OBLIGATIONS SYLLABUS

A. GENERAL PROVISIONS
I. Definition
II. Elements of an Obligation
III. Sources of Obligations

B. NATURE AND EFFECTS OF OBLIGATIONS

I. Obligation to Give
II. Obligation to Do or Not to Do
III. Transmissibility of Obligations
IV. Performance of Obligations
V. Breaches of Obligations
VI. Remedies Available to Creditor in Cases of Breach

C. KINDS OF OBLIGATIONS
I. Pure
II. Conditional
III. Obligations with a Period or a Term
IV. Alternative or Facultative Obligations
V. Joint and Solidary Obligations
VI. Obligations with a Penal Clause
A. GENERAL PROVISIONS

I. DEFINITION
Obligation
- A juridical necessity to give, to do or not to do. (An Act to Ordain and
Institute the Civil Code of the Philippines [CIVIL CODE], Republic
Act No. 386, art. 1156 (1950)

II. ELEMENTS OF AN OBLIGATION

Essential Elements an Obligation (Arts. 1156 – 1162) (PAVO)

1. Passive Subject (obligor/debtor): the person who has the duty of giving,
doing or not doing; person bound to the fulfillment
2. Active Subject (obligee/creditor): the person in whose favor the
obligation is constituted; person entitled to make a demand

3. Vinculum Juris/ Legal Tie: the efficient cause or the juridical tie between
two subjects by reason of which the debtor is bound in favor of the creditor
to perform the obligation. It can be established by various sources of
obligations (law, contract, quasi-contracts, delicts, and quasi-delicts) and
may arise either from bilateral or unilateral acts of persons.

4. Object/ Subject Matter: the prestation or conduct which has to be

observed by the debtor/obligor; to be valid, it must be:

(LiPoDeM):
- Licit
- Real or Possible
- Determinate/ Determinable
- Must be within the commerce of men (i.e. susceptible of appropriation
and transmissible from one person to another)

In certain kinds of obligations, the following may constitute additional

requirements:

5. Form: in formal contracts where form is necessary for validity, e.g.,

donation

6. Delivery or Tradition: real contracts where delivery is necessary for

perfection of the obligation, e.g., Pledge

III. SOURCES OF OBLIGATIONS

Obligations arise from: (L-CQAQ)

1. Law;

2. Contracts;
3. Quasi-contracts;
4. Acts or omissions punished by law; and

5. Quasi-delicts (CIVIL CODE, art. 1157)

Note: The list is exclusive.
1. LAW (OBLIGATION EX LEGE)
- The law cannot exist as a source of obligations, unless the acts to which its
principles may be applied exist.
- Once the acts or facts exist, the obligations arising therefrom by virtue of
the express provisions of the law are entirely independent of the agreement
of the parties.

- It must be expressly or impliedly set forth and cannot be presumed.

2. CONTRACTS (OBLIGATION EX CONTRACTU)

- Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith. (CIVIL
CODE, art. 1159)

- Parties may freely enter into any stipulations provided they are not
contrary to law, morals, good customs, public order or public policy. (CIVIL
CODE, art. 1306)

- The terms of the contracts determine the respective obligations of the

parties. If the terms of the contract are clear and leave no doubt upon the
contracting parties’ intention, such terms should be applied in their literal
meaning. (CIVIL CODE, art. 1370)

- Neither party may unilaterally evade his obligation in the contract, unless
the contract authorizes it or the other party assents.

C. QUASI-CONTRACTS (OBLIGATION EX QUASI-CONTRACTU)

- Juridical relations resulting from lawful, voluntary and unilateral acts,
which has for its purpose, the payment of indemnity to the end that no one
shall be unjustly enriched or benefited at the expense of another. (CIVIL
CODE, art. 2142)

Distinguished from other Sources (LUV)

1. The act giving rise to a quasi-contract must be Lawful distinguishing it
from delict;

2. The act must be Voluntary distinguishing it from a quasi-delict which is

based on fault or negligence; and

3. The act must be Unilateral distinguishing it from contract which is based

on agreement.

Kinds of quasi-contract
a) Negotiorum Gestio - is the voluntary management of the property or
affairs of another in times of emergency without the owner’s authority.
(CIVIL CODE, art. 2144)
Obligation created: Return of the property by the officious manager to the
owner once the emergency ceases, and for the owner to reimburse expenses
incurred by the officious manager. (CIVIL CODE, art. 2150)

b) Solutio Indebiti - is the juridical relation, which is created when

something is received when there is no right to demand it and it was
unduly delivered through mistake. (CIVIL CODE, art. 2154)

Obligation created: Recipient to return the property delivered through

mistake.

c) Other cases of quasi-contracts (CIVIL CODE, art. 2164-2175)

Note: The Civil Code provides [the above- mentioned] enumeration of
quasi-contracts, but the list is not exhaustive and merely provides examples.

Solutio indebiti vs. Natural obligations

- In natural obligations, the person making the payment or delivery knows
that he has no legal obligation to pay or to deliver but still voluntarily
makes such payment or delivery.

- For this reason, once payment or delivery has been made, there is no right
to ask for the return. (CIVIL CODE, art. 1423)

- In solutio indebiti, the payment or delivery is made on the basis of a

mistake, hence the recipient has the legal obligation to return. (CIVIL CODE,
art. 2154)

D. DELICTS (OBLIGATION EX MALEFICIO OR EX DELICTO)

- Every person criminally liable for a felony is also civilly liable. (An Act
Revising the Penal Code and Other Penal Laws [REVISED PENAL CODE],
Act No. 3815, art. 100 (1932))
- Such civil liability is a necessary consequence of criminal responsibility,
and is to be declared and generally enforced in the criminal proceeding

EXCEPT where:
(a) the injured party reserves his right to avail himself of it in a distinct civil
action or

(b) in cases where an independent civil action is allowed by law. (CIVIL

CODE, art. 33; 2000 REVISED RULES OF CRIMINAL PROCEDURE, rule
110, Section 1)

Scope of civil liability

1. Restitution
2. Reparation for damage caused
3. Indemnity for consequential damages

(REVISED PENAL CODE, art. 104)

Effect of acquittal in criminal case
General Rule: The acquittal of the accused in the criminal case due to the
prosecution’s failure to prove guilt beyond reasonable doubt does not
prejudice the civil action, in which the offended party may still be able to
recover damages by a mere preponderance of evidence. (CIVIL CODE, art.
29)

Exception: Where the judgment of acquittal contained a declaration that no

negligence can be attributed to the accused and that the fact from which the
civil action might arise did not exist.

