CIVIL LAW REVIEWER TABLE of CONTENTS

OBLIGATIONS
Table of Contents

Chapter I. General Provisions.......................91

I. Obligations ..........................................91

OBLIGATIONS
II. Sources of Obligations ........................91
90
Chapter II. Nature and Effect of Obligations93
I. Kinds of Prestations ............................93
II. Breach of Obligation............................94
III. Fortuitous Event (Force Majeure) .......96
IV. Remedies to Creditors ........................96
V. Usurious Transactions and Rules on
Interest .........................................................97

Chapter III. Different Kinds of Obligations ..98

I. Pure and Conditional Obligations .......98
II. Reciprocal Obligations ......................100
III. Obligations with a Period ..................100
IV. Alternative and Facultative Obligations
101
V. Joint and Solidary Obligations ..........103
Effects of Prejudicial and Beneficial Acts
(Art.1212) ...................................................105
VI. Divisible and Indivisible Obligations ..106
VII. Oblligations with a Penal Clause ..106

Chapter IV. Extinguishment of Obligations

.......................................................................107
I. Payment or Performance ..................107
II. Loss or Impossibility..........................109
III. Condonation or Remission of the Debt
109
IV. Confusion or Merger of Rights ..........110
V. Compensation ...................................110
VI. Novation ............................................111

Charts: Payment & Performance ................114

 CONTRA
CIVIL LAW REVIEWER Chapter I. GENERAL PROVISIONS

Chapter I. General Provisions

OBLIGATIONS & CONTRACTS TEAM
Prof. Solomon Lumba I. OBLIGATIONS
Faculty Editor
II. SOURCES OF OBLIGATIONS
Leo Ledesma A. LAW
Lead Writer B. CONTRACTS
Krizel Malabanan C. QUASI-CONTRACTS
Ivy Velasco Tin D. DELICTS

OBLIGATIONS
Reyes Frances E. QUASI-DELICTS
Domingo Hazel 91
Abenoja Writers

CIVIL LAW Article 1156, Civil Code. An obligation is a juridical

necessity to give, to do or not to do.
Kristine Bongcaron
Patricia Tobias
Subject Editors I. Obligations
ACADEMICS COMMITTEE
Elements of an Obligation (De Leon, 2003)
Kristine Bongcaron
Michelle Dy Patrich 1. ACTIVE SUBJECT (Obligee/Creditor): the
person who has the right or power to

OBLIGATIONS
Leccio Editors-in-
Chief demand the prestation.
2. PASSIVE SUBJECT (Obligor/Debtor): the
PRINTING & DISTRIBUTION person bound to the perform the prestation.
Kae Guerrero 3. PRESTATION (Object): the conduct
required to be observed by the
DESIGN & LAYOUT debtor/obligor (to give, to do or not to do).
Pat Hernandez 4. VINCULUM JURIS (Juridical or Legal Tie;
Viktor Fontanilla Efficient Cause): that which binds or
&
Rusell Aragones connects the parties to the obligation.
Romualdo Menzon Jr.
Rania Joya
II. Sources of Obligations
LECTURES COMMITTEE
Michelle Arias A. Law
Camille Maranan Art. 1158, Civil Code. Obligations derived from law
Angela Sandalo are not presumed. Only those expressly determined in
Heads this Code or in special laws are demandable, and
Katz Manzano Mary Rose Beley shall be regulated by the precepts of the law which
Sam Nuez Krizel Malabanan establishes them; and as to what has not been
Arianne Cerezo Marcrese Banaag foreseen, by the provisions of this Book.
Volunteers

MOCK BAR COMMITTEE B. Contracts

Lilibeth Perez Art. 1159. Has the Force of Law Between
Parties. Obligations arising from contracts have
the force of law between the contracting parties
BAR CANDIDATES WELFARE and should be complied with in good faith

Dahlia Salamat C. Quasi-Contracts

LOGISTICS Art. 2142, Civil Code. Certain lawful, voluntary and
unilateral acts give rise to the juridical relation of
Charisse Mendoza quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.
SECRETARIAT COMMITTEE
Jill Hernandez Lawful Distinguished from crimes
Head Voluntary Distinguished from quasi-delict,
which are based on fault and
Loraine Mendoza Faye Celso
Mary Mendoza Joie Bajo
negligence
Members Unilateral Distinguished from contract which is
based on agreement
Kinds of Quasi-Contracts action (res judicata)
Negotiorum Gestio: officious or voluntary if judgment of acquittal
management of the property or affairs of contained a declaration
another without the knowledge or consent of that no negligence can
be attributed to the
the latter.
accused and that the
Solutio Indebiti: undue payment. The fact from which civil
juridical relation arises when: action might arise did
o a thing is received without any right; and

