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8/20/2019 Oblicon Reviewer Balane

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Obligations and Contracts

Introduction

Our Civil Code follows the Gaian order which is of three parts: Persons, Thingsand Obligations.

The title of Book I of the Civil Code is inaccurate. !hile the title is "Obligations and Contracts#, it should onl$ be "Obligations# since b$ including "Contracts# in the title, it is putting the latter on e%ual footing with the for&er' butthis is not correct since contracts is onl$ one of the sources of obligations.

Obligations is the &ost i&portant, &ost abstract and &ost difficult of all of civil law. It is the entiret$ of private law. If $ou don(t know obligations andcontracts, $ou will never understand co&&ercial law.

The ter& "obligations# was derived fro& the words "ob# and "ligare# which&eans "to bind or tie together#. ")igare# is the source of several co&&on wordssuch as "liga&ent# and "ligation#. *)igation and asecto&$ have the sa&e purpose:to tie and to cut off, the fallopian tube, for the for&er, and the vas deferens, for thelatter.+

"Obligatio# was initiall$ a ph$sical act of being chained *with shackles+.Before, under o&an law, if the debtor cannot pa$, the creditor can bring hi& to the&agistrate and the &agistrate can authori-e the creditor to cuff the debtor and offerhi& for sale for da$s, the proceeds of which go to the creditor. The debtor thenbeco&es a slave. If he is not bought, the creditor can have hi& chopped into littlepieces or have hi& sold to the barbarians.

/s ti&e passed, cruelt$ softened. B$ the ti&e of Cicero, "ligatio# does not&ean vinculu& of chains but vinculum juris *bond of law+. Obligation beca&e&etaphorical and not literal.

I. Obligations

A. Definition of Obligation

Art. 1156. An obligation is a juridical necessity to give, to do or not to

do.

• This provision is the soul of brevit$. It was borrowed fro& 0anche-o&an. 1owever, &an$ co&&entators sa$ it is inco&plete because the "obligation# is onl$ fro& the point of view of the debtor. To &ake itco&plete, it &ust cover the points of view of both the debtor and creditor.Obligations are bilateral. It should include what can be re%uired, there&ed$ and the &eans b$ which the creditor can take to pursue there&ed$.

• /n obligation is a 2uridical relation whereb$ a person should engage orrefrain fro& engaging in a certain activit$ for the satisfaction of theprivate interest of another who, in the case of non3fulfill&ent of such dut$,&a$ obtain fro& the patri&on$ of the for&er through proper 2udicialproceedings the ver$ prestation due or in default thereof, the econo&ice%uivalent that it represents *4ia- Piero+.

• /n obligation is a 2uridical relation whereb$ a person *called a creditor+&a$ de&and fro& another *called the debtor+ the observance of a


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deter&inate conduct, and, in case of breach, &a$ obtain satisfaction fro&the assets of the latter */rias a&os+.

B. Characteristics of Obligations

5. It represents an e6clusivel$ private interest

7. It creates ties which are b$ nature transitor$

• Because obligations are e6tinguished. But the period is relative 8could be seconds *e.g., bu$ing coke+ and could be $ears *e.g.,partnership, lease+

. It involves the power to &ake the 2uridical tie defective in case of non3fulfill&ent through satisfaction of the debtor(s propert$

C. Trends in the Modern Law of Obligations

1. Progressive spiritualization of the la on obligations

• Before, obligations were ver$ for&al and ritualistic. If it was not in theproper for&, no obligations will assu&e. 9ow, the e&phasis is in the

&eeting of the &inds, and not on the specific for&. There is even noneed that it be in writing, as a !eneral "ule, since consensualit$ isthe prevailing doctrine. /s long as it can be &anifest 8 and an$ kindof &anifestation will do 8 it is sufficient.

• o&an )aw was for&alistic. estiges of o&an )aw in the Civil Codecan be seen in the law governing donations, which is ver$ for&al.ven for sales, the re%uire&ent of for& is onl$ for enforceabilit$ andnot for validit$. This is to &ake it conducive to business and facilitateco&&ercial transactions.

• This is still an ongoing trend: e3co&&erce added another option infor& and proof of contracts *but this is not applicable to all, usuall$

onl$ for business, not applicable to wills+.

#. $he principle of autono%y of ill of the parties is no subject toseveral restrictions

• !hile the principle still operates, the e6ceptions *prohibited areas+have grown larger and larger.

• /rticle 5;< gives the five restrictions: not contrar$ to law, &orals,good custo&s, public order, or public polic$. Those which are againstthese five restrictions are void, as can be seen in /rticle 5=;>?.1owever, now we have restrictions such as social 2ustice,environ&ental preservation, etc. This is because of the rising tide of social discontent, hence social legislation ca&e to be for the

underprivileged.

&. $he %itigation of the principle that the debtor should anser ith

all his property

* Art. 1409. The following contracts are ine6istent and void fro& the beginning:*5+ Those whose cause, ob2ect or purpose is contrar$ to law, &orals, good custo&s, public

order or public polic$'


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• Before, the debtor had to answer his debts with all his propert$. 9ow,certain properties are e6e&pt and these can be found in substantivelaw *i.e., ho&e+ and in procedural law *i.e. support, etc.+

• /lso, the debtor &a$ not be i&prisoned for non3pa$&ent of debts.

• The theor$ is to leave the debtor so&ething to live decentl$ b$.

'. $he ea(ening of the principle that liability arises fro%

responsibility

• This is basicall$ the principle in %uasi3delicts. 9ow, in &an$ cases, aperson &a$ be held liable even if not responsible.

• @or e6a&ple, under work&an(s co&pensation, the e&plo$er is liable toco&pensate the e&plo$ee even if the e&plo$er was not negligent.

). $he tendency of unity in %odern legislation

• This can be &anifest in the rise of a "global village#. This can be seenparticularl$ in trade laws.

• The tendenc$ now is to &ake things unifor& especiall$ in co&&erce.

4ifferent rules would i&pede co&&erce.


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*. Essential Reqisites of Obligations

1. Active subject

• The active sub2ect is called a creditor if the obligation is to give. Theactive sub2ect is called an obligee if the obligation is to do.

• The active sub2ect is alwa$s a person whether 2uridical or natural.

7. Passive subject

• The passive sub2ect is called a debtor if the obligation is to give. Thepassive sub2ect is called an obligor if the obligation is to do.

• The passive sub2ect &ust be deter&inate or deter&inable

• 1ow can both sub2ects be deter&inate or deter&inableA

a. Obligations where the sub2ects are co&pletel$ and absolutel$deter&ined at the birth of an obligation.

• If / and B are parties to a contract of sale and B doesn(t co&pl$. /cannot sue C.

a. Obligations where one sub2ect is deter&ined at the &o&ent of thebirth of the obligation and the other sub2ect is to be deter&inedsubse%uentl$ at so&e fi6ed criterion, which criterion is fi6ed at thestart of the obligation.

• B &akes a pro&issor$ note pa$able to or order. In this case, thecreditor is not necessaril$ . The creditor is either or towho&ever the pro&issor$ note is endorsed.

• /t the ti&e of the birth of the obligation, the pa$ee is not $etknown but the obligation is valid.

b. Obligations in which sub2ects are deter&ined in accordance with itsrelation to a thing.

• The real( rights

• / &ortgaged propert$ to D pursuant to a loan. The &ortgageattaches to the propert$. If / sells the propert$ to B, theannotation in the TCT will follow and B beco&es the &ortgagor. If / doesn(t pa$, D goes against B.

• The obligor in this case is whoever owns the land. D doesn(t carewhether its / or B.

. Object of the obligation

• The ob2ect of the obligation alwa$s consists in an activit$ or conduct tobe observed b$ the debtor towards the creditor. This conduct to beobserved is also known as the prestation.

• In a contract of sale for e6a&ple, the ob2ect of the obligation is theconduct of the vendor in delivering the car. The car, on the otherhand, is the ob2ect of the prestation.


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• 0o&eti&es, the co&&entators confuse the car as the ob2ect of theobligation, but this is wrong. The ob2ect is not the car but theprestation.

• /ccording to Professor Balane, the distinction between the ob2ect of the obligation and the ob2ect of the prestation has been blurred b$/rticles 5=E35=>.

• e%uisites of the Ob2ect of the Obligation

a. )icit *)egal+

• Example: Can(t validl$ enter into a contract for se6ual services

b. Possible both in fact and in law

• 4eter&ined b$ the rules of e6perience

c. 4eter&inate or deter&inable

• Can(t sa$ that "I pro&ise to sell $ou so&ething#.

• Example of determinate: I pro&ise to sell $ou &$ car.

• Example of determinable: I pro&ise to sell $ou &$ riceland inBicol in 9ove&ber *will beco&e deter&inate when ti&e co&es+.

d. ust have pecuniar$ value

=. !incl" #ris

• The vinculum juris is the legal tie. It consists of the enforceabilit$ of the obligation. If the debtor does not confor&, the creditor has thepower to go to court to &ake the debtor perfor& 8 coercive.

• !hat &akes an obligation is the power of the creditor to haul thedebtor before the court, su&&oning powers of the state if needed.

• oluntariness goes into entering into an obligation. But once $ouenter, it beco&es involuntar$.

F. Casa

• Castan adds a Fth essential re%uisite 8 causa. /lso known as causadebendi or causa obligationes. Causa &eans the wh$ of an obligation.

• The ob2ect of an obligation answers the %uestion "!hat is owedA# *uid+. The causa answers the %uestion "!h$ is it owedA# *Cur+.

