

***The accessory obligation to give the payment of thepenalty of 10,000 php cannot stand alone. X cannot justpay the penalty. This obligation is attached to thefulfillment principal obligation which is to give the specifichorse.****

Penal Clause- is an accessory undertakingattached to an obligation to assume greater liabilityin case of breach (non-fulfillment, partly fulfilled orirregularly complied with)

PENAL CLAUSE VS CONDITION

Penal Clause ConditionStill constitutes an obligation (to give or todo)

Not an obligation

Demandable in defaultof the unperformed obligation and sometimes jointly with it

Never Demandable

Obligation with a Penal clause is one whichcontains an accessory obligation attached tothe principal obligation, which imposes anadditional liability or an accessory undertakingto pay a previously stipulated indemnity in caseof breach of the principal obligation.

***It pushes the debtor to perform his obligationfaithfully and without delay – within the periodagreed upon, or else, he suffers a fixed civil penaltywithout need of proving the damages of the otherparty***

***Measure beforehand the damages which would resultfrom non-compliance

PURPOSE OF PENALTY

1. Funcion coercitivao de grantia- insureperformance of obligation by creating aneffective deterrent against breach, makingthe consequences of such breach onerousas it may be possible. (Yulo vs. Chan Pe,101 Phil. 134) This is the general purposeof a penal clause.

2. Funcion liquidatoria- to liquidate theamount of damages to be awarded to theinjured party in case of breach of theprincipal obligation. (compensatory)

3. Funcion estrictamente penal- in certainexceptional cases, to punish the obligor incase of breach of principal obligation orviolation of his obligation (punitive)

KINDS OF PENALTY (penal clause)

1. As to its origin:a. Legal- penalty provided by lawb. Conventional- provided for by

stipulation of the parties2. As to its purpose:

a. Compensatory- penalty takes the place of damages in case of breach

b. Punitive- penalty imposed merely as punishment for breach

3. As to effect or demandability:a. Subsidiary or alternative- when

only the penalty can be enforced ordemanded

b. Joint or Cumulative- when both the principal obligation and the penal clause can be enforced or demanded

Art. 1226. In obligations with a penal clause, thepenalty shall substitute the indemnity for damagesand the payment of interests in case ofnoncompliance, if there is no stipulation to thecontrary. Nevertheless, damages shall be paid if theobligor refuses to pay the penalty or is guilty offraud in the fulfillment of the obligation.

The penalty may be enforced only when it isdemandable in accordance with the provisions ofthis Code. (1152a)

Obligations and Contracts ReviewerF-r-1-e-n-d-s (1-E, 2010-2011)

25

GR: PENALTY: as compensation or substitute for damages.

XPN: PENALTY: as punitive a form

GR: The penalty imposable is a substitute for the indemnity for:

1. Damages (reparation) damages not needed; in case of

breach, the stipulated indemnity or prestation represents a legitimate estimate made by the contracting parties.

2. payment of interest in case of breach of obligation (compensation)

*** unless the contrary is stipulated

XPN: Damages or interests and penalty in case of breach may be recovered from the following acts:

1. If the debtor refuses to pay the penalty2. If the debtor is guilty of fraud in the

fulfillment of the obligation3. If there is express stipulation that the

other damages or interests are demandable to the penalty in the penal clause (purpose: to punish the obligor)

ENFORCEABILITY OF PENALTY

1. Penalty becomes demandable upon breach.

2. Penalty must not be contrary to laws, morals, good customs, public order or public policy

3. ***In Reciprocal Obligation- non compliance of parties although breach is not willful like due to fortuitous event:penal clause cannot be invoked***

Penalty substitutes for damages and interestsAs a general rule, in an obligation with a penal

clause, the penalty takes the place of the indemnityfor damages and the payment of interests in caseof non-compliance (Art. 1226). Proof of actualdamages suffered by the creditor is not necessaryin order that the penalty may be enforced.

When creditor may recover damagesThe creditor, in addition to the penalty, may

recover damages and interests:(1) When so stipulated by the parties;(2) When the obligor refuses to pay the

penalty, in which case the creditor mayrecover legal interest thereon; or

(3) When the obligor is guilty of fraud in thefulfilment of the obligation, in which casethe creditor may recover damages causedby such fraud.

Example: D promised to construct a house forC. The contract carried a penal clause that incase of non-compliance, X would have to pay apenalty of P50,000.00. X did not construct thehouse and, as a consequence, Y suffereddamage in the amount of P40,000.00.

In this case, the penalty of P50,000.00 shallbe paid. Y cannot recover more thanP50,000.00, the penalty stipulated, even if heproves that the damages suffered by him isP60,000.00.

The penalty substitutes the indemnity forthe damage P40,000.00, unless there is astipulation to the contrary, in which case Y mayalso recover the damages proved by him.If X refuses to pay the penalty, Y may recover

legal interest thereon, the interest representing newdamages brought about by the non-payment of thepenalty.

If X is guilty of fraud (not mere fault) in thefulfilment of his obligation, he is also liable for thedamages caused thereby in conformity with Article1171. Proof of the fraud and the existence andamount of damages is incumbent upon Y. But Yneed not prove fraud to recover the penalty.

When penalty may be enforcedThe penalty may be enforced only when it is

demandable in accordance with the provisionsof the Civil Code. This means that the penalty,as a stipulation in a contract, is demandableonly if there is a breach of the obligation and itis not contrary to law, morals, good customs,public order, or public policy. (Art. 1306)

Obligations and Contracts ReviewerF-r-1-e-n-d-s (1-E, 2010-2011)

26

Thus, if the obligation cannot be fulfilleddue to a fortuitous event, the penalty is notdemandable. Under Article 1229, the penaltymay be reduced if it is iniquitous orunconscionable or in case there is partial orirregular fulfillment.