OBLIGATIONS
not exist
o the thing delivered by mistake. 92
Others: See Arts. 2164-2175 E. Quasi-Delicts (Voluntary acts or omissions
(De Leon, 2003) with fault or negligence causing damage to
another; not a crime nor a contract)
D. Delicts (Acts or omissions punished by law;
crimes) Quasi-Delict Crimes
Private, against Public, against the State
Extent of Civil Liability individual
Governed by the Revised Penal Code and the Criminal intent is not Criminal intent is
Civil Code, includes: necessary necessary for criminal
1. Restitution; liability
2. Reparation of damages caused; and Present in any act or An act can is only
3. Indemnity for consequential damages (Art. omission where fault or punishable when there is
104, Revised Penal Code). negligence intervenes a law penalizing it
(Tolentino,
1987) Gives rise to liability for There are crimes from
damages to the injured which no civil liability
Enforcement of Civil Liability party arises
1. Independent: Criminal and civil action Reparation, Fine or imprisonment or
arising from the same offense may be compensation or both, to public treasury
instituted separately. indemnification of the
2. Suspended: However, after criminal action injury suffered by the
has been commenced prosecution for civil injured party
action is suspended in whatever stage it Preponderance of Proof of guilt beyond
may be found, until final judgment in the evidence reasonable doubt
criminal proceeding is rendered; Can be compromised Can never be
3. Impliedly Instituted: Civil action is impliedly compromised
instituted with the criminal action, when:
offended party expressly waives the civil Requisites of Liability (DWD)
action or reserves the right to institute a 1. Wrongful act or omission by fault or
separate civil action; or negligence
the law provides for an independent civil 2. Damage or injury proven by the person
action claiming recovery
3. Direct causal connection between the fault
Barredo v. Garcia, (1942): The same negligent act or negligence and the damage or injury
may give rise to an action based on delict or quasi-
delict and the injured party is free to choose which Liability for Quasi- Liability for Crimes
remedy to enforce. Delict (Art. 2180, NCC) (Art. 103, RPC)
Mendoza vs. Arrieta, (1979): If the civil action is Primary, can be directly Subsidiary, employee
based on quasi-delict, there is no need to reserve the sued by the injured must first be convicted
right to file a civil action in the criminal case. party and sentenced to pay
civil indemnity

Effect of Acquittal on Civil Actions

All employers, whether Employer is only liable
engaged in some when he is engaged in
Barred No Effect enterprise or not, are some kind of business
if based on the very an independent civil liable for acts of or industry
same facts on which action is allowed by law employees, even
the criminal action acquittal is due to lack household helpers
which ended in of proof beyond
Avoid civil liability by Subsidiary liability is
acquittal was based reasonable doubt
if the facts alleged in proving exercise of absolute and cannot be
the civil case has been diligence of a good avoided by any proof of
found to be non- father of a family diligence
existent in the criminal
 CIVIL LAW REVIEWER Chapter II. NATURE and EFFECT of OBLIGATIONS
Chapter II. Nature and Effect of OBLIGATION TO GIVE
Obligations
Specific Thing Generic Thing Limited
Generic Thing
I. KINDS OF PRESTATIONS Particularly Object is When the
II. BREACH OF OBLIGATIONS designated or designated only generic objects
III. FORTUITOUS EVENTS physically by its class/ are confined to
IV. REMEDIES segregated genus/ species. a particular

OBLIGATIONS
V. USURIOUS TRANSACTIONS from all other of Debtor can give class.
the same class; anything of the 93
identified by same class as
individuality. long as it is of
I. Kinds of Prestations the same kind.
Cannot be Can be
KINDS OF PREST ATION substituted. substituted by
1. TO GIVE: real obligation; to deliver either any of the same
(1) a specific or determinate thing, or (2) a class and same
generic or indeterminate thing. kind.
2. TO DO: positive personal obligation;
includes all kinds of work or services.
3. NOT TO DO: negative personal obligation; to Personal Right Real Right
abstain from doing an act; Vested before delivery Vested after delivery
includes the obligation not to give. A right enforceable only A right enforceable
against the debtor against the world
Right of the creditor to Right pertaining to a
Accessories: those joined to or included with demand from the debtor, person over a specific
the principal for the latters completion, better the fulfillment of a thing, without a passive
use, perfection or enjoyment prestation to give, to do subject individually
or not to do determined against
Accessions: additions to or improvement upon whom such right may be
a thing, either naturally or artificially personally enforced