• @or e6a&ple, / will deliver a car to B since / e6pects to get P;;,;;;.The P;;,;;; is the causa of the obligation.

obligation

prestation

car

*ob2ect of the obligation+ deliver the car

*ob2ect of the prestation+


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de%andable, and shall be regulated by the precepts of the lahich establishes the% and as to hat has not been foreseen, by

the provisions of this Boo(.

• There is onl$ 5 ulti&ate source of obligations 8 law. 1owever, thereare F pro6i&ate sources of obligations */rticle 55FE+.

7. Contract */rticle 55F>+

Art. 115'. Obligations arising fro% contracts have the forceof la beteen the contracting parties and should be co%pliedith in good faith.

• Contract is onl$ 5 of the sources of obligations.

• This provision co&bines two concepts of o&an law 8 e%uit$ or goodfaith #ius gentium$ and strict co&pliance b$ the parties #ius c%inile$.

• / contract is a &eeting of &inds between 7 persons whereb$ onebinds hi&self, with respect to the other, to give so&ething or to renderso&e service */rticle 5;F+

• Contractual obligations have the force of law between the contractingparties and should be co&plied with in good faith */rticle 55F>+.

• The contracting parties &a$ establish such stipulations, clauses, ter&sand conditions as the$ &a$ dee& convenient, provided the$ are notcontrar$ to law, &orals, good custo&s, public order, or public polic$*/rticle 5;


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• !eneral "ule- If $ou co&&it a cri&e, $ou are liable both cri&inall$and civill$.

• E)ce*tion+ 9o private offended part$ *e.g. conte&pt, etc.+

• The Civil Code deals with the civil aspect * i.e. inde&nification for lossof earning capacit$+.

F. 2uasi3delict */rticle 55


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carriage or for %uasi3delict *negligence in the selection andsupervision+.

The cause of action one chooses deter&ines the:

5. Parties involved

7. 4egree of proof

. 4efenses

One can tailor his suit depending on the cause of action he chooses.

+. -atre and Effect of Obligations

5. :inds of Prestations

a. $o give */rticles 55


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• If through negligence, so&ething causes the thingda&age, the debtor is liable for da&ages.

• This is not applicable to a generic thing.

7. o account and deliver to t%e creditor t%e fruits if t%e t%ingbears fruits upon t%e time t%e obligation to deliver it arises

*/rticle 55= +

Art. 11&'. ;hen the conditions have beeni%posed ith the intention of suspending the efficacy of

an obligation to give, the folloing rules shall beobserved in case of the i%prove%ent, loss or

deterioration of the thing during the pendency of thecondition-

1/ If the thing is lost ithout the fault of the

debtor, the obligation shall be e4tinguished

#/ If the thing is lost through the fault of thedebtor, he shall be obliged to pay da%ages it is

understood that the thing is lost hen itperishes, or goes out of co%%erce, or disappears

in such a ay that its e4istence is un(non or itcannot be recovered

&/ ;hen the thing deteriorates ithout the fault of the debtor, the i%pair%ent is to be borne by the

creditor


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'/ If it deteriorates through the fault of the debtor,the creditor %ay choose beteen the rescission

of the obligation and its fulfill%ent, ithinde%nity for da%ages in either case

)/ If the thing is i%proved by its nature, or by ti%e,the i%prove%ent shall inure to the benefit of the

creditor

=/ If it is i%proved at the e4pense of the debtor, heshall have no other right than that granted to the

usufructuary.

Art. 11'(. ;hen the conditions have for their

purpose the e4tinguish%ent of an obligation to give, theparties, upon the fulfill%ent of said conditions, shall

return to each other hat they have received.

In case of the loss, deterioration or i%prove%ent

of the thing, the provisions hich, ith respect to thedebtor, are laid don in the preceding article shall be

applied to the party ho is bound to return.

As for the obligations to do and not to do, the

provisions of the second paragraph of article 11>8 shallbe observed as regards the effect of the e4tinguish%ent

of the obligation.

Art. 11'/. In case of loss, deterioration ori%prove%ent of the thing before the arrival of the day

certain, the rules in article 11>? shall be observed.

5. e%uisites

a. Obligation has a suspensive condition, a resolutor$condition or ter&

b. The obligor is obligated to deliver a deter&inate thing

c. There is i&prove&ent, loss or deterioration before thefulfill&ent of the condition or the period

d. The condition is fulfilled or the period arrives

7. ules Proper

a. If the thing is lost without the fault of the debtor, theobligation is e6tinguished

b. If the thing is lost through the fault of the debtor, he&ust pa$ da&ages

• The thing is lost when it perishes, goes out of co&&erce or disappears in such a wa$ that itse6istence is unknown or cannot be recovered.

c. If the thing deteriorates without the fault of the debtor,the creditor &ust accept the thing in its i&pairedcondition


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d. If the thing deteriorates through the fault of the debtor,the creditor &a$ choose between

i. esolution */rticle 55H>+ plus da&ages

ii. @ulfill&ent of the obligation plus da&ages

e. If the thing is i&proved b$ nature or b$ ti&e, the

i&prove&ent shall inure to the benefit of the creditorf. If the thing is i&proved at the e6pense of the debtor, the

debtor shall the sa&e rights as a usufructuar$

L


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ii. o give a generic t%ing

• e&edies /vailable to the Creditor

5. 0pecific perfor&ance 8 the debtor &ust perfor& itpersonall$

7. 0ubstitute perfor&ance 8 done b$ so&eone else *perfor& at

the e6pense of the debtor+

. %uivalent perfor&ance 8 da&ages

• 4a&ages &a$ be obtained e6clusivel$ or in addition tothe 5st 7 actions.

c. To do */rticle 55


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• Summary of the rules regarding remedies available to the creditor in

obligations to give, to do and not to do.

Obligation

@pecific

Perfor%ance

5uivalent

Perfor%ance

@ubstitute

Perfor%ance

1. $o give

a. *eter%inate thing M M N

b. *eter%inable thing M M M

#. $o do

a. 7ery personal N M N

b. ot very personal N M M

&. ot to do N M M

• 0pecific perfor&ance is the perfor&ance of the prestation itself.

• In obligations to do or not to do, specific perfor&ance is not

available since it will go against the constitutional prohibitionagainst involuntar$ servitude.

• %uivalent perfor&ance is the pa$&ent of da&ages

• 0ubstitute perfor&ance is when so&eone else perfor&s or so&ethingelse is perfor&ed at the e6pense of the debtor.

7. Irregularity in Perfor%ance

a. Attribtable to the Debtor cl*able2

• /rticle 55E; provides that those who in the perfor&ance of theirobligations are guilt$ of fraud, negligence, or dela$ and those whoin an$ &anner contravene the tenor thereof, are liable forda&ages. /ccording to Professor Balane, the phrase " who in an$&anner contravene the tenor thereof# is a catch3all provision.1owever, such is unnecessar$. 9othing will escape fraud,negligence or dela$.

i. -raud */rticles 55E;, 55E5+

Art. 11%(. $hose ho in the perfor%ance of their

obligations are guilty of fraud, negligence, or delay, andthose ho in any %anner contravene the tenor thereof, are

liable for da%ages.

Art. 11%1. "esponsibility arising fro% fraud is

de%andable in all obligations. Any aiver of an action for

future fraud is void.

• The proble& with fraud is the ter&. It is used in different&eanings in the Code.

• @raud &a$ be defined as the voluntar$ e6ecution of a wrongfulact, or willful o&ission, knowing and intending the effects whichnaturall$ and necessaril$ arise fro& such act or o&ission.@raud is the deliberate and intentional evasion of the nor&al


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fulfill&ent of the obligation. It is distinguished fro& negligenceb$ the presence of deliberate intent, which is lacking in thelatter. #egaspi !il vs. CA$

• @raud under /rticle 55E; is &ore properl$ called as &alice.

• @raud under /rticle 55E; &ust not be confused with fraud

under /rticle 5H♣

. @raud under /rticle 5H is &ore properl$called as deceit.

• In /rticle 5H, fraud pree6ists the obligation, thus theobligation is voidable. 4eceit vitiates consent in contracts.4eceit is antecedent fraud. The deceit occurs b$ using insidiouswords &achinations. !ithout this deceit, the other part$ wouldnot have entered into the contract.

In /rticle 55E5, there was alread$ an obligation before thefraud e6ists. alice is subse%uent fraud.

Example of fraud as deceit under Article 1//: / and B enteredinto a contract of sale of a dia&ond necklace. 1owever, the

necklace was reall$ &ade of glass. @raud here is deceit. Therewas vitiation of consent hence the contract is voidable.

Example of fraud as malice under Article 111. / and Bentered into a contract. B will deliver furniture &ade of narrabut B delivered one &ade of pl$wood. @raud here is malice. Itwill not affect the validit$ of the contract.

• ffects of @raud */rticles 55E;, 55E5+

5. Creditor &a$ insist on proper substitute or specificperfor&ance */rticle 57♦+' or

7. escissionesolution */rticle 55>5♥+

. 4a&ages in either case */rticle 55E;+

ii. "egligence

• 9egligence is the absence of due diligence */rticle 55E+

Art. 11%. $he fault or negligence of the obligor

consists in the o%ission of that diligence hich is re5uired

by the nature of the obligation and corresponds ith the

Art. 1//. There is fraud when, through insidious words or &achinations of one of thecontracting parties, the other is induced to enter into a contract which, without the&, hewould not have agreed to. /rt. 57. / debt shall not be understood to have been paid unless the thing or service inwhich the obligation consists has been co&pletel$ delivered or rendered, as the case &a$ be. Art. 1191. The power to rescind obligations is i&plied in reciprocal ones, in case one of theobligors should not co&pl$ with what is incu&bent upon hi&.