Extinguishment of liability
The civil liability for crimes is extinguished by the same causes provided by
the Civil Code for the extinguishment of other obligations. (RULES OF
CIVIL PROCEDURE, rule 4, § 4)

Note: Death of the accused during the pendency of the case can extinguish
the civil liability if the same arose directly from the crime committed.

However, this does not apply if civil liability can be based on another source
of obligation (i.e., law on human relations).

E. QUASI-DELICT/TORTS (OBLIGATION EX QUASI-DELICTO OR EX

QUASI MALEFICIO)
- It is an act or omission arising from fault or negligence, which causes
damage to another, there being no pre-existing contractualrelations between
the parties. (CIVIL CODE, art. 2176)

Elements: (ADD)
1. That there exists a wrongful Act or omission imputable to the defendant
by reason of his fault or negligence;

2. That there exists a Damage or injury, which must be proved by the person
claiming recovery;

3. That there must be a Direct causal connection or a relation of cause and

effect between the fault or negligence and the damage or injury; or that the
fault or negligence be the cause of the damage or injury. (CIVIL CODE, art.
2176)

Negligence: Failure to observe for the protection of the interests of another

person, that degree of care, precaution and vigilance, which the
circumstances justly demand, whereby such other person suffers injury.

Test of Negligence: “Would a prudent man, in the position of the person to

whom negligence is attributed, foresee harm to the person injured as a
reasonable consequence of the course about to be pursued?”

Quasi-delict as a cause of action despite a pre-existing contractual relation

General Rule: Actions based on breach of contract and actions based on
quasi-delicts differ in terms of conditions, defenses, and proof. They cannot
co-exist.

Exceptions:
1. When such a contractual relation exists, the obligor may break the
contract that the same act which constitutes a breach of the contract would
have constituted the source of an extra-contractual obligation, had no
contract existed between the parties

2. If the act that breaks the contract may also be a tort.

Note: When the obligation is based on a contract, without which the
obligation does not exist, the cause of action must be founded on the breach
of contract and cannot be based on quasi-delict.

————- end of topic ————-

B. NATURE AND EFFECTS OF OBLIGATIONS

I. DUTIES OF A DEBTOR IN AN OBLIGATION TO GIVE 1. To

give a determinate thing (CIVIL CODE, arts. 1163, 1164 & 1166) (a)
To deliver the thing itself; (CIVIL CODE, art. 1163)

(b) To preserve or take care of the thing due with the diligence of a good
father of a family (i.e., that standard of care which an owner would give to
his own property), unless the law requires or the parties agree otherwise;
(CIVIL CODE, art. 1163)

- The law or contractual stipulation may require a different degree of

diligence: greater or extraordinary diligence (diligentia exactissima),
or less or slight diligence (diligentia levissima).

(c) To deliver fruits, whether civil, industrial, or natural fruits (obligor is

liable for fruits only from the time the obligation to deliver arises); and

(d) To deliver accessions and accessories (CIVIL CODE, art. 1166)

• Accessions – incorporated or attached to the object to form part of the

principal.

• Accessories – added for completion, use perfection or embellishment.

2. To give a generic thing (CIVIL CODE, arts. 1246 & 1170) (a) To deliver
the thing of the quality intended by the parties, taking into

consideration the purpose of the obligation, intent of the parties, and other
circumstances. (CIVIL CODE, art. 1246)

(b) To pay damages in case of breach of the obligation. (CIVIL CODE, art.
1170)

II. RIGHTS OF A CREDITOR IN AN OBLIGATION TO DO OR NOT

TO DO

1. To do (Positive Personal)

(a) The obligee is entitled to have the thing done in a proper manner, by
himself or by a third person, at the expense of the obligor;

(b) To demand what has been poorly done be undone;

(c) To recover damages because of breach of the obligation. (CIVIL CODE,
art. 1167)

2. Not to do (Negative Personal)

(a) To have the thing undone at the expense of the obligor; and/or
(b) To ask for damages. (CIVIL CODE, art. 1168)

PERSONAL RIGHT REAL RIGHT

Jus ad rem, a right enforceable Jus in re, a right enforceable

only against a definite person or against the whole world
group of persons

Right pertaining to a person to Right pertaining to a person over a

demand from another, as a definite specific thing, without a definite
passive subject, the fulfillment of passive subject against whom the
the prestation to give, to do or not right may be personally enforced
to do.
 III. TRANSMISSIBILITY OF OBLIGATIONS
General Rule: All rights acquired in virtue of an obligation are generally
transmissible (CIVIL CODE, art. 1178)

Exception: Rights acquired in virtue of an obligation are NOT transmissible

when:

1. Prohibited by law

Examples:
(a) Contract of partnership (CIVIL CODE, art. 1767)
(b) Contract of agency (CIVIL CODE, art. 1868)

(c) Contract of commodatum (CIVIL CODE, art. 1933)

2. Prohibited by stipulation of the parties, as long as it is not contrary to
public policy.

3. The obligation is purely personal in nature— when the obligor’s personal

qualifications and skill was the motive behind the contract.

IV. PERFORMANCE OF OBLIGATIONS

The obligation arises:

1. Pure obligation: Upon demand (CIVIL CODE, art. 1179)
2. Obligations with Suspensive Condition:

General Rule: Only from the time the condition is fulfilled, but the
obligation retroacts to the day of its constitution. (CIVIL CODE, art. 1187)
Exception: Regarding fruits and interests in reciprocal obligations (even if
the two reciprocal obligations are not of the same value), the parties are
deemed as mutually compensated during the pendency of the condition.

Thus, there is no liability to account for fruits and interests in reciprocal

obligations. For unilateral obligations, the debtor shall appropriate the fruits
and interests received, unless it was intended otherwise.

3. Obligations subject to a Suspensive Period: There is no similar provision

as Article 1187, hence there are 2 schools of thought: (1) from perfection,
since there is already an obligation from the date the obligation is perfected,
and only the performance or delivery is suspended until the arrival of the
period, and (2) same as a suspensive condition, from date the period arrives.