Duties of the Debtor Rights of the creditor

To Give To preserve or take care of the thing To compel specific performance
Specific due To recover damages in case of breach of
Thing To deliver the thing itself the obligation, exclusive or in addition to
(Asked To deliver the fruits of the thing specific performance
in 83, To deliver the accessions and Entitlement to fruits and interests from the
84, 85 accessories time the obligation to deliver arises
and To pay for damages in case of breach
86)
To Give To deliver a thing of the quality intended To ask for performance of the obligation
Generic by the parties taking into consideration To ask that the obligation be complied with
Thing the purpose of the obligation and other by a third person at the expense of the
circumstances debtor
Creditor cannot demand a thing of To recover damages in case of breach of
superior quality neither can the debtor obligation
deliver a thing of inferior quality
To be liable for damages in case of
breach
To Do To do it To compel performance
To shoulder the cost of having someone To recover damages where personal
else do it qualifications of the debtor are involved
To undo what has been poorly done
To pay for damages in case of breach
Not To Not to do what should not be done
Do To shoulder the cost of undoing what
should not have been done
To pay for damages in case of breach
To ask to undo what should not be done
To recover damages, where it would be
physically or legally impossible to undo
what has been undone, because of :
o the very nature of the act itself;
o rights acquired by third persons who
acted in good faith;
o when the effects of the acts prohibited

OBLIGATIONS
are definite in character and will not 94
cease even if the thing prohibited be
undone.

II. Breach of Obligation Effect of Contributory Negligence

A. Voluntary fraud, negligence, delay or
contravention of tenor of the obligation
B. Involuntary fortuitous event
TYPES OF BREACH
Reduces or mitigates the recoverable
damages, UNLESS, the negligent act or
omission of the creditor is the
proximate cause of the event which led
to the damage or injury complained of.
In this case, he cannot recover.

Substantial Breach Slight or Casual Breach Diligence Required (De Leon, 2003)
Total breach Partial breach a. By stipulation: that agreed upon by
Amounts to Non- Obligation is partially the parties.
Performance; performed; b. By law: in the absence of
Basis for rescission Gives rise to liability for stipulation, that required by law in
under Art. 1191 and damages only
the particular case.
payment of damages
c. Diligence of a good father of a
family: if both the contract and law
1. FRAUD (DOLO): deliberate or intentional are silent.
evasion of the normal fulfillment of an Future Negligence: may be waived
obligation (De Leon, 2003). except in cases where the nature of the
obligation or the public requires another
Future Fraud: Any waiver of action for standard of care (i.e. extraordinary
future fraud is void (Art. 1171). diligence as for a common carrier)
Past Fraud: can be subject of a valid
waiver by the aggrieved party (De Leon, Fraud Negligence
2003). There is deliberate There is no deliberate
Woodhouse vs. Halili, (1953): In order intention to cause intention to cause damage
that fraud may vitiate consent, it must be damage
the dolo causante and not merely the Liability cannot be Liability may be mitigated
dolo incidente, inducement to the mitigated
making of the contract. The false Waiver for future fraud Waiver for future
representation was used by plaintiff to is void negligence may be
allowed in certain cases:
get from defendant a bigger share of net
gross can NEVER
profits. This is just incidental to the be excused in
matter in agreement. Because despite advance; amounts to
plaintiffs deceit, respondent would have wanton attitude; rules
still entered into the contract. on fraud shall apply
simple may be
2. NEGLIGENCE or FAULT (CULPA): excused in certain
cases
omission of that diligence which is required
by the nature of the obligation and
corresponds with the circumstances of the Mandarin Villa Inc. v. CA (1996): Test of
person, of the time and of the place (Art. Negligence: Did the defendant in doing the alleged
1173). negligent act use the reasonable care and caution
which an ordinary and prudent person would have
used in the same situation? If not, then he is guilty of
negligence.
 Extent of Damages to be Awarded Mora Solvendi Mora Accipiendi
Requisites Requisites
Bad Faith Good Faith 1. Obligation must be 1. Debtor offers of
Debtor is liable for all Debtor is liable only for liquidated, due and performance
damages which can be the natural and demandable 2. Offer must be in
probable 2. Non-performance by compliance with the
reasonably attributed to
consequences of the the debtor on period prestation
the non-performance of
breach of obligation and agreed upon 3. Creditor refuses the
the obligation. Any waiver
3. Demand, judicial or performance