The in2ured part$ &a$ choose between the fulfill&ent and the rescission of theobligation, with the pa$&ent of da&ages in either case. 1e &a$ also seek rescission, evenafter he has chosen fulfill&ent, if the latter should beco&e i&possible.

The court shall decree the rescission clai&ed, unless there be 2ust cause authori-ingthe fi6ing of a period.

This is understood to be without pre2udice to the rights of third persons who haveac%uired the thing, in accordance with articles 5HF and 5HH and the ortgage )aw.


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circu%stances of the persons, of the ti%e and of the place.;hen negligence shos bad faith, the provisions of articles

1181 and ##


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iii. 3ela( #2ora$

Art. 116'. $hose obliged to deliver or to doso%ething incur in delay fro% the ti%e the obligee judicially

or e4trajudicially de%ands fro% the% the fulfill%ent of theirobligation.

9oever, the de%and by the creditor shall not benecessary in order that delay %ay e4ist-

1/ ;hen the obligation or the la e4pressly so declare

or

#/ ;hen fro% the nature and the circu%stances of theobligation it appears that the designation of the

ti%e hen the thing is to be delivered or the serviceis to be rendered as a controlling %otive for the

establish%ent of the contract or

&/ ;hen de%and ould be useless, as hen the

obligor has rendered it beyond his poer to

perfor%.In reciprocal obligations, neither party incurs in delay

if the other does not co%ply or is not ready to co%ply in a

proper %anner ith hat is incu%bent upon hi%. +ro% the%o%ent one of the parties fulfills his obligation, delay by

the other begins.

• 4ela$ has nothing to do with %ualit$ but onl$ with punctualit$.

• 4ela$ is the non3fulfill&ent of the obligation with respect toti&e. In fraud and negligence, the %uestion is the %ualit$ evenif perfor&ed on ti&e. In dela$, even if the %ualit$ is e6cellentbut the perfor&ance is not in due ti&e, the debtor is liable.

• e%uisites of dela$ # vs. 2oon)al$

• Obligation is de&andable and li%uidated

• 4ela$ is through fault or negligence

• Creditor re%uires perfor&ance either 2udiciall$ *throughcourt action+ or e6tra2udiciall$ *an$ co&&unication b$ thecreditor to debtor+.

• In reciprocal obligations *obligations with a counterpartprestation+ which re%uire si&ultaneous perfor&ance, de&and isstill needed.

• 5%at is t%e form of suc% demand6 /n$ co&&unication of a

part$ that he is read$ and willing to co&pl$ with hisobligation. If after receipt of de&and and the other part$does not co&pl$ with his obligation, he is in dela$.

• inds of 4ela$

5. 2ora solvendi

• 4ela$ in perfor&ance incurred b$ the debtor.

• e%uisites:


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a. The obligation is de&andable and li%uidated

b. 4ebtor dela$s perfor&ance either because of dolo orculpa

c. The creditor de&ands the perfor&ance either 2udiciall$ or e6tra2udiciall$

• !eneral "ule- 4e&and is necessar$. *mora solvendi ex persona+. Thus, no de&and, no dela$.

• E)ce*tions+ *mora solvendi ex re+ 8 /rticle 55

a. !hen the obligation or the law e6pressl$ so declares

• ere setting of due date is not enough. Thisdoes not constitute auto&atic dela$.

• There &ust be an e6press stipulation to thefollowing effect: "9on3perfor&ance on that da$ isdela$ without need of de&and.# #3ela 7osa vs.8&$

b. !hen it appears fro& the nature and circu&stancesof the obligation that ti&e was a controlling &otivefor the establish&ent of the contract.

• Example: The wedding gown has to be read$before the wedding.

c. !hen de&and would be useless, when obligor hasrendered it be$ond his power to perfor&.

• Example: / sold the fruits of the &angoplantation he alread$ sold to B to C. B need not&ake a de&and on / to deliver the fruits sincede&and would be useless.

• ffects of 2ora olvedi

a. !hen the obligation is to deliver a deter&inate thing,the risk is placed on the part of the debtor */rticle555+

7. 2ora accipiendi

• The creditor incurs in dela$ when debtor tenderspa$&ent or perfor&ance, but the creditor refuses toaccept it without 2ust cause.

• 2ora accipiendi is related to pa$&ent *consignation+.

Art. 11;. !hen what is to be delivered is a deter&inate thing, the creditor, in addition tothe right granted hi& b$ article 55E;, &a$ co&pel the debtor to &ake the deliver$.

If the thing is indeter&inate or generic, he &a$ ask that the obligation be co&pliedwith at the e6pense of the debtor.

If the obligor dela$s, or has pro&ised to deliver the sa&e thing to two or &orepersons who do not have the sa&e interest, he shall be responsible for an$ fortuitous eventuntil he has effected the deliver$.


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• e%uisites:

a. /n offer of perfor&ance b$ the debtor who has there%uired capacit$

b. The offer &ust be to co&pl$ with the prestation as itshould be perfor&ed

c. The creditor refuses the perfor&ance without 2ustcause.

• ffects of 2ora Accipiendi:

a. esponsibilit$ of debtor for the thing is li&ited tofraud and gross negligence

b. 4ebtor is e6e&pted fro& risk of loss of thing wcauto&aticall$ pass to creditor

c. 6penses incurred b$ debtor for preservation of thingafter the dela$ shall be chargeable to creditor.

d. If the obligation has interest, debtor shall not have

obligation to pa$ the sa&e fro& the ti&e of thedela$

e. Creditor beco&es liable for da&ages

f. 4ebtor &a$ relieve hi&self b$ consignation of thething

. Compensatio morae

• 4ela$ on both sides in reciprocal obligations, cancel eachother out.

b. -ot Attribtable to the Debtor non3cl*able2

• -ortuitous event

Art. 11%/. 4cept in cases e4pressly specified by thela, or hen it is otherise declared by stipulation, or hen

the nature of the obligation re5uires the assu%ption of ris(,no person shall be responsible for those events hich could

not be foreseen, or hich, though foreseen, ere inevitable.

• /lso governed b$ /rticle 5775∅ but is called loss( there, a causefo e6tinguish&ent of obligation.

• /lso called caso fortuioto, force marjeure, act of God.

• e%uisites #"apil vs. CA$

Art. 1


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5. The cause of the unforeseen and une6pected occurrence, orthe failure to co&pl$ with his obligations, &ust beindependent of the hu&an will

7. It &ust be i&possible to foresee the event which constitutethe caso fortuito, or if it can be foreseen, it &ust bei&possible to avoid

. The occurrence &ust be such as to render it i&possible forthe debtor to fulfill his obligation in a nor&al &anner

=. The obligor &ust be free fro& an$ participation in theaggravation of the in2ur$ resulting to the creditor

• !eneral "ule- !hen a debtor is unable to fulfill his obligationbecause of a fortuitous event or force majeure, he cannot beheld liable for da&ages or non3perfor&ance.

• E)ce*tions+

5. !hen the law so provides *i.e. /rticle 55FE, 5=5 and 5>


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$he receipt of a later install%ent of a debt ithoutreservation as to prior install%ents, shall li(eise raise the

presu%ption that such install%ents have been paid.

• 7 Presu&ptions regarding:

a. Interest bearing debt

• Presu&ption that interest has been paid if the principal hasbeen received without reservation regarding interest,

b. 4ebt pa$able in install&ents

• Presu&ption that earlier install&ents have been paid if the laterinstall&ent has been received without reservation regarding theprevious install&ents.

• These are onl$ rebuttable presu&ptions, $ou can prove through otherevidence. Jou can prove &istake.

Art. 11%%. $he creditors, after having pursued the property

in possession of the debtor to satisfy their clai%s, %ay e4ercise allthe rights and bring all the actions of the latter for the sa%e

purpose, save those hich are inherent in his person they %ayalso i%pugn the acts hich the debtor %ay have done to defraud

the%.

• nforce&ent of Creditor(s e&edies

a. )ev$ and e6ecution of the debtor(s non3e6e&pt properties */rticles55EE, 77


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• e%uisites:

i. There is a credit in favor of the plaintiff

ii. The debtor has perfor&ed an act subse%uent to thecontract, giving advantage to other persons.

iii. The creditor is pre2udiced b$ the debtor(s act which are in

favor of third parties and rescission will benefit the creditor.

iv. The creditor has no other legal re&ed$.

v. The debtor(s acts are fraudulent.

d. Accion directa

• / direct *not subrogator$+ action b$ the creditor against hisdebtor(s debtor, a re&ed$ which gives the creditor theprerogative to act in his own na&e, such as the actions of thelessor against the sublessee */rticle 5?+, theprincipal against the subagent */rticle 5H>♣+, and the vendor3a3retro against the transferee of the vendee */rticle 5


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• Example 355>7+

Art. 11%'. very obligation hose perfor%ance does notdepend upon a future or uncertain event, or upon a past event

un(non to the parties, is de%andable at once.

very obligation hich contains a resolutory condition shall

also be de%andable, ithout prejudice to the effects of thehappening of the event.

Art. 11&(. ;hen the debtor binds hi%self to pay hen his

%eans per%it hi% to do so, the obligation shall be dee%ed to beone ith a period, subject to the provisions of article 11?8.