4. Obligations subject to a Resolutory Condition/Period:

- No obligation to deliver fruits since performance or delivery is immediate,
subject to its resolution upon the happening of the condition/period. (CIVIL
CODE, art. 1187)

V. BREACHES OF OBLIGATIONS
Causes of Breach

1. Incidental Fraud (Dolo incidente)

2. Negligence (Culpa)
3. Default / Delay (Mora)
4. Contravention of Terms (CIVIL CODE, art. 1170)
There is breach when the obligor fails without legal excuse (such as
fortuitous events) to perform any promise, which forms the whole or part of
an obligation.
BREACH BREACH FORTUITOUS
ARISING ARISING EVENT
FROM DOLO FROM CULPA

Scope of Liable for all Liable only for No liability

liability consequences of Those –
act, whether foreseen, or Unforeseen or
foreseen or could have even if foreseen,
unforeseen foreseen is unavoidabl e
(e.g., loss of (CIVIL CODE, (CIVIL CODE,
profits) art. 2201) art. 1174)
(CIVIL CODE,
art. 2201)

Basis of Actual Possibility of Absence of

liability knowledge or knowledge or possibility of
awareness of awareness knowledge (could
the cause not be foreseen or
(CIVIL CODE, (ought or if foreseen, could
art. 2201; could have not be avoided)
foreseen) (CIVIL CODE,
(CIVIL CODE, art. 1174)
art. 2201)

1. Incidental fraud (Dolo incidente)

- Fraud is the deliberate or intentional evasion of the normal fulfillment of
an obligation.

Types of Fraud
INCIDENTAL CAUSAL
(Dolo incidente) (ART. 1170) (Dolo causante) (ART. 1338)
Present during the performance Present before or
of a pre-existing obligation simultaneously with the
perfection of a contract

Purpose is to evade the Purpose is to secure the consent

normal fulfillment of the of another to enter into the
obligation contract
Results in the breach of an Results in vitiation of
obligation consent; voidable contract

Gives rise to a right in favor of Gives rise to a right of an

the obligee to sue for breach innocent party to annul the
contract

Note: Future fraud CANNOT be waived.

However, the law does NOT prohibit renunciation of the action for
damages on the ground of past fraud. (CIVIL CODE, art. 1171)

2. Negligence (Culpa)

- Any voluntary act or omission, there being no malice which prevents the
normal fulfillment of an obligation.

- Consists in the omission of that diligence which is required by the nature

of the obligation and corresponds with the circumstances of the persons, of
the time and of the place (CIVIL CODE, art. 1173)
FRAUD NEGLIGENCE
There is deliberate intention There is no deliberate intention
to cause damage to cause damage

Liability cannot be mitigated Liability may be mitigated

(CIVIL CODE, art. 1173)
Must be clearly proved Presumed from the breach of
a contractual obligation
 Waiver for future fraud is Waiver for future negligence may
void (CIVIL CODE, art. be allowed in certain cases
1171)

NEGLIGENCE CRIME
Any act with fault or Acts punishable by law
negligence (CIVIL CODE, art. (REVISED PENAL CODE, art. 3)
1173)
Criminal intent unnecessary Criminal intent necessary

Damages may be awarded Some crimes do NOT give rise

to injured party to civil liability

Violation of private rights Violation of public rights

Preponderance of evidence Proof beyond reasonable doubt

Can be compromised as Criminal liability cannot be

any other civil liability compromised

Presumption of negligence Presumption of innocence

Kinds of Negligence
1. Quasi-Delict (Culpa aquiliana/culpa extra contractual) – source of
obligation; wrong or negligence committed independent of contract and
without criminal intent

2. Contractual Negligence (Culpa Contractual) – wrong or negligence in the

performance of an obligation or contract

3. Criminal Negligence (Culpa Criminal) – wrong or negligence in the

commission of a crime
CULPA AQUILIANA CULPA CONTRACTUAL
Negligence is substantive and Negligence merely an incident of
independent performance of an obligation

There may or may NOT be a pre There is a pre-existing

existing contractual obligation contractual relation
 Source of the obligation is the Source of the obligation is the
negligence itself breach of the contractual
(CIVIL CODE, art. 2176) obligation
(CIVIL CODE, arts. 1170-1174;2201)
Negligence must be proved Proof of existence of the contract
and its breach is prima facie
sufficient to warrant recovery

For the negligence of an For the negligence of an employee,

employee, diligence in the diligence in the selection and
selection and supervision of the supervision of the employees is
employees is a defense of the NOT available as a defense of the
employer employer

Rule on Standard of Care

1. That which the law requires; or

2. That stipulated by the parties; or
3. In the absence of the above, diligence of a good father of a family (CIVIL
CODE, art. 1163)

- However, parties cannot stipulate that there would be absolute exemption

from liability for any fault or negligence, since it is against public policy.
(CIVIL CODE, arts. 1306, 1744, 1745)

- Diligence of a good father of a family: ordinary care or that diligence which

an average or reasonably prudent person would exercise over his own
property.

Standard of care of disabled person

A disabled person is required to use the same degree of care that a
reasonably careful person having the same disability would use. Physical
handicaps are treated as part of the circumstances under which a reasonable
person must act. Thus, the standard of conduct for a blind person becomes
that of a reasonable person who is blind.

Instances where the law requires a higher standard of care

• Banks – as a business affected with public interest, and because of the
nature of its functions, banks are under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature
of their relationship.
Exception: Extraordinary diligence does not cover transactions outside bank
deposits, i.e. commercial transactions.
• Realty Corporations – A corporation engaged in the buying and selling of
real estate is expected to exercise a higher standard of care and diligence in
ascertaining the status and condition of the property subject of its business
transaction. Similar to investment and financing corporations, it cannot
simply rely on an examination of a Torrens certificate to determine what the
subject property looks like, as its condition is not apparent in the document.