PENALTY NOT ENFORCEABLE:

1. Impossible performance of principal obligation due to fortuitous events

2. Creditor prevented the debtor from fulfilling the obligation

3. Penalty is contrary to good morals or good customs

4. Both parties are guilty of breach of contract

5. Breach of contract by the creditor

6. None of the parties committed any willful or culpable violation of the agreement

Art. 1227. The debtor cannot exempt himself fromthe performance of the obligation by paying thepenalty, save in the case where this right has beenexpressly reserved for him. Neither can the creditordemand the fulfillment of the obligation and thesatisfaction of the penalty at the same time, unlessthis right has been clearly granted him. However, ifafter the creditor has decided to require thefulfillment of the obligation, the performance thereofshould become impossible without his fault, thepenalty may be enforced. (1153a)

LIMITATION UPON RIGHT OF CREDITOR

GR: Debtor can’t exempt himself from theperformance of the principal obligation bypaying the stipulated penalty

XPN: Right EXPRESSLY RESERVED for him tosubstitute penalty for the principal obligation

***An obligation with penalty clause cannot

be turned to facultative obligation unless expressly

stipulated in the contract.***

LIMITATION UPON RIGHT OF CREDITOR

GR: Creditor can’t demand fulfillment ofprincipal obligation and satisfaction of thestipulated penalty at the same time.

XPN:

1. when the creditor was CLEARLY given/ GRANTED the right to enforce both the principal obligation and penalty

2. When the creditor has demanded fulfillment of the obligation but cannot be fulfilled due to: debtor’s fault – creditor may

demand for penalty and damages

without creditor’s fault – he can demand the penalty

***if creditor chooses penalty he cannot afterwards demand fulfillment of principal obligation.

Example: S is required to deliver to B certain products; otherwise, he shall pay a penalty in the amount of P10,000.00. Under the above article, S cannot just pay the penalty as a

Obligations and Contracts ReviewerF-r-1-e-n-d-s (1-E, 2010-2011)

27

substitute for non-compliance of the principal obligation except when he is expressly given the right by B to do so.

Penal Clause presumed subsidiary

General Rue: The creditor cannot demandthe fulfillment of the obligation and thesatisfaction of the penalty at the same time. Theprimary purpose of penalty is to urge the debtorto the performance of the main obligation.

(1) Where there is performance – no needfor demanding the penalty. Theexception arises when “this right hasbeen clearly granted” the creditor.Under Articles 1227, therefore, thegeneral rule is that a penal clause issubsidiary and not joint.

(2) Where there is no performance – thecreditor may ask for the penalty orrequire specific performance. Theremedies are alternative and notcumulative nor successive, subject tothe exception that the penalty may beenforced if after the creditor hasdecided to require fulfillment, the sameshould become impossible without hisfault. If there was fraud on the part ofthe debtor, the creditor may recover thepenalty as well as damages for non-fulfillment.

When Penal Clause is Joint

The debtor has the right to pay penalty inlieu of performance only when this right hasbeen expressly reserved for him. With respectto the creditor, he has the right to demandperformance and payment of penalty jointlywhen this right has been clearly granted him. Itis, therefore, not required that this right beexpressly reserved for him; an implied grantclearly deducible from the evidence or thenature of the obligation is sufficient.

Art. 1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. (n)

PROOF OF ACTUAL DAMAGE

Applicable on to Penal Clause which are ascompensation or substitute for damages orpayment of interest.

GR: Proof of Actual damages not needed in order for penalty to be demanded.

XPN: Stipulated penal clause as a punitive form-damages besides penalty still subsist. Actual proof for damages needed in case of:

1. If the debtor refuses to pay the penalty2. If the debtor is guilty of fraud in the

fulfillment of the obligation3. If there is express stipulation that the

other damages or interests are demandable to the penalty in the penal clause

Art. 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 penaltymay also be reduced by the courts if it is iniquitous or unconscionable. (1154a)

JUDICIAL REDUCTION OF PENALTY

1. When there is partial or irregular performance-

partial- refers to the extent of the fulfillment which not all prestations are complied.

Obligations and Contracts ReviewerF-r-1-e-n-d-s (1-E, 2010-2011)

28

irregular- refers to the manner by which all prestations but not in accordance to the tenor.

2. When the penalty agreed upon is iniquitous or unconscionable - even if there was no performance at all. In the court’s sound discretion to determine if amount should be reduced because of excessiveness.

INIQUITOUS OR UNCONSCIONABLE – when it is revolting to the conscience or common sense; grossly disproportionate to the damages suffered.

Judge’s power to reduce penalties are limited to private contracts.

Art. 1230. The nullity of the penal clause does notcarry with it that of the principal obligation.

The nullity of the principal obligation carries with itthat of the penal clause. (1155)

PRINCIPAL OBLIGATION VOID = PENAL CLAUSE ALSO VOID

If the principal obligation is void itnecessarily follows that the penal clauseis also void- as the penal clause is onlyan accessory obligation.

PENAL CLAUSE VOID = PRINCIPAL OBLIGATION NOT NECESSARILY VOID.

GR: The accessory follows the principaland not vice versa. If only penal clauseis void, the principal obligation is stillvalid and demandable. The penal clauseis just disregarded. The injured partymay recover indemnity for damages incase of non-performance of theobligation as if no penalty had beenstipulated (art. 170)

------ END -----