Art. 11&1. In conditional obligations, the ac5uisition of

rights, as ell as the e4tinguish%ent or loss of those alreadyac5uired, shall depend upon the happening of the event hich

constitutes the condition.

Art. 11&,. ;hen the fulfill%ent of the condition dependsupon the sole ill of the debtor, the conditional obligation shall be

void. If it depends upon chance or upon the ill of a third person,the obligation shall ta(e effect in confor%ity ith the provisions of

this Code.

Art. 11&. I%possible conditions, those contrary to good

custo%s or public policy and those prohibited by la shall annulthe obligation hich depends upon the%. If the obligation isdivisible, that part thereof hich is not affected by the i%possible

or unlaful condition shall be valid.

$he condition not to do an i%possible thing shall be

considered as not having been agreed upon.

Art. 11&/. $he condition that so%e event happen at adeter%inate ti%e shall e4tinguish the obligation as soon as the

piece of work/

#customer$labor

CBcontract of contract for a

#contractor$ #)orer$


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ti%e e4pires or if it has beco%e indubitable that the event ill notta(e place.

Art. 11&5. $he condition that so%e event ill not happen at

a deter%inate ti%e shall render the obligation effective fro% the%o%ent the ti%e indicated has elapsed, or if it has beco%e

evident that the event cannot occur.If no ti%e has been fi4ed, the condition shall be dee%ed

fulfilled at such ti%e as %ay have probably been conte%plated,bearing in %ind the nature of the obligation.

Art. 11&6. $he condition shall be dee%ed fulfilled hen the

obligor voluntarily prevents its fulfill%ent.

Art. 11&%. $he effects of a conditional obligation to give,once the condition has been fulfilled, shall retroact to the day of

the constitution of the obligation. evertheless, hen theobligation i%poses reciprocal prestations upon the parties, the

fruits and interests during the pendency of the condition shall bedee%ed to have been %utually co%pensated. If the obligation is

unilateral, the debtor shall appropriate the fruits and interests

received, unless fro% the nature and circu%stances of theobligation it should be inferred that the intention of the person

constituting the sa%e as different.

In obligations to do and not to do, the courts shalldeter%ine, in each case, the retroactive effect of the condition that

has been co%plied ith.

Art. 11&&. $he creditor %ay, before the fulfill%ent of thecondition, bring the appropriate actions for the preservation of his

right.

$he debtor %ay recover hat during the sa%e ti%e he has

paid by %ista(e in case of a suspensive condition.

Art. 11&'. ;hen the conditions have been i%posed ith theintention of suspending the efficacy of an obligation to give, the

folloing rules shall be observed in case of the i%prove%ent, lossor deterioration of the thing during the pendency of the condition-

1/ If the thing is lost ithout the fault of the debtor, the

obligation shall be e4tinguished

#/ If the thing is lost through the fault of the debtor, he shallbe obliged to pay da%ages it is understood that the thing

is lost hen it perishes, or goes out of co%%erce, ordisappears in such a ay that its e4istence is un(non or

it cannot be recovered

&/ ;hen the thing deteriorates ithout the fault of the

debtor, the i%pair%ent is to be borne by the creditor

'/ If it deteriorates through the fault of the debtor, the

creditor %ay choose beteen the rescission of theobligation and its fulfill%ent, ith inde%nity for da%ages

in either case


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)/ If the thing is i%proved by its nature, or by ti%e, thei%prove%ent shall inure to the benefit of the creditor

=/ If it is i%proved at the e4pense of the debtor, he shallhave no other right than that granted to the usufructuary.

Art. 11'(. ;hen the conditions have for their purpose the

e4tinguish%ent of an obligation to give, the parties, upon thefulfill%ent of said conditions, shall return to each other hat they

have received.

In case of the loss, deterioration or i%prove%ent of thething, the provisions hich, ith respect to the debtor, are laid

don in the preceding article shall be applied to the party ho is

bound to return.

As for the obligations to do and not to do, the provisions of

the second paragraph of article 11>8 shall be observed as regardsthe effect of the e4tinguish%ent of the obligation.

Art. 11'1. $he poer to rescind obligations is i%plied in

reciprocal ones, in case one of the obligors should not co%ply ithhat is incu%bent upon hi%.

$he injured party %ay choose beteen the fulfill%ent andthe rescission of the obligation, ith the pay%ent of da%ages in

either case. 9e %ay also see( rescission, even after he has chosenfulfill%ent, if the latter should beco%e i%possible.

$he court shall decree the rescission clai%ed, unless there

be just cause authorizing the fi4ing of a period.

$his is understood to be ithout prejudice to the rights of third persons ho have ac5uired the thing, in accordance ith

articles 1&>) and 1&>> and the ortgage 0a.

Art. 11',. In case both parties have co%%itted a breach of the obligation, the liability of the first infractor shall be e5uitably

te%pered by the courts. If it cannot be deter%ined hich of theparties first violated the contract, the sa%e shall be dee%ed

e4tinguished, and each shall bear his on da%ages.

a. re

• / pure obligation is one which has neither a condition nor a ter&attached to it. It is one which is sub2ect to no contingenc$.

• / pure obligation is de&andable at once */rticle 55E>+.

b. Conditional

• / condition is a future and uncertain event.

• /ll conditions are future.

• /rticle 55E> &entions the ter& "past event unknown to theparties#. This has been critici-ed b$ &an$ co&&entators. This is acontradiction in ter&s. The condition in a past even unknown tothe parties is knowledge b$ the parties of the past event.


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• In conditional obligation, the happening of the condition deter&inesits birth or death. In ter&, the happening of the ter& deter&inesits de&andabilit$.

• T$pes of Conditions

i. 5. uspensive

• The fulfill&ent of a suspensive condition results in theac%uisition of rights arising out of the obligation.

• The condition that so&e event happen at a deter&inateti&e shall e6tinguish the obligation as soon as the ti&ee6pires or if it has beco&e indubitable that the event willnot take place */rticle 55H=+

• The condition that so&e event will not happen at adeter&inate ti&e shall render the obligation effectivefro& the &o&ent the ti&e indicated has elapsed, or if ithas beco&e evident that the event cannot occur */rticle55HF+.

• The &o&ent the suspensive condition happens, theobligation beco&es effective and enforceable. 1owever,the effects of the obligation retroact to the &o&entwhen such obligation was constituted or created. B$ theprinciple of retroactivit$, therefore, a fiction is createdwhereb$ the binding tie of the conditional obligation isproduced fro& the ti&e of its perfection, and not fro&the happening of the condition */rticle 55HE+

• The law does not re%uire the deliver$ or pa$&ent of thefruits or interests accruing before the happening of thesuspensive condition. The right to the fruits of the thingis not within the principle of retroactivit$ of conditional

obligations */rticle 55HE+

• If the obligation i&poses reciprocal prestations, fruitsand interest are dee&ed &utuall$ co&pensated.

Example: I pro&ise to sell &$ &ango plantation atPF;;;hectare if $ou pass the bar e6a&ination.

I do not have to give $ou the fruits fro& the ti&e of theagree&ent to the release of the bar e6a&s.

• If the obligation is unilateral, debtor appropriates thefruits.

• In obligations to do and not to do, the courts shall use

sound discretion to deter&ine the retroactive effect of the fulfill&ent of the condition */rticle 55HE+

• The creditor &a$, before the fulfill&ent of the condition,bring the appropriate actions for the preservation of hisright */rticle 55HH, 5st Q+. B) e$es critici-es the use of the word "bring#. The 5st Q of /rticle 55HH does not li&ititself to 2udicial actions. Thus, the word "take# is better.


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• The debtor who paid before the happening of thecondition &a$ recover onl$ when he paid b$ &istake andprovided the action to recover is brought before thecondition */rticle 55HH+.

7. 7esolutor(

• The fulfill&ent of the resolutor$ condition results in thee6tinguish&ents of rights arising out of the obligation.

• If the resolutor$ condition is fulfilled, the obligation istreated as if it did not e6ist. Thus, each part$ is boundto return to the other whatever he has received, so thatthe$ &a$ be returned to their original condition beforethe creation of the obligation */rticle 55>;+.

• esolution */rticle 55>5+ is found on the conditionalobligations because if there is a breach, the breach is aresolutor$ condition which e6tinguishes the obligation.

• /rticle 55>5 uses the ter& "rescission#. The better

ter& is "resolution#. The ter& rescission is also found in/rticle 5H5♥, rescissible contracts. esolution isdifferent fro& rescission. esolution is based on thenon3fulfill&ent of the obligation. escission is based onecono&ic pre2udice. @urther&ore, the character of resolution is principal and retaliator$ while the characterof rescission is subsidiar$. This &eans that in resolutionthere is no need to show that there is no other re&ed$.In rescission, the plaintiff &ust show that there is noother recourse.

• The right of resolution applies to reciprocal obligations.

• / reciprocal obligation has 7 ele&ents

5. 7 prestations arising fro& the sa&e source

7. ach prestation is designed to be the counterpart of the other

• /n e6a&ple of a reciprocal obligation is a contract of sale.