• Common Carriers – from the nature of their business and for reasons of
public policy, common carriers are bound to observe extraordinary diligence
in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case. (CIVIL
CODE, art. 1733)

Effects of contributory negligence of the obligee

• General rule: Reduces or mitigates the damages which he can recover.
• Exception: If the negligent act or omission of the creditor is the proximate
cause of the event, which led to the damage or injury complained of, he
cannot recover. (CIVIL CODE, art. 2179)

3. Default or Delay (Mora)

General rule: Those obliged to deliver or to do something incur in delay
from the time the oblige judicially or extrajudicially demands from them
the fulfillment of their obligation. (CIVIL CODE, art. 1169)

Exception: Demand by the creditor NOT necessary when: (LTU)

1. Law or obligation expressly declares so

2. Time is of the essence

3. Demand would be Useless (CIVIL CODE, art. 1169)

Requisites to be in delay: (CIVIL CODE, art. 1169)
1. Obligation is Demandable

2. Debtor Delays performance

3. Creditor Demands performance judicially or extrajudicially
Note: In reciprocal obligations, a party does not incur in delay if the other
party is not ready or willing to assume and perform the obligation imposed
upon him/her (CIVIL CODE, art. 1169)
But see: In reciprocal obligations, if the period for the fulfillment of the
obligation is fixed, demand by the obligee is still necessary before the
obligor
can be considered in default and before a cause of action for rescission will
accrue.

Note: The power to rescind is implied in reciprocal obligations.

-The use of a credit card to pay for a purchase is only an offer to the credit
card company to enter a loan agreement with the credit card holder.

-Before the credit card issuer accepts this offer, no obligation relating to the
loan agreement exists between them. A demand presupposes the existence
of an obligation between the parties.

-If the contract stipulates that “the project is estimated to be completed in 6

years,” failure to finish the project in 6 years does not put the obligor in
delay. Mere estimate cannot be considered a period or a day certain.

Kinds of delay

1. Mora solvendi – delay or default committed by obligor

2. Mora accipiendi – delay or default committed by obligee

3. Compensatio Morae – default of both obligor and obligee

4. Contravention of the tenor of the obligation

- This refers to failure to comply with the terms of the obligation, and will
require dolo, culpa or delay as the cause of the failure to comply, in order to
constitute a breach.

Defense against breach: FORTUITOUS EVENTS

Requisites of Fortuitous Events (NIIU)

1. Event must be Independent of obligor’s will;
2. Event is Unforeseeable or unavoidable
3. Such event renders it Impossible for the debtor to perform (not only
makes it difficult, but impossible)

4. No contributory negligence
General rule: Loss due to fortuitous events shall extinguish the obligation
(CIVIL CODE, art. 1174)

Exceptions: (SALTD)
1. If by Law the obligor is liable even for fortuitous event
2. If by Stipulation the obligor is liable even for fortuitous event
3. If the nature of the obligation requires the Assumption of the risk (CIVIL
CODE, art. 1174)

4. If the loss of the thing occurs after the obligor incurred in Delay; and
5. If the obligor promised to deliver the same thing to Two or more persons
who do not have the same interest (CIVIL CODE, art. 1165)

VI. REMEDIES AVAILABLE TO CREDITOR IN CASES OF BREACH 1.

Specific Performance -requiring delivery or performance of the obligation.

• Can be combined with damages, but inconsistent with the remedy of

resolution or cancellation.

• Can be pursued successively (but not simultaneously) with resolution or

cancellation; if initial action is for specific performance and obligor does not
or cannot deliver, courts have allowed obligee to pursue resolution or
cancellation. (CIVIL CODE, art. 1191)

• This is NOT a remedy in an obligation “Not to do” that has been breached
since the prohibited act has been done.

2. Damages - can be combined with any remedy or pursued independently

– also available in breach of any prestation. (CIVIL CODE, art. 1191)

3. Substitute performance - ask others to perform and charge the cost to the
obligor (CIVIL CODE, arts. 1165-1168)

• Not available in:

a. Obligation to give specific things (already set apart from class or
genus to which it belongs); (CIVIL CODE, art. 1165)

b. Obligations not to do; (CIVIL CODE, art. 1168) and

c. Obligations to do which are purely personal in character.

4. Resolution/Cancellation - implied in reciprocal obligations, but not
available if the breach is slight, unless time is of the essence.

- If breach is only slight, generally courts will grant additional time for the
obligor to pay or perform and after this additional time, if obligor still does
not perform, courts will allow resolution or cancellation. (CIVIL CODE,
art.1191)
-The principle is that resolution will not be permitted for a slight or casual
breach of a contract, but only for such breaches as are so substantial and
fundamental as to defeat the object of the parties in entering into the
agreement.
Remedy Specific only to Obligations Not to Do: to compel that the act in
violation of the obligation to be undone if possible and if not, only damages
may be pursued. (CIVIL CODE, art. 1168)

————- end of topic ————-

C. KINDS OF OBLIGATIONS

I. PURE
Pure Obligations - It is an unqualified obligation, which is demandable
immediately. Its performance does NOT depend upon a future and
uncertain event, or past event unknown to the parties. (CIVIL CODE, art.
1179)

II. CONDITIONAL OBLIGATION

Conditional Obligations - The performance in conditional obligations
depends upon a (1) future AND uncertain event, (2) or upon a past event
unknown to the parties.

Note: For the first kind, Article 1179 uses the phrase “future ‘or’ uncertain”
-- it must be construed as “and”.

Conditional Obligations may be further classified into;

a) Suspensive or resolutory
b) Potestative (based on the will of one of the parties)
- Casual (based upon chance or will of 3rd parties), and - Mixed
(combination of will of one of the parties + chance and/or will of 3rd
persons)
c) Possible or impossible
d) Positive or negative
e) Divisible or indivisible
f) Conjunctive or alternative
g) Express or implied
Note: All combinations are valid, EXCEPT only those conditional
obligations which are suspensive and dependent solely on the will of the
debtor.
Thus: suspensive condition + purely potestative on debtor = both condition
and obligation void.

Hence, there is no obligation.

• A provision in a Conditional Deed of Sale stating that the vendee shall
pay the balance of the purchase price when he has successfully
negotiated and secured a right of way is not a purely potestative
condition on the perfection of the contract nor on the validity of the
entire contract or its compliance as contemplated by Art. 1308. Such a
condition is likewise dependent on chance as there is no guarantee
that the vendee and the third-party landowners would come to an
agreement regarding the road right of way, a type of mixed condition
expressly allowed under Art. 1182. Where the so-called potestative
condition is imposed not on the birth of the obligation but on its
fulfillment, only the condition is avoided, leaving unaffected the
obligation itself.