OBLIGATIONS
or renunciation made in fortuitous events
extra-judicial, by the without just cause
anticipation of such creditor
95
liability is null and void
Effects Effects
Culpa Contractual Culpa Aquiliana Asked 1. The debtor is liable 1. The responsibility of
in 83, 84, and 86) for damages the debtor is
2. The debtor is liable reduced to fraud
Negligence is merely Negligence is substantive
even if the loss is due and gross
incidental in the and independent
to fortuitous events negligence
performance of an
3. For determinate 2. The debtor is
obligation
objects, the debtor exempted from risk
There is always a pre- There may or may not be shall bear the risk of of loss of the thing
existing contractual a pre-existing contractual loss
relation obligation which is borne by
the creditor
The source of obligation The source of obligation 3. The expenses
of defendant to pay is the defendants incurred by the
damages is the breach or negligence itself debtor for the
non-fulfillment of the preservation of the
contract thing after the mora
Proof of the existence of The negligence of the shall be chargeable
the contract and of its defendant must be to the creditor
breach or non-fulfillment proved 4. If the obligation
is sufficient prima facie to bears interest, the
warrant recovery debtor does not
Proof of diligence in the Proof of diligence in the have to pay from
selection and supervision selection and supervision the time of delay
of the employees is NOT of the employee is a 5. The creditor is liable
available as defense defense for damages
6. The debtor may
Culpa Criminal: wrong or negligence in the commission of relieve himself of
obligation by
a crime consigning the thing