• 0u&&ar$ of ulings on esolution

5. The right to resolve is in inherent in reciprocalobligations.

Art. 1/1. The following contracts are rescissible:*5+ Those which are entered into b$ guardians whenever the wards who& the$ represent

suffer lesion b$ &ore than one3fourth of the value of the things which are the ob2ectthereof'

*7+ Those agreed upon in representation of absentees, if the latter suffer the lesion statedin the preceding nu&ber'

*+ Those undertaken in fraud of creditors when the latter cannot in an$ other &annercollect the clai&s due the&'

*=+ Those which refer to things under litigation if the$ have been entered into b$ thedefendant without the knowledge and approval of the litigants or of co&petent 2udicialauthorit$'

*F+ /ll other contracts speciall$ declared b$ law to be sub2ect to rescission.


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7. The breach of the obligation &ust be substantial.Proof of substantial breach is a prere%uisite forresolution.

. The right of resolution can be e6ercisede6tra2udiciall$ and will take effect uponco&&unication to the defaulting part$. This notice of

resolution is necessar$.

=. The e6ercise of this right can be the sub2ect of 2udicial review.

F. Kpon resolution, there &ust be &utual restitution of the ob2ect and its fruits

• The parties are returned to their original situation8 status >uo ante.


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of the will of the debtor. There is no ele&ent of co&pulsion. In the e6a&ple above, the creditor cannever co&pel, can never have a cause of action.

• In reciprocal obligations, the law onl$ talks about thefirst prestation, the reciprocal prestation is not takeninto consideration.

7. Casual

• In a casual condition, the fulfill&ent of the conditiondepends upon chance andor upon the will of a rd

person and not on the will of a part$.

• Example: I will give $ou &$ house if the Philippinesrenounces its foreign debt in F $ears. *4ependent solel$on the will of a third person or on chance+.


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. 2ixed

• In a &i6ed condition, the fulfill&ent of the conditiondepends partl$ upon the will of a part$ to the obligationand partl$ upon chance andor the will of a rd person.

• !hen the condition depends not onl$ upon the will of

the debtor, but also upon chance or will of the others,the obligation is valid.

• Example: I will give $ou &$ house if $ou &arr$ hi&within $ears. *The condition here is a &i6ed condition.In this case, the condition of &arriage depends partl$on the creditor, a part$ to the obligation, and partl$ on ard person.+

• 4octrine of Constructive Co&pliance

• The condition shall be dee&ed fulfilled when the obligorvoluntaril$ prevents its fulfill&ent */rticle 55H


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• 1owever, if the obligation is divisible and that part of theobligation is not unaffected b$ the i&possible condition,then the obligation is valid */rticle 55H+.

• ustice Paras distinguishes as follows:

5. Positive condition to do so&ething i&possible

• oid condition and obligation

7. 9egative condition not to do so&ething i&possible

• 4isregard the condition, the obligation is valid

. 9egative condition not to do so&ething illegal

• alid condition and obligation

iv. 5. &ositive

• / condition is positive when the condition involves theperfor&ance of an act.

7. "egative

• / condition is negative when the condition involves thenon3perfor&ance of an act.

v. 5. 3ivisible

• / condition is divisible when the condition is susceptibleof partial reali-ation.

7. ndivisible

• / condition is indivisible when the condition is notsusceptible of partial reali-ation.

vi. 5. Conjunctive

• / condition is con2unctive when there are severalconditions, all of which &ust be reali-ed.

7. Alternative

• / condition is alternative when there are severalconditions, onl$ one of which &ust be reali-ed.

vii. 5. Express

• / condition is e6press when the condition is statede6pressl$.

7. mplied

• / condition is i&plied when the condition is tacit.

c. Ter" */rticles 55>355>H+

Art. 11'. Obligations for hose fulfill%ent a day

certain has been fi4ed, shall be de%andable only hen that dayco%es.

Obligations ith a resolutory period ta(e effect at once,but ter%inate upon arrival of the day certain.


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A day certain is understood to be that hich %ustnecessarily co%e, although it %ay not be (non hen.

If the uncertainty consists in hether the day ill co%eor not, the obligation is conditional, and it shall be regulated by

the rules of the preceding @ection.

Art. 11'/. In case of loss, deterioration or i%prove%entof the thing before the arrival of the day certain, the rules in

article 11>? shall be observed.

Art. 11'5. Anything paid or delivered before the arrivalof the period, the obligor being unaare of the period or

believing that the obligation has beco%e due and de%andable,%ay be recovered, ith the fruits and interests.

Art. 11'6. ;henever in an obligation a period is

designated, it is presu%ed to have been established for thebenefit of both the creditor and the debtor, unless fro% the

tenor of the sa%e or other circu%stances it should appear thatthe period has been established in favor of one or of the other.

Art. 11'%. If the obligation does not fi4 a period, butfro% its nature and the circu%stances it can be inferred that a

period as intended, the courts %ay fi4 the duration thereof.

$he courts shall also fi4 the duration of the period henit depends upon the ill of the debtor.

In every case, the courts shall deter%ine such period as%ay under the circu%stances have been probably

conte%plated by the parties. Once fi4ed by the courts, theperiod cannot be changed by the%.

Art. 11'&. $he debtor shall lose every right to %a(e use

of the period-

1/ ;hen after the obligation has been contracted, he

beco%es insolvent, unless he gives a guaranty orsecurity for the debt

#/ ;hen he does not furnish to the creditor the guarantiesor securities hich he has pro%ised

&/ ;hen by his on acts he has i%paired said guaranties

or securities after their establish%ent, and hen

through a fortuitous event they disappear, unless hei%%ediately gives ne ones e5ually satisfactory

'/ ;hen the debtor violates any underta(ing, inconsideration of hich the creditor agreed to the

period

)/ ;hen the debtor atte%pts to abscond.

• / ter& is a length of ti&e which, e6erting an influence on anobligation as a conse%uence of 2uridical acts, suspends itsde&andabilit$ or deter&ines its e6tinguish&ent.


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• / ter& is a future and certain event *i.e. death+

• !hen the debtor binds hi&self to pa$ when his &eans per&it hi&to do so, the obligation is one with a ter& */rticle 55H;+. /lthough/rticle 55H; looks like a condition dependent on the sole will of thedebtor, the law treats it as a ter&.

• If prepa$&ent is &ade without the debtor being aware that theperiod had not $et arrived, then the thing and the fruits can berecovered */rticle 55>F+. If prepa$&ent is &ade and the debtorwas aware that the period had not $et arrived, then the debtorwaives the benefit of the ter&.

• /n obligation was entered on a$ 5, 7;;7 between / and B.The obligation is to be perfor&ed on October 5, 7;;7. /delivers on 0epte&ber 5, 7;;7 b$ &istake to B. / discovers his&istake and tells B to return the ob2ect and the fruits delivered.

/rticle 55>F does not answer who is entitled to the fruits whichhave been produced in the &eanti&e *a$ 5, 7;;7 to October5, 7;;7+.

/ccording to the 0panish Code, the debtor */+ can onl$ fruits.

There are 7 views:

i. The debtor is entitled to the fruits produced in the&eanti&e *Tolentino+

• This is because deliver$ is not re%uired until October 5.

ii. The creditor is entitled to the fruits since the obligation isde&andable onl$ when the period arrives

• This is because the obligation is alread$ e6istingalthough it is not $et de&andable.

• Professor Balane believes that the fruits belong to thedebtor. !h$ would /rticle 55>F allow the debtor to recoverthe fruits if he should still give the& back after the ter&co&es.

• Instances when the @ruits Cannot be ecovered

i. !hen the obligation is reciprocal and there has beenprepa$&ent of both sides

ii. !hen the obligation is a loan and the debtor is bound to pa$interest

iii. !hen the period is e6clusivel$ for the creditor(s benefit

iv. !hen the debtor is aware of the period and pa$s an$wa$ 8waiver

• The presu&ption is that the period is for the benefit of both thedebtor and the creditor */rticle 55>


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Example: / issues a pro&issor$ note to B de&andable on October5F. / cannot insist on prepa$&ent nor can B insist that he be paidon 0epte&ber.

• If the period is for the benefit of the creditor onl$, the creditor cande&and perfor&ance at an$ ti&e, but the debtor cannot co&pelhi& to accept pa$&ent before the period e6pires.

• If the period is for the benefit of the debtor onl$, the debtor can he&a$ oppose a pre&ature de&and for pa$&ent, but &a$ validl$ pa$at an$ ti&e before the period e6pires.

• !hen the obligation is worded such that pa$&ent it to be &ade "within < &onths#, the period is for the benefit of the debtor.

• !hen the obligation is worded such that pa$&ent is to be &ade "on or before#, the period is for the benefit of the debtor.

• The debtor shall lose ever$ right to &ake use of the period:

i. !hen after the obligation has been contracted, the debtorbeco&es insolvent unless he gives a guarant$ or securit$ for

the debt */rticle 55>H *5++

• The insolvenc$ here need not be 2udicial. It can be actualinsolvenc$.

ii. !hen he does not furnish to the creditor the guaranties orsecurities which he has pro&ised */rticle 55>H *7++

iii. !hen b$ his own acts he has i&paired the said guaranties orsecurities after their establish&ent, and when through afortuitous event he$ disappear, unless he i&&ediatel$ givesnew ones e%uall$ satisfactor$ */rticle 55>H *++

iv. !hen the debtor violates an$ undertaking, in consideration of which the creditor agreed */rticle 55>H *=++

v. !hen the debtor atte&pts to abscond */rticle 55>H *F++

vi. !hen the creditor is deceived on the substance or %ualit$ of thething pledged, the creditor &a$ either clai& another thing in itsstead or de&and i&&ediate pa$&ent of the principal obligation*/rticle 75;>+

• T$pes of Periods

i. 5. uspensive *ex die+

• The period is suspensive when the obligation beco&esde&andable onl$ upon the arrival of the period.