A. Suspensive Condition
• The happening of the condition creates the obligation.

• Not demandable at once.

• Gives rise to the existence of an obligation.
For example, in a Contract to Sell, the fulfillment of the suspensive
condition, which is the full payment of the purchase price, gives rise to
the obligation of the seller to convey the title to the prospective buyer. If
the condition was not fulfilled, it only prevents the obligation of the
seller to convey title to arise.

• Also known as “condition precedent”

• Gives birth to obligations

Rule on fruits in suspensive condition:
(a) In suspensive conditions, the effect of a conditional obligation “to give”
retroacts to the day of the constitution of the obligation.

(b) Nevertheless, when the obligation imposes reciprocal prestations, the

fruits and interests during the pendency of the suspensive condition shall be
deemed to have been mutually compensated.

(c) If the obligation is unilateral, the debtor or obligor shall appropriate the
fruits and interests received, unless from the nature and circumstances of
the obligation it should be inferred that the intention of the person
constituting the same is different. (CIVIL CODE, art. 1187)
Note: Doctrine of constructive fulfillment - Condition shall be deemed
fulfilled when the obligor voluntarily prevents fulfillment. (CIVIL CODE,
art. 1186)

• REQUISITES:

(a) Condition is suspensive

(b) Obligor prevents fulfillment of condition

(c) Obligor acts voluntarily

B. Resolutory Condition
• Demandable at once
• Once the condition is established or acknowledged, the right to demand
performance immediately exists and therefore the obligation can be
demanded at once.

• It is also known as “condition subsequent”

• The happening of the condition has the effect of extinguishing an
obligation.

Note: In case of reciprocal obligations, the obligation of one is a resolutory

condition of the obligation of the other, the non-fulfillment of which entitles
the other party to resolve or cancel the contract.

3. Potestative condition
The fulfillment of the condition entirely depends upon the sole will of a
party – may be purely potestative on the part of the obligee (valid), or the
obligor/ debtor (void if suspensive).

Effect of illegal, immoral or impossible condition

TO GIVE / TO DO SOMETHING NOT TO GIVE / NOT TO DO
SOMETHING
 Both condition and obligation are Condition considered not written,
void, hence, there is no obligation. hence, the obligation is valid – the
Exception: In gratuitous condition is merely superfluous.
obligations, illegal conditions are
considered as not written, hence
condition is deemed not written
and the obligation is valid
(becomes a pure obligation).

Condition coupled with a Term:

- The condition that some event will not happen at a determinate time, shall
render the obligation effective from the moment (1) the time indicated has
elapsed, or (2) if it has become evident that the event cannot occur. (CIVIL
CODE, art. 1185)

- Otherwise, generally, a party must wait for the condition to be fulfilled,

until it becomes certain that condition (1) cannot be fulfilled (parties are
released), or (2) may be deemed fulfilled at such time as the parties
contemplated, bearing in mind the nature of the obligation. (CIVIL CODE,
art. 1185)
POSITIVE NEGATIVE
SUSPENSIVE SUSPENSIVE

Rule Condition must be Condition should

fulfilled before NOT happen before
stipulated term stipulated term
Effect if Condition Obligation arises The parties are
is fulfilled before from fulfillment released as of the
arrival of the term date of the
happening of the
condition
Effect if Condition is Parties are released as The obligation arises
not fulfilled before the of arrival of the term from the time the
arrival of the term But; term arrives.
Parties may be
released even before
arrival if it becomes
indubitable that the
condition will not
happen
III. OBLIGATIONS WITH A PERIOD OR A TERM
- Obligations which are demandable on a “day certain”.

“Day certain” refers to either:

(a) A future AND certain event; or

(b) Payable when able, or when debtor promises to pay when “his means
permit him to do so”

– period is to be fixed by the court, taking into account intention of the

parties
May also be further classified into:

(a) Suspensive - obligation is suspended until arrival of the period; or

(b) Resolutory - obligation is immediate but terminates upon arrival of the
period.

Difference between condition and term

CONDITION TERM

Suspensive It may or may not It is certain that it will

happen, hence uncertain happen; just
whether there is an uncertain as to when
obligation. it will happen.

Resolutory It is not certain if the It is certain that it will

obligation will terminate terminate at a future
at all time.
 Retroactivity Once fulfilled, it will There is no
retroact to date the retroactivity because
obligation was entered there is already an
into obligation from the
(Note: if it is an time the parties enter
obligation o do or not to in the obligation,
do, courts will except only in
determine retroactivity) prescription (where
prescriptive period is
EXCEPT: counted from arrival
(i) fruits (Art. 1187- of the term – i.e.,
when the obligation to when the action
deliver arises), could have been
(ii) brought).
Prescription (from
fulfillment of condition
– when action could
have been brought)

Effects before the happening/ arrival of condition/ term

Obligee: May file Protective Action only, such as asking for security or
requiring escrow of the object since there is no right or obligation yet at this
time.

Obligor: No obligation to deliver or perform yet at this time.

Note: In an obligation to give specific things, these are the effect of loss,
impairment or improvement of the specific thing which is the object of the
obligation:
CAUSE LOSS IMPAIRMENT IMPROVEMENT

Obligor ’s Fault Obligor to Obligee may Obligor has

pay choose usufructuary
damages resolution or rights only –
fulfillment, i.e., can use it
with damages but is not
entitled to
payment, and
can remove it
only if it will
not cause
damage
 Obligee ’s Fault Obligor Deliver in its Obligor without
released impaired state right to payment
of improvement
Nature/Fortuito Obligor Borne by the Inures to the
us Events released obligee; cannot benefit of the
ask for obligee
damages or
refuse to accept
impaired
object

-The same effect applies if the resolutory condition happens and the party
obliged cannot return the object or is improved for the same above reasons.

Benefit of the period

Significance of Period:
(a) Obligor cannot be compelled to pay or perform before the arrival of the
period

(b) Obligee cannot compel payment or performance

Both are subject to the right of each party to waive

– even if the obligor is willing to pay interest for the remainder of the
period. Presumption: for the benefit of both parties

It can be given to either party:

(a) To the Debtor or Obligor: By law or by stipulation (e.g., payable on or
before)

(b) To the Creditor or Obligee: Only by Stipulation

Debtor/obligor may lose the benefit of the period (therefore may be
compelled to pay immediately) in the following cases (FAt-VISA):

(a) Debtor becomes Insolvent (when his assets are less than his liabilities)

Exception: When he gives security for the obligation

(b) Failure to create or establish the security promised;

(c) When Security established but is later impaired (through fault of debtor)
or totally lost (due to fault of debtor or fortuitous events).