3. DELAY or DEFAULT (MORA): failure to perform an Rules on Mora, Delay or Default

obligation on time which constitutes breach of the
obligation (De Leon, 2003). Unilateral Obligations Reciprocal Obligations
Mora Solvendi: delay on the part of the General Rule: General Rule:
debtor to fulfill his obligation either to Delay occurs from the
give (Ex re) or to do (Ex persona), No demand no delay. moment one party fulfills
(Asked in 83, 84, 85, and 86); his undertaking, while the
The mere expiration of other does not comply or
the period fixed by the is not ready to comply in
No Mora Solvendi in: parties is not enough in a proper manner with
Negative Obligations because delay order that the debtor may what is incumbent upon
is impossible (De Leon, 2003); incur in delay. him.
Natural Obligations (Tolentino, No delay if neither party
1987). performs his undertaking
(Art. 1169, par. 2).
Mora Accipiendi: delay on the part of Exceptions Exception:
the creditor to accept the performance of 1. the obligation or law different dates for the
the obligation provides performance of
2. time is of the respective obligations are
Compensatio Morae: delay of the essence fixed by the parties
parties in reciprocal obligations; effect: 3. demand useless
as if there is no default. 4. debtor
acknowledges that
he is in default
4. CONTRAVENTION OF THE TENOR:
violation of the terms and conditions
stipulated in the obligation, which must not
be due to a fortuitous event or force majeure
(De Leon, 2003).
In any manner contravenes the
tenor means any illicit act, which
impairs the strict and faithful fulfillment
of the obligation, or every kind of
defective performance (Tolentino, 1987).
III. Fortuitous Event (Force Majeure)
Any event which could not be foreseen, or which
though foreseen are inevitable (Art. 1174)
A happening independent of the will of the
debtor and which makes the normal fulfillment of
the obligation impossible (De Leon, 2003).
A. Act of God: an accident, due directly or
exclusively to natural causes without human
intervention, which by no amount of
foresight, pains or care, reasonably to have
been expected, cold have been prevented.
B. Act of Man: force majeure is a superior or
irresistible force, which is essentially an act
of man; Includes unavoidable accidents,
even if there has been an intervention of
human element, provided that no fault or
negligence can be imputed to the debtor
(Asked in 81, 87 and
88)
Liability in case of Fortuitous Event
No person shall be responsible for fortuitous
events, UNLESS:
1. expressly specified by law (Arts. 552(2),
1942, 2147, 2148, 2159)
2. liability specified by stipulation
3. the nature of the obligations requires
assumption of risk (Art. 1174)
4. when debtor is guilty of concurrent or
contributory negligence
5. debtor has promised to deliver the same
thing to two or more persons who do not
have the same interests (Art. 1165 par. 3)
6. the thing is lost due to the obligors fraud,
negligence, delay or contravention of the
tenor of the obligation (Art. 1170)
7. the obligation to deliver a specific thing
arises from a crime (Art. 1268)
8. the object is a generic thing, i.e. the genus
never perishes
Requisites for Exemption
1. The event must be independent of the
debtors will (fraud or negligence)
2. The event must be unforeseeable or
inevitable
3. The event renders it impossible for debtor to
fulfill his obligation in a normal manner
4. The debtor must be free from any
participation in the aggravation of the injury
to the creditor (Tolentino, 1987; De Leon,
2003)
OBLIGATIONS
5. It must be the only and sole cause, not 96
merely a proximate cause.
IV. Remedies to Creditors
Art. 1170, Civil Code. Those who in the performance
of their obligations are guilty of fraud, negligence, or
delay and those who in any manner contravene the
tenor thereof, are liable for damages.
Transmissibility of Rights
Art. 1178: Rights acquired by virtue of an
obligation are transmissible in character,
UNLESS prohibited:
1. by their very nature (i.e. personal
obligations)
2. by stipulation of the parties
3. by operation of law
(De Leon, 2003)
Primary Remedies
Arts. 1165-1168: PRESS
1. Specific Performance performance
by the debtor of the prestation itself
2. Substituted Performance someone
else performs or something else is
performed at the debtors expense
3. Equivalent Performance right to
claim damages (in either performance or
rescission)
4. Rescission right to rescind or cancel
the contract
5. Pursue the Leviable to attach the
properties of the debtor, except those
exempt by law from execution
Subsidiary Remedies of Creditor
General Rule: Contracts are binding only
between the parties thereto, and their heirs,
assignees, and the estate, UNLESS: Accion
Subrogatoria and Accion Pauliana
1. Accion Subrogatoria: right of creditor to
exercise all of the rights and bring all of the
actions which his debtor may have against
third persons; Novation by change of debtor
(Art. 1291, par.3).
 Requisites
a. Debtor to whom the right of action
properly pertains must be indebted to
the creditor
b. The debt is due and demandable
c. The creditor must be prejudiced by the
failure of the debtor to collect his own
rd
debt from 3 persons either through
malice or negligence
Siguan v. Lim, (1999): Petitioner cannot invoke the
credit of a different creditor to justify the rescission of
the subject deed of donation, because the only
creditor who may benefit from the rescission is the
creditor who brought the action; those who are
strangers to the action cannot benefit from its effects.
97
V. Usurious Transactions and Rules on

OBLIGATIONS
d. The debtors assets are insufficient Interest
(debtor is insolvent)
e. The right of action is not purely personal USURY: stipulation of interest rates higher than
to the debtor the ceiling provided by law.
2. Accion Pauliana: Rescission, which Note: Usury Law (Act No. 2655, as amended)
involves the right of the creditor to attack or was repealed by Central Bank Circular No. 905,
impugn by means of a rescissory action any Dec. 10, 1982.
act of the debtor which is in fraud and to the
prejudice of his rights as creditor. INTEREST
Requisites: CASAL Art. 1176, Civil Code. Receipt of the principal without
a. There is a credit in favor of plaintiff reservation as to the interest shall give rise to a
prior to alienation disputable presumption that the interest has been
b. The debtor has performed a paid. Receipt of the latter installment without
subsequent contract conveying a reservation as to prior installments shall likewise give
patrimonial benefit to third persons rise to a disputable presumption that such prior
c. The creditor has no other legal remedy installments have been paid.
to satisfy his claim
d. The debtors acts are fraudulent to the Determination of Interests
prejudice of the creditor Eastern Shipping Lines v. CA
e. The third person who received the (1961)
property is an accomplice in the fraud Stage 1
For loan or forbearance NOT for loan or
of money, goods or forbearance of money,
credit, the interest rate goods or credit, the
Accion Subrogatoria Accion Pauliana is 12% interest rate is 6%
Not necessary that Credit must exist before
creditors claim is prior to the fraudulent act a) Interest = interest a) If date of demand is
the acquisition of the right rate stipulated in certain, compute from
by the debtor writing + 12% legal the date when demand
No need for fraudulent Fraudulent intent is interest, computed is made (judicial or
intent required if the contract from date of judicial extra-judicial)
rescinded is onerous demand (filing of
No period for prescription Prescribes in 4 years complaint)
from the discovery of the b) If there is no b) If date of demand is
fraud stipulated interest rate, NOT certain, compute
the interest rate is 12% from the date of trial
computed from date of court decision (judicial
3. Accion Directa (Art. 1729, 1652, 1608,
default or demand demand)
1893): the right of lessor to go directly to a (judicial or extra-
sublessee for unpaid rents of the lessee judicial)
Stage 2
4. The right of laborers or persons who furnish Add 12% interest from finality of SC decision until
materials for a piece of work undertaken by fully paid (equivalent to a forbearance of credit)
a contractor to go directly to the owner for
any unpaid claim due to the contractor