7. 7esolutor( #in diem+

• The period is resolutor$ when the perfor&ance &ustter&inate upon the arrival of the period.

ii. 5. egal

• / period is legal when it is granted b$ law.

7. ?oluntar(

• / period is voluntar$ when it is stipulated b$ the parties.


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. @udicial

• / period is 2udicial when it is fi6ed b$ the courts.

• If the obligation does not fi6 a period, but fro& itsnature and the circu&stances it can be inferred that aperiod was intended, the courts &a$ fi6 the duration

thereof */rticle 55>E, 5st

Q+.• 7 steps involved in an action for fi6ing a period:

5. The court should deter&ine that the obligation doesnot fi6 a period but it can be inferred that a period isintended due to the circu&stances O the period isdependent on debtor(s will.

7. Court shall decide what period was probabl$conte&plated b$ the parties.

• Court should &ake an educated guess.

• Court should not fi6 a period which it thinks is fair

or reasonable but rather the period which wasprobabl$ conte&plated b$ the parties.

• Generall$, $ou cannot ask for specific perfor&ancebecause fi6ing a period conte&plates so&ething in thefuture, hence to ask for specific perfor&ance would beillogical.

• Instances !hen Court a$ @i6 a Period

5. /rticle 55>E, Q5

Art. 11'% 71. If the obligation does notfi4 a period, but fro% its nature and the

circu%stances it can be inferred that a periodas intended, the courts %ay fi4 the duration

thereof.

• 6ceptions

a. /rticles 5


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ee( to ee(, if the rent is ee(ly andfro% day to day, if the rent is to be paid

daily.

b. &acto de retro sales */rticle 5


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Art. 11&(. ;hen the debtor bindshi%self to pay hen his %eans per%it hi% to

do so, the obligation shall be dee%ed to be oneith a period, subject to the provisions of

Article 11?8.

iii. 5. 6press• / period is e6press when the period is specificall$

stated.

7. Tacit

• / period is tacit when a person undertakes to do so&ework which can be done onl$ during a particular season.

iv. 5. !riginal

7. *race

• / grace period is an e6tension fi6ed b$ the parties or b$the court.

v. 5. 3efinite

• / period is definite when it refers to a fi6ed known dateor ti&e.

7. ndefinite

• / period is indefinite when it refers to an event whichwill necessaril$ happen but the date of its happening isunknown *i.e. death+

7. According to Plurality of Object */rticles 55>>357;


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Art. 1,(/. $he creditor shall have a right to inde%nity forda%ages hen, through the fault of the debtor, all the things

hich are alternatively the object of the obligation have been lost,or the co%pliance of the obligation has beco%e i%possible.

$he inde%nity shall be fi4ed ta(ing as a basis the value of the last thing hich disappeared, or that of the service hich last

beca%e i%possible.

*a%ages other than the value of the last thing or service%ay also be aarded.

Art. 1,(5. ;hen the choice has been e4pressly given to the

creditor, the obligation shall cease to be alternative fro% the day

hen the selection has been co%%unicated to the debtor.

ntil then the responsibility of the debtor shall be governed

by the folloing rules-

1/ If one of the things is lost through a fortuitous event, he

shall perfor% the obligation by delivering that hich the

creditor should choose fro% a%ong the re%ainder, or thathich re%ains if only one subsists

#/ If the loss of one of the things occurs through the fault of

the debtor, the creditor %ay clai% any of those subsisting,or the price of that hich, through the fault of the for%er,

has disappeared, ith a right to da%ages

&/ If all the things are lost through the fault of the debtor,

the choice by the creditor shall fall upon the price of anyone of the%, also ith inde%nity for da%ages.

$he sa%e rules shall be applied to obligations to do or not to

do in case one, so%e or all of the prestations should beco%e

i%possible.

Art. 1,(6. ;hen only one prestation has been agreed upon,but the obligor %ay render another in substitution, the obligation

is called facultative.

$he loss or deterioration of the thing intended as a

substitute, through the negligence of the obligor, does not renderhi% liable. But once the substitution has been %ade, the obligor is

liable for the loss of the substitute on account of his delay,negligence or fraud.

a. Alternati8e

• /n obligation is alternative when several ob2ects or prestations are

due, but the pa$&ent or perfor&ance of 5 of the& would besufficient.

• / pro&ises to deliver either F;; kgs of rice or 5;;; liters of gas.The obligation is alternative. The debtor cannot perfor& theobligation b$ giving 7F; kgs of rice and F;; liters of gas unless thecreditor agrees. In which case there is a novation.

• !eneral "ule- The right of choice the right to belongs to thedebtor.


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• E)ce*tions+

i. !hen it is e6pressl$ granted to the creditor

ii. !hen it is agreed upon b$ the parties that a rd person shall&ake the choice

• The act of &aking the choice is called concentration. Once the

choice has been &ade, then the obligation is concentrated in 5ob2ect.

• !hoever has the right of choice &ust co&&unicate it to the otherpart$ */rticle 57;5+. The creditor has to co&&unicate his choiceto the debtor so that the debtor will know. On the other hand, in!ng *uan vs. Centur( nsurance, the 0upre&e Court said that thepurpose for notice to the creditor is to give the creditor theopportunit$ to e6press his consent or to i&pugn the election &adeb$ the debtor. Professor Balane does not agree with this state&entsince the creditor does not have the right to i&pugn, otherwise,the obligation would not be an alternative obligation. / betterreason according to Professor Balane is to give the creditor ti&e to

prepare.

Example: The choice is either to give dia&ond ring or a ercedesBen-. The debtor should notif$ the creditor so the creditor caneither rent a safet$ deposit bo6 or prepare a garage.

1owever, according to Professor Balane, the best reason is becauseonce the choice is co&&unicated, the obligation ceases to bealternative. The risk of loss belongs to the creditor now.

• Choice Belongs to the 4ebtor

i. !hen through fortuitous event or through the debtor(s acts,there is onl$ 5 prestation left, the obligation ceases to bealternative */rticle 57;7+.

ii. !hen the choice of the debtor is li&ited through the creditor(sown acts, then the debtor has the re&ed$ of resolution */rticle55>5+ plus da&ages */rticle 57;+

iii. !hen all the things are lost due to the debtor(s fault, thecreditor can sue for da&ages */rticle 57;=+

iv. !hen so&e things are lost due to the debtor(s fault but thereare still so&e things re&aining, then the debtor can choosefro& what(s left

v. !hen all the things are lost due to a fortuitous event, theobligation is e6tinguished

vi. !hen all but 5 of the things are lost due to a fortuitous eventand the last ob2ect is lost through the debtor(s fault, then thecreditor can sue for da&ages

vii. !hen all but 5 of the things are lost through the debtor(s ownacts and the last ob2ect is lost through a fortuitous event, theobligation is e6tinguished

• Choice Belongs to the Creditor */rticle 57;F+


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i. !hen 5 or so&e of the ob2ects are lost through fortuitousevents, then the creditor chooses fro& the re&ainder

ii. !hen 5 or so&e of the ob2ects are lost due to the debtor(sfault, the creditor &a$ choose fro& the re&ainder or get thevalue of an$ of the ob2ects lost plus da&ages in either case

iii. !hen all of the things are lost due to the debtor(s fault, thecreditor can get the value of an$ of the ob2ects lost plusda&ages

iv. !hen so&e are lost through the debtor(s fault, the creditorchooses fro& the re&ainder

v. !hen all the ob2ects are lost due to a fortuitous event, then theobligation is e6tinguished

vi. !hen all the ob2ects are lost due to the creditor(s fault, theobligation is e6tinguished


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b. 9acltati8e

• /n obligation is facultative when onl$ 5 ob2ect or prestation hasbeen agreed upon b$ the parties to the obligation, but the debtor&a$ deliver or render another in substitution.

• @acultative obligations bear a rese&blance to alternative

obligations particularl$ when the choice in an alternative obligationis with the debtor.

• In a facultative obligation, the right of choice is alwa$s with thedebtor.

• In an alternative obligation, if 5 of the prestations is i&possible,then there are other choices. In a facultative obligation, if theprincipal obligation is i&possible, then ever$thing is annulled.

• In theor$, it is eas$ to distinguish a facultative obligation fro& analternative obligation. In practice, it is difficult to do so since &ostof the ti&e, the words are a&biguous. @or e6a&ple, I pro&ise todeliver &$ 1onda /ccord, but I reserve &$ right to substitute this

with &$ Gold ole6. In this case, it is not ver$ clear whether theobligation is alternative or facultative. /ccording to ProfessorBalane, the rule is that one &ust look at the circu&stances of theobligation. If it is i&possible to deter&ine which one, then thedoubt should be resolved in the favor of an alternative obligationsince its effects are less radical.

. According to Plurality of @ubject */rticles 57;E35777+

Art. 1,(%. $he concurrence of to or %ore creditors or of

to or %ore debtors in one and the sa%e obligation does noti%ply that each one of the for%er has a right to de%and, or that

each one of the latter is bound to render, entire co%pliance ith

the prestation. $here is a solidary liability only hen the obligatione4pressly so states, or hen the la or the nature of theobligation re5uires solidarity.

Art. 1,(&. If fro% the la, or the nature or the ording of

the obligations to hich the preceding article refers the contrarydoes not appear, the credit or debt shall be presu%ed to be

divided into as %any shares as there are creditors or debtors, thecredits or debts being considered distinct fro% one another,

subject to the "ules of Court governing the %ultiplicity of suits.