Unless: Debtor provides another security of equal value;

(d) Violation of any undertaking on the basis of which, period is granted;
(e) Debtor Attempts to abscond (mere attempt sufficient, because if actual
abscondment is to be awaited, creditor can no longer collect; and

(f) With an Acceleration clause stipulation

• Applies to obligations payable in installments or based on amortization

schedule, where stipulation says that failure to pay one or some installments
or amortizations will entitle creditor to accelerate payment – i.e., to call for
the payment on the entire remaining unpaid obligation. (CIVIL CODE, art.
1198)

When courts may fix period (ID-JBL)

(a) If the obligation does NOT fix a period, but from its nature and
circumstances it can be inferred that a period was intended by the parties
(CIVIL CODE, art. 1197)

(b) If the duration of the period Depends upon the will of the debtor (CIVIL
CODE, art. 1197)

(c) In case of reciprocal obligations, when there is a Just cause for fixing a
period (CIVIL CODE, art. 1191)

(d) If the debtor Binds himself when his means permit him to do so (CIVIL
CODE, art. 1180)

(e) If no period for the Lease has been set, applicable in specific cases
depending on the length of the lessee’s stay in the premises (CIVIL CODE,
art. 1687)

Note: Art. 1197 is only applicable when there is absence of any period fixed
by the parties. It requires that period cannot be set arbitrarily by the courts.

• 2-step process to determine if the Court may fix the period

(a) Determine that the obligation does not fix a period (or that period is
made to depend upon will of debtor) but from the nature and
circumstances, it can be inferred that a period was intended

(b) Decide what period was probably contemplated by the parties.

IV. ALTERNATIVE OR FACULTATIVE OBLIGATIONS
Alternative Obligations

-Initially, the obligation is indeterminate and becomes determinate upon

making of choice and notification.
General Rule: The right to make a choice is with the debtor/obligor, subject
to the rule that he cannot choose the impossible, unlawful or could not have
been the object of the obligation.

Exception: By contrary stipulation, the right to make a choice may be given

to the creditor/obligee or to a 3rd person, subject also to the rule that he
CANNOT choose the:

• Impossible
• Unlawful
• Could not have been the object of the obligation.
When Choice is Effective – from notification.

(a) Debtor’s Choice: upon notice to creditor

(b) Creditor’s Choice: upon notice to debtor
(c) 3rd Person’s Choice: upon notice to both debtor and creditor
Note: There is no form required for the notice.

-It may be oral or written, express or implied (as when debtor delivers one
of the choices and creditor accepts). Mere notice is required, not consent.
Once choice is made and communicated, it becomes irrevocable, and
converted to a simple obligation. If the party who has the right to make the
choice does not make it or delays, the right does not pass to the other party
– action is specific performance to compel delivery of ANY prestation.

Note: When only one object or prestation is left, it becomes a tacit choice.
The obligation becomes a simple obligation. (CIVIL CODE, art. 1202)

Effect of loss / impossibility of one, some or all prestations

(a) If debtor has right of choice
CAUSE ONE/SOME ALL

Debtor’s Act Exercise of the right Creditor is entitled

of choice, debtor to damages based
may choose from on value of the last
remaining one lost
 Creditor’s Act Debtor can Debtor is entitled
choose to resolution or
(a)deliver cancellation plus
object damages
from remaining
or (b) resolution or
cancellation with
damages
Fortuitous Event Debtor may choose Obligation is
from remaining extinguished
objects; and if only 1
left – it becomes a
simple obligation

Note: As long as one choice is left, it becomes a simple obligation and if the
last object is lost due to fortuitous events, the obligation is extinguished.

(b) If creditor has right of choice

CAUSE ONE/SOME ALL

Debtor’s Act Creditor may Creditor entitled to

choose from choose the value of
remaining, or the any of the objects
price of any object lost, with damages
destroyed by the
debtor, with
damages
Creditor’s Act Exercise of the right Obligation is
of choice- creditor extinguished
may choose the
from remaining
objects
Fortuitous Event Creditor to choose Obligation is
from remaining; if extinguished
only 1 left –
becomes a simple
obligation

- In alternative obligations, various things are due but the delivery or

performance of one will extinguish the obligation.
- If one of the prestations is illegal, others may be valid but obligations
 remains.
- If it is impossible to give all except one, the last one must still be given.
- The right to choose may be given either to the debtor or creditor.
V. JOINT AND SOLIDARY OBLIGATIONS

- Involves multiple parties (more than one debtor or more than one creditor
or more than 1 debtors and creditors).

- The liability or rights of parties may be joint or solidary. It is presumed

joint.
- Solidary obligation requires either stipulation or law to create the solidary
liability/right. (CIVIL CODE, art. 1207)

- In a joint obligation/credit, just divide the obligation/credit into as many

numbers of debtors and creditors to get the sharing, unless sharing was
stipulated (sharing is presumed equal). (CIVIL CODE, art. 1208)

- In a joint obligation, each of the joint debtors is only responsible for

his/her own share and each cannot be made to pay for the share of others,
even those who are insolvent or who have died; joint creditors cannot collect
the share of the others. (CIVIL CODE, arts. 1207 & 1209)

- In a solidary obligation, the solidary debtors can be made to pay the full
amount of the obligation (subject to presentation of available defenses);
solidary creditors can collect the full amount of the obligation. (CIVIL
CODE, art. 1216)

- Among solidary debtors and creditors, one who pays or receives the full
amount of the obligation can recover from or deliver the share of others.
(CIVIL CODE, art. 1214 &1217)

a. JOINT (DIVISIBLE) OBLIGATION

Joint obligation (Obligacion Mancomunada) –
- The whole obligation is to be paid or fulfilled proportionately by
different debtors or demanded proportionately by the different
creditors.

General rule: The presumption is that an obligation is always joint. (CIVIL

CODE, art. 1207)

Exceptions: (FLENT)

1. When the obligation Expressly stipulates solidarity;

2. When the Law requires solidarity;
3. When the Nature of the obligation requires solidarity;
4. When a charge or condition is imposed upon heirs or legatees and the
Testament expressly makes the charge or condition in solidum; and

5. When a solidary responsibility is imputed by a Final judgment upon

several defendants.