Art. 1,('. If the division is i%possible, the right of the

creditors %ay be prejudiced only by their collective acts, and thedebt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable

for his share.

Art. 1,1(. $he indivisibility of an obligation does notnecessarily give rise to solidarity. or does solidarity of itself

i%ply indivisibility.


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Art. 1,11. @olidarity %ay e4ist although the creditors andthe debtors %ay not be bound in the sa%e %anner and by the

sa%e periods and conditions.

Art. 1,1,. ach one of the solidary creditors %ay dohatever %ay be useful to the others, but not anything hich %ay

be prejudicial to the latter.

Art. 1,1. A solidary creditor cannot assign his rights

ithout the consent of the others.

Art. 1,1/. $he debtor %ay pay any one of the solidary

creditors but if any de%and, judicial or e4trajudicial, has been%ade by one of the%, pay%ent should be %ade to hi%.

Art. 1,15. ovation, co%pensation, confusion or re%ission

of the debt, %ade by any of the solidary creditors or ith any of the solidary debtors, shall e4tinguish the obligation, ithout

prejudice to the provisions of article 1#1?.

$he creditor ho %ay have e4ecuted any of these acts, as

ell as he ho collects the debt, shall be liable to the others for

the share in the obligation corresponding to the%.

Art. 1,16. $he creditor %ay proceed against any one of the

solidary debtors or so%e or all of the% si%ultaneously. $hede%and %ade against one of the% shall not be an obstacle to

those hich %ay subse5uently be directed against the others, solong as the debt has not been fully collected.

Art. 1,1%. Pay%ent %ade by one of the solidary debtors

e4tinguishes the obligation. If to or %ore solidary debtors offer

to pay, the creditor %ay choose hich offer to accept.

9e ho %ade the pay%ent %ay clai% fro% his co3debtorsonly the share hich corresponds to each, ith the interest for the

pay%ent already %ade. If the pay%ent is %ade before the debt is

due, no interest for the intervening period %ay be de%anded.

;hen one of the solidary debtors cannot, because of hisinsolvency, rei%burse his share to the debtor paying the

obligation, such share shall be borne by all his co3debtors, inproportion to the debt of each.

Art. 1,1&. Pay%ent by a solidary debtor shall not entitle

hi% to rei%burse%ent fro% his co3debtors if such pay%ent is

%ade after the obligation has prescribed or beco%e illegal.

Art. 1,1'. $he re%ission %ade by the creditor of the share

hich affects one of the solidary debtors does not release thelatter fro% his responsibility toards the co3debtors, in case the

debt had been totally paid by anyone of the% before the re%ission

as effected.


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Art. 1,,(. $he re%ission of the hole obligation, obtainedby one of the solidary debtors, does not entitle hi% to

rei%burse%ent fro% his co3debtors.

Art. 1,,1. If the thing has been lost or if the prestation hasbeco%e i%possible ithout the fault of the solidary debtors, the

obligation shall be e4tinguished.If there as fault on the part of any one of the%, all shall be

responsible to the creditor, for the price and the pay%ent of da%ages and interest, ithout prejudice to their action against

the guilty or negligent debtor.

If through a fortuitous event, the thing is lost or the

perfor%ance has beco%e i%possible after one of the solidarydebtors has incurred in delay through the judicial or e4trajudicial

de%and upon hi% by the creditor, the provisions of the precedingparagraph shall apply.

Art. 1,,,. A solidary debtor %ay, in actions filed by the

creditor, avail hi%self of all defenses hich are derived fro% thenature of the obligation and of those hich are personal to hi%, or

pertain to his on share. ;ith respect to those hich personallybelong to the others, he %ay avail hi%self thereof only as regards

that part of the debt for hich the latter are responsible.

a. $ingle

• /n obligation is single when there is onl$ 5 debtor and 5 creditor.

b. :oint

• /n obligation is 2oint when each of the debtor is liable onl$ for aproportional part of the debt, and each creditor is entitled onl$ to a

partial part of the credit.• / 2oint obligation is also called mancomunada, pro rata,

mancomunada si&ple.

• !eneral "ule- The obligation is 2oint since 2oint obligations areless onerous.

• E)ce*tions+

i. /gree&ent of the parties

ii. )aw *i.e. tort feasors are solidaril$ liable+

iii. 9ature of the obligation

• /ccording to &an$ co&&entators, this is superfluous since

a solidar$ obligation arises because of law.

• EE"A "A7E: There are as &an$ obligations as there arecreditors &ultiplied b$ as &an$ debtors.

• T$pes of oint Obligations

i. Active joint

• In active 2oint, there are &ultiple creditors.


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• /, B, and C are creditors, and D is the debtor. If theobligation is 2oint, there are obligations 8 D(s obligation to/, D(s obligation to B, and D(s obligation to C.

• The de&and of 5 creditor on 5 debtor will not constitute ade&and on the others.

• The prescription of 5 of the debts will not affect the otherdebts.

ii. &assive joint

• In passive 2oint, there are &ultiple debtors.

• D, J, and S are debtor, and / is the creditor. If theobligation is 2oint, there are obligations 8 D(s obligation to/, J(s obligation to /, and S(s obligation to /.

• The de&and of 5 creditor on 5 debtor will not constitute ade&and on the others.

• The prescription of 5 of the debts will not affect the other

debts.• The insolvenc$ of 5 of the debtors will not affect the burden

of the other debtors.

iii. 2ixed joint

• In &i6ed 2oint, there are &ultiple creditors and debtors.

• D, J, and S are debtors, and /, B, and C are the creditors.If the obligation is 2oint, there are > obligations 8 D(sobligation to /, D(s obligation to B, D(s obligation to C, J(sobligation /, J(s obligation to B, J(s obligation to C, S(sobligation to /, S(s obligation to B, and S(s obligation to C.

c. $olidar0

• /n obligation is solidar$ when an$ of the debtors can be hled liablefor the entire obligation, and an$ of the creditors is entitled tode&and the entire obligation.

• / solidar$ obligation is also called 2oint and several, 2oint andindividual, and in solidum.

• If a pro&issor$ sa$s, "I pro&ise to pa$,# and it is signed b$ , B,and , then the obligation is solidar$.

• /n obligation is solidar$ when

i. The parties so agree

ii. !hen the law so provides *i.e. tort feasors are solidaril$ liable+iii. !hen nature of the obligation re%uires the obligation to be

solidar$

• /ccording to &an$ co&&entators, this is superfluous sincea solidar$ obligation arises because of law.

• T$pes of 0olidar$ Obligations

i. Active solidar(


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• In active solidar$, there are &ultiple creditors.

• Characteristics of /ctive 0olidar$

• / credit once paid is shared e%uall$ a&ong the creditorsunless a different intention appears.

• The debtor &a$ pa$ an$ of the creditors, but if an$de&and, 2udicial or e6tra2udicial is &ade on hi&, he&ust pa$ onl$ to the one de&anding pa$&ent*/rticle 575=+.

• /rticle 575= can be open to abuse. @or e6a&ple,if / writes J de&anding the perfor&ance of theobligation and / takes no further action, B and Ccannot de&and fro& J. This is open to collusion.

• 0uppose /, B, and C are creditors of D. /de&ands the pa$&ent of the loan worth P>,;;;.D instead pa$s to B. The pa$&ent to B will betreated as a pa$&ent to a rd person. Therefore,

D &ust still pa$ / the a&ount of the loan &inusthe share of B. 0o, D has to pa$ P


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pa$&ent is considered a pa$&ent to a third person.Therefore the debtor can still be &ade to pa$ b$ theone who &ade the de&and on hi&.

Example: D owes / and B. B de&anded fro& D. Dpa$s /. D &ust still pa$ B P


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after D for onl$ P=,F;;. The re&ission benefits D initiall$ since Donl$ has to pa$ P=,F;; instead of


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not co%ply ith his underta(ing. $he debtors ho %ay have beenready to fulfill their pro%ises shall not contribute to the inde%nity

beyond the corresponding portion of the price of the thing or of the value of the service in hich the obligation consists.

Art. 1,,5. +or the purposes of the preceding articles,

obligations to give definite things and those hich are notsusceptible of partial perfor%ance shall be dee%ed to beindivisible.

;hen the obligation has for its object the e4ecution of a

certain nu%ber of days of or(, the acco%plish%ent of or( by%etrical units, or analogous things hich by their nature are

susceptible of partial perfor%ance, it shall be divisible.

9oever, even though the object or service %ay be

physically divisible, an obligation is indivisible if so provided byla or intended by the parties.

In obligations not to do, divisibility or indivisibility shall bedeter%ined by the character of the prestation in each particular

case.

• 4ivisible and indivisible obligations have nothing to do with the ob2ectof the prestation. / co&&on &isconception is if the ob2ect of theprestation is divisible, then the obligation is also divisible.

a. 4ivisible

• /n obligation is divisible when it is susceptible to partialperfor&ance.

b. Indivisible

• /n obligation is indivisible when it cannot be validl$ perfor&ed in

parts.• !eneral "ule- Obligations are indivisible.

• E)ce*tions+

i. !hen the parties provide otherwise */rticles 577F, rd Q, 57=H∅+

ii. !hen the nature of the obligation necessaril$ entails theperfor&ance of the obligation in parts

• Example: 1iring a securit$ guard to guard fro& Hp& to 7a&dail$ for < &onths. This obligation cannot be perfor&edindivisibl$. Jou can(t co&press ti&e.