Effects of joint liability

1. Demand on one produces delay only with respect to the debt of the
debtor against whom a demand is made.

2. Interruption in payment by one does not benefit or prejudice the other.

3. Each debtor can be held liable only for the payment of his proportionate
share of the debt.

4. A joint debtor cannot be compelled to answer for the acts or liability of the
other debtors.

5. Vice of one debtor to creditor has no effect on the others. 6.

Insolvency or death of one debtor does NOT affect other debtors.
Effects of joint credit

1. Each creditor can demand for the payment only of his proportionate share
of the credit.

2. A joint creditor cannot act in representation of the other creditors.

NOTE: Unless there is no specification as to their proportionate share in the

credit or in the debt, the creditors and debtors in a joint obligation shall be
entitled or shall make payment in equal proportion.

b. JOINT (INDIVISIBLE) OBLIGATIONS

- If there are 2 or more debtors, the fulfillment of or compliance with the
obligation requires the concurrence of all the debtors, although each for his
own share. (CIVIL CODE, art. 1209) The obligation can be enforced only by

proceeding against all of the debtors.

-If there are 2 or more creditors, the concurrence or collective act of all the
creditors, although each for his own share, is also necessary for the
enforcement of the obligation (CIVIL CODE, art. 1209).

Effect of breach
If one of the joint debtors fails to comply with his undertaking, the
obligation can no longer be fulfilled or performed. Consequently, it is
converted into one of indemnity for damages. Innocent joint debtor shall
not contribute to
the indemnity beyond their corresponding share of the obligation. (CIVIL
CODE, art.1224)
INDIVISIBILITY SOLIDARITY

Refers to the prestation which Refers to the legal tie and

constitutes the object of the consequently to the subjects or
obligation parties of the obligation

Plurality of subjects is NOT Plurality of subjects is indispensable

required

c. SOLIDARY OBLIGATIONS
- Solidary obligation (Obligacion Solidaria) – must be expressed in
stipulation or provided by law or by nature of obligation. Otherwise, it will
be considered a joint obligation/credit. (CIVIL CODE, art.1207)

- Words denoting solidarity include “jointly and severally” (most common);

“individually and collectively”; “severally”; “individually”; “collectively”;
“separately”; “distinctively”, “individually liable” and “individually and
jointly”.

- Also, use of pronoun “I” in a promissory note where several debtors sign
denotes solidarity.

- If a solidary debtor pays the obligation in part and is issued a quitclaim, he

can recover reimbursement from the co-debtor only insofar as his payment
exceeded his share in the total obligation. If the debtor pays less than his
share, he cannot demand reimbursement because his payment is less than
his actual debt.

Kinds of solidary obligations

1. Active Solidarity
2. Passive Solidarity
3. Mixed Solidarity
4. Conventional Solidarity
5. Legal Solidarity

1. Active Solidarity – solidarity on the part of creditor or obligee (a) Each

creditor represents the other in the act of recovery of payment. (b) Credit
is divided equally between creditors as among themselves. (c) Debtor
may pay any of the solidary creditors. (CIVIL CODE, art. 1214)
(d) Any creditor can collect full amount of obligation. Unless there is an
agreement as to which creditor can collect. Debtor must pay to the creditor
who first makes a demand.

- There is a case of improper payment if the debtor pays to another creditor

who did not make a demand; he can be made to pay again to the creditor
who made the demand. (CIVIL CODE, art. 1214)

(e) After a solidary creditor collects the full amount, all debtors are released
from the obligation. The creditor who received payment must then deliver
the shares of the other solidary creditors (presumed equal unless amount
indicated).

Effect if one of solidary creditor dies: Share is transmitted to heirs (but

collectively)

2. Passive Solidarity – solidarity on the part of debtors or obligors

(a) Any debtor can be made to pay the full amount of the obligation with
the right to recover from co-debtors. (CIVIL CODE, art. 1216)

(b) The right to make a choice of who among the debtors the creditor will
proceed against, lies on the creditor.

- An accommodation party under the law is solidarily liable based on the

Negotiable Instruments Law.

Effect of demand on one solidary debtor: It will not stop the creditor from
going against another debtor as long as the debt has not yet been paid in
full. (CIVIL CODE, art. 1216)

Effect if one of solidary debtor dies: creditor is not bound to make a claim
on the estate of the deceased debtor within 2-year period under the Rules of
Court since creditor may choose any of the living debtors, in which case the
2-year period does not apply.

Although the Rules of Court mandate that in case of death of a respondent,

the claims should be filed in the settlement of estate, the court said that’s a
procedural rule and the rule of the Civil Code on solidary liability should
prevail — in which case, creditor can choose who to sue.

Effect if several solidary debtors offer to pay: creditor can choose from
anyone or all of them, as long as he does not collect more than the full
amount of the obligation.

Effect of Prescription: interruption of prescription to one creditor affects all

creditors.
Effect of Delay: interests from delay on one debtor is borne by all debtors.
Defenses – a solidary debtor when sued can raise the ff. defenses:

(a) From the nature of obligation – e.g. the obligation is void, has prescribed,
or has already been paid – the defense is complete: debtor sued is not liable,
and no one is liable;

(b) Personal to him – may be:

(i) complete (debtor sued is not liable, but others may be sued and the
amount that may be collected should be less than the share of the
debtor with a personal defense) e.g., minority, vitiated consent; or

(ii) partial e.g., non arrival of term or condition – possible even if

solidary-debtor sued is liable for share of others, less his own share

(c) Those which pertains to the share of his co-debtors – with respect to the
share which personally belong to others, the debtor may avail himself
thereof only as regards that part of the debt for which the others are
responsible. (CIVIL CODE, art. 1222)

- Once creditor is paid in full, the obligation is extinguished, and the debtor
who pays is entitled to reimbursement from others, as if joint (based on
agreed sharing or if not, equal). (CIVIL CODE, art. 1217)

- When one of the solidary debtors cannot, because of his insolvency,

reimburse his share to the debtor paying the obligation, such share shall be
borne by all his co-debtors, in proportion to the debt of each. (CIVIL CODE,
art. 1217)

Difference from joint obligation: The share of the insolvent debtor is

assumed proportionately by others, in the meantime.

Reimbursement includes interest from date of payment until actual

reimbursement, except if solidary debtor pays before maturity – in which
case interest runs only from maturity.

3. Mixed Solidarity – on the part of the obligors and obligees, or the part of
the debtors and the creditors

4. Conventional Solidarity – agreed upon by the parties

5. Legal Solidarity – imposed by law; instances:
(a) Obligations arising from tort
(b) Obligations arising from quasi-contracts
(c) Legal provisions regarding obligation of devisees and legatees
(d) Liability of principals, accomplices, and accessories of a
felony (e) Bailees in commodatum

Effects:

No reimbursement if payment is made after prescription or became illegal.

Payment made before debt is due: no interest can be charged except from
maturity, otherwise, interest can be charged from date of payment

Insolvency of one: others are liable for share pro-rata

If different terms and conditions: collect only what is due, later on collect
as and when they become due or the conditions are fulfilled

Remission made after payment is made: co-debtor still entitled to

reimbursement

Effect of insolvency or death of co-debtor: still liable for whole amount

Fault of any debtor: everyone is responsible to the creditor – price, damage

and interest, but the debtor at fault should reimburse those who paid the
creditor

Complete/personal defense: total or partial (up to amount of share only) if

NOT personal to him
SOLIDARY DEBTOR SURETY
With principal liability With subsidiary liability: can be
made to pay only when principal
debtor does not pay
Pays for full amount and can seek If he pays the full amount, he may
reimbursement from other recover the FULL amount from
solidary debtors principal debtors

Extension of time granted to other Extension of time granted to

solidary debtors w/o his consent principal debtor w/o his consent
does not release him releases him

de to pay the full amount Can bind

himself for less than the full
amount of the obligation
Effect of loss or impossibility of the prestation:
(a) If without fault – no liability
(b) If with fault – there is liability (also for damage and interest) (c) Loss
due to fortuitous event after default – there is liability (because of
default)
As a rule, corporations are solely liable for their obligations. The directors or
trustees and officersare not liable with the corporation even if it is through
their acts that the corporation incurred the obligation. As an exception,
directors or trustees and corporate officers may be solidarily liable with the
corporation for corporate obligations if they acted “in bad faith or with
gross
negligence in directing the corporate affairs.”

Note: The law clearly provides that the creditor who may have executed any
acts mentioned in Art. 1215 (Novation, Compensation, Merger or
Confusion), as well as he or she who collects the debts, shall be liable to the
others for the share in the obligation corresponding to them.

VI. OBLIGATIONS WITH A PENAL CLAUSE

- One to which an accessory undertaking is attached for the purpose of
insuring its performance by virtue of which the obligor is bound to
pay a stipulated indemnity or perform a stipulated prestation in case
of breach.

Penal cause vs. Condition

PENAL CLAUSE CONDITION

Serves as accessory obligation NOT a separate obligation; part of

principal
Demandable in default Never demandable

Obligation exists No obligation until suspensive

condition happens

Depends on the non- performance Principal itself is dependent on an

of the principal obligation uncertain event

Obligation with a penal clause vs. Alternative obligation

PENAL CLAUSE ALTERNATIVE OBLIGATION
 Only 1 prestation Several prestations
Impossibility of principal Impossibility of 1 prestation does
extinguishes penalty NOT extinguish the obligation

Debtor may not choose between Debtor may choose among the
principal and penalty different prestations

Obligation with a penal clause vs. Facultative obligation

PENAL CLAUSE FACULTATIVE OBLIGATION
Penalty of payment in lieu of the Power to choose prestation is
principal must be expressly absolute
granted

Creditor may demand both if Creditor may not demand both

expressly granted principal and substitute

Purpose
1. Funcion coercitiva o de garantia – to insure the performance of the
obligation

2. Funcion liquidatoria – to liquidate the amount of damages to be awarded

to the injured party in case of breach of the principal obligation
(compensatory); and

3. Funcione strictamente penal – in certain exceptional cases, to punish the

obligor in case of breach of the principal obligation (punitive).

Characteristics
1. Subsidiary – As a general rule, only penalty can be demanded, principal
cannot be demanded,

Except: Penalty is joint or cumulative (Art. 1227), and in monetary

obligations where both principal and interest as a form of penalty may be
collected.

2. Exclusive – generally takes place of all damages and interests.

Penalty as substitute for damages

General rule: the penalty fixed by the parties takes the place of all damages
and interests in case of breach. (CIVIL CODE, art. 1226)

Exceptions: (StiRF)
1. When by Stipulation of the parties, penalty, IN ADDITION to interest,
may be collected;

2. When the debtor is sued for Refusal to pay the agreed penalty; and
3. When debtor is guilty of Fraud. (CIVIL CODE, art. 1226) Double
functions of penalty:

1. To provide for liquidated damages

2. To strengthen the coercive force of the obligation by the threat of greater
responsibility in the event of breach

Kinds of penalties:
(a) Legal – constituted by law
(b) Conventional – constituted by agreement of the parties (c)
Compensatory – established for the purpose of indemnifying the
damages suffered by the obligee or creditor in case of breach of the
obligation
(d) Punitive – established for the purpose of punishing the obligor or
debtor in case of breach of the obligation
(e) Subsidiary or alternative- in case of non- performance only the
penalty is demandable
(f) Joint or cumulative – both the principal undertaking and the penalty
may be demanded

Causes for reduction of penalty

(a) Partial/irregular performance
(b) Penalty provided is iniquitous/ unconscionable (CIVIL CODE, art.
1229)

Although parties may voluntarily agree on any amount of interest,

voluntariness does not make the stipulation on interest valid. A 5% per
month, or 60% per annum, rate of interest is iniquitous, and must be struck
down.

Parties have wide latitude to stipulate any rate of interest in view of BSP
Circular 905, which suspended the ceiling on interest effective Jan. 1, 1983.
However, whenever interest is unconscionable, the courts may declare it
illegal. Compounded interest of 5% monthly, being iniquitous and
unconscionable, is void and inexistent from the very beginning. Thus, the
legal rate of 6% per annum must be imposed in lieu of the excessive interest
agreed upon by the parties.

————- end of topic ————-