• !hen the obligation has for its ob2ect the e6ecution of a certain

nu&ber of da$s of work, the acco&plish&ent of work b$&etrical units, or analogous things, which b$ their nature are

Art. 1


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susceptible of partial perfor&ance, it shall be divisible */rticle577F, 7nd Q+

• E)ce*tion to the E)ce*tion+ 1owever, even though theob2ect or service &a$ be ph$sicall$ divisible, an obligation isindivisible if

5. 0o provided b$ law' or7. Intended b$ the parties.

iii. !hen the law provides otherwise

• There are provisions on pa$&ent which provide thatperfor&ance &a$ be divisible.

• 4ivisibilit$ of the ob2ect does not &ean that the obligation is alsodivisible. But indivisibilit$ of the ob2ect necessaril$ &eans an indivisibleobligation.

• The test of divisibilit$ of an obligation is whether or not it is susceptibleof partial perfor&ance.

• @or e6a&ple, if D is supposed to deliver 5;;; kilos of sugar, thisdoes not &ean that D can deliver the sugar in install&ents.

F. According to @anction for Breach */rticles 577


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Art. 1,(. $he nullity of the penal clause does not carryith it that of the principal obligation.

$he nullity of the principal obligation carries ith it that of the penal clause.

a. -o *enal clase

b. ;ith *enal clase

• / penal clause is an accessor$ undertaking to assu&e greaterliabilit$ in case of breach # vs. 2oon)al$.

• Penal clauses are governed b$ /rticles 777


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ii. 6clusive */rticle 577


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9. E)tingish"ent of Obligations

Art. 1,1. Obligations are e4tinguished-

1/ By pay%ent or perfor%ance-

#/ By the loss of the thing due-

&/ By the condonation or re%ission of the debt'/ By the confusion or %erger of the rights of creditor and

debtor

)/ By co%pensation

=/ By novation.

Other causes of e4tinguish%ent of obligations, such asannul%ent, rescission, fulfill%ent of a resolutory condition, and

prescription, are governed elsehere in this Code.

5. Pay%ent or Perfor%ance */rticles 577 8 57F5+

Art. 1,,. Pay%ent %eans not only the delivery of %oneybut also the perfor%ance, in any other %anner, of an obligation.

Art. 1,. A debt shall not be understood to have been paid

unless the thing or service in hich the obligation consists hasbeen co%pletely delivered or rendered, as the case %ay be.

Art. 1,/. If the obligation has been substantially

perfor%ed in good faith, the obligor %ay recover as though there

had been a strict and co%plete fulfill%ent, less da%ages sufferedby the obligee.

Art. 1,5. ;hen the obligee accepts the perfor%ance,

(noing its inco%pleteness or irregularity, and ithoute4pressing any protest or objection, the obligation is dee%ed fullyco%plied ith.

Art. 1,6. $he creditor is not bound to accept pay%ent or

perfor%ance by a third person ho has no interest in thefulfill%ent of the obligation, unless there is a stipulation to the

contrary.

;hoever pays for another %ay de%and fro% the debtor

hat he has paid, e4cept that if he paid ithout the (noledge or

against the ill of the debtor, he can recover only insofar as thepay%ent has been beneficial to the debtor.

Art. 1,%. ;hoever pays on behalf of the debtor ithoutthe (noledge or against the ill of the latter, cannot co%pel the

creditor to subrogate hi% in his rights, such as those arising fro%a %ortgage, guaranty, or penalty.

Art. 1,&. Pay%ent %ade by a third person ho does not

intend to be rei%bursed by the debtor is dee%ed to be a donation,


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hich re5uires the debtorDs consent. But the pay%ent is in anycase valid as to the creditor ho has accepted it.

Art. 1,'. In obligations to give, pay%ent %ade by one ho

does not have the free disposal of the thing due and capacity toalienate it shall not be valid, ithout prejudice to the provisions of

article 1'#8 under the $itle on Eatural Obligations.E

Art. 1,/(. Pay%ent shall be %ade to the person in hose

favor the obligation has been constituted, or his successor in

interest, or any person authorized to receive it.

Art. 1,/1. Pay%ent to a person ho is incapacitated toad%inister his property shall be valid if he has (ept the thing

delivered, or insofar as the pay%ent has been beneficial to hi%.

Pay%ent %ade to a third person shall also be valid insofar

as it has redounded to the benefit of the creditor. @uch benefit tothe creditor need not be proved in the folloing cases-

1/ If after the pay%ent, the third person ac5uires thecreditorDs rights

#/ If the creditor ratifies the pay%ent to the third person

&/ If by the creditorDs conduct, the debtor has been led to

believe that the third person had authority to receive thepay%ent.

Art. 1,/,. Pay%ent %ade in good faith to any person in

possession of the credit shall release the debtor.

Art. 1,/. Pay%ent %ade to the creditor by the debtor afterthe latter has been judicially ordered to retain the debt shall not

be valid.

Art. 1,//. $he debtor of a thing cannot co%pel the creditorto receive a different one, although the latter %ay be of the sa%e

value as, or %ore valuable than that hich is due.

In obligations to do or not to do, an act or forbearance

cannot be substituted by another act or forbearance against theobligeeDs ill.

Art. 1,/5. *ation in pay%ent, hereby property is

alienated to the creditor in satisfaction of a debt in %oney, shallbe governed by the la of sales.

Art. 1,/6. ;hen the obligation consists in the delivery of an

indeter%inate or generic thing, hose 5uality and circu%stanceshave not been stated, the creditor cannot de%and a thing of

superior 5uality. either can the debtor deliver a thing of inferior5uality. $he purpose of the obligation and other circu%stances

shall be ta(en into consideration.


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Art. 1,/%. nless it is otherise stipulated, thee4trajudicial e4penses re5uired by the pay%ent shall be for the

account of the debtor. ;ith regard to judicial costs, the "ules of Court shall govern.

Art. 1,/&. nless there is an e4press stipulation to that

effect, the creditor cannot be co%pelled partially to receive theprestations in hich the obligation consists. either %ay thedebtor be re5uired to %a(e partial pay%ents.

9oever, hen the debt is in part li5uidated and in part

unli5uidated, the creditor %ay de%and and the debtor %ay effectthe pay%ent of the for%er ithout aiting for the li5uidation of

the latter.

Art. 1,/'. $he pay%ent of debts in %oney shall be %ade inthe currency stipulated, and if it is not possible to deliver such

currency, then in the currency hich is legal tender in thePhilippines.

$he delivery of pro%issory notes payable to order, or bills of e4change or other %ercantile docu%ents shall produce the effect

of pay%ent only hen they have been cashed, or hen throughthe fault of the creditor they have been i%paired.

In the %eanti%e, the action derived fro% the original

obligation shall be held in the abeyance.

Art. 1,5(. In case an e4traordinary inflation or deflation of

the currency stipulated should supervene, the value of thecurrency at the ti%e of the establish%ent of the obligation shall be

the basis of pay%ent, unless there is an agree%ent to thecontrary.

Art. 1,51. Pay%ent shall be %ade in the place designated

in the obligation.

$here being no e4press stipulation and if the underta(ing is

to deliver a deter%inate thing, the pay%ent shall be %adeherever the thing %ight be at the %o%ent the obligation as

constituted.

In any other case the place of pay%ent shall be the do%icile

of the debtor.

If the debtor changes his do%icile in bad faith or after he

has incurred in delay, the additional e4penses shall be borne byhi%.

$hese provisions are ithout prejudice to venue under the"ules of Court.

• )ike obligee and creditor, pa$&ent and perfor&ance are twin ter&s.Pa$&ent refers to obligations to give while perfor&ance refers toobligations to do.

• Pa$&ent and perfor&ance is the paradig&atic &ode. !henobligations are entered into, the parties e6pect pa$&ent or


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perfor&ance. /ll other &odes of e6tinguishing obligations areabnor&al &odes.

• e%uisites of Pa$&ent

a. As to *restation

i. dentit(

• Identit$ &eans that the ver$ prestation &ust be perfor&ed.

• @or e6a&ple, if the obligation is to give a car, one cannotfulfill the obligation pa$ giving a house.

• If the prestation is specific, the debtor &ust give or deliverthe specific thing which was agreed upon */rticle 57==⊗+.

• If the prestation is generic, the creditor cannot de&and athing of superior %ualit$. 1owever, the debtor cannot give athing of inferior %ualit$ */rticle 57=ℵ, 5st Q+.

./. 9o. F7> has been repealed b$ ./. 9o. H5H whichallows pa$&ent in different currenc$. 1owever, in theabsence of an agree&ent, pa$&ent shall be &ade in P.

• 9egotiable papers and other co&&ercial docu&ents can berefused b$ the creditor unless there is stipulation to thecontrar$.

• If the negotiable papers and other co&&ercial docu&entsare accepted b$ the creditor, it has onl$ a provisional effect.There is pa$&ent onl$ in the following */rticle 57=>ℵ, 7nd Q+.

5. !hen the$ have been honored and cashed' or

7. !hen through the fault of the creditor, the$ have beeni&paired

Art. 1


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In the case of "A2A7C!, the check &ust be the check of another person, not a part$, before there will bei&pair&ent.

@or e6a&ple, / gave B a check as pa$&ent for a loan. B didnot encash the check as a result of which, the checkbeca&e stale. There is no i&pair&ent here. B can still ask

/ for pa$&ent of the loan.

oblicon reviewer balane

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