5. The right of vendor against every possessor

whose right is derived from the vendee

6. The right of a principal against a substitution

appropriated by an agent
 CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
The mere intention of the debtor to
Chapter III. Different Kinds of Obligations prevent, without actually preventing
fulfillment is not sufficient.
I. PURE AND CONDITIONAL OBLIGATIONS Constructive fulfillment will not hold
II. RECIPROCAL OBLIGATIONS when the debtor acts pursuant to a
III. OBLIGATIONS WITH A PERIOD
right. There is constructive
IV. ALTERNATIVE AND FACULTATIVE
OBLIGATIONS fulfilment:
V. JOINT AND SOLIDARY OBLIGATIONS a. Intent of the obligor to prevent

OBLIGATIONS
VI. DIVISIBLE AND INDIVISIBLE OBLIGATIONS fulfilment; and 98
VII. OBLIGATIONS WITH A PENAL CLAUSE b. Actual prevention of compliance
Principle of Retroactivity in
I. Pure and Conditional Obligations Suspensive Conditions
Art.1187, par.1: once the condition is
(Asked in 79, 88, 00, fulfilled its effects must logically retroact
03) to the moment when the essential
elements, which gave birth to the
Pure Obligation (Art.1179): Effectivity or obligation have taken place. The
extinguishment does not depend upon the condition which is imposed is only
fulfillment or non-fulfillment of a condition or accidental, not an essential element of
upon the expiration of a term or period and the obligation.
characterized by the quality of its being Applied only to consensual
IMMEDIATELY DEMANDABLE. contracts. No application to real
contracts which can only be perfected by
Conditional Obligation (Art.1181): Effectivity is delivery.
subject to the fulfillment or non-fulfillment of a
condition, which is characterized to be a To Give To Do/Not To Do
FUTURE and UNCERTAIN event. If reciprocal, the fruits In obligations to do or not
and interests shall be to do, the court shall
Effects of Conditions deemed to have been determine the retroactive
1. Suspensive Condition: Obligation shall mutually compensated effect of the condition
only be effective upon the fulfillment of the condition as a matter of justice and that has been complied
(Art.1181). What is acquired by the obligee upon the convenience with.
(Art. 1187, par. 1) (Art. 1187, par. 2)
constitution of the obligation is mere hope or
expectancy, but is protected by law. If unilateral, the debtor The power of the court
shall appropriate the includes the
fruits and interests determination whether or
received, unless from the not there will be any
Before Fulfillment After Fulfillment nature and circumstance retroactive effects. This
The demandability and The obligation arises or it should be inferred that rule shall likewise apply
acquisition or effectivity becomes effective. the intention of the in obligations with a
of the rights arising from The obligor can be persons constituting the resolutory condition (Art.
the obligation is compelled to comply with same was different. 1190 par. 3)
suspended. Anything what is incumbent upon
paid by mistake during him. Preservation of Creditors Rights
such time may be Art.1188, par.1: The creditor may,
recovered.
Doctrine of Constructive Fulfillment before the fulfillment of the condition,
of Suspensive Conditions bring the appropriate action for the
Art. 1186: the condition shall be deemed preservation of his rights. However, this
fulfilled when the obligor actually does not grant any preference of credit
prevented the obligee from complying but only allows the bringing of the proper
with the condition, and that such action for the preservation of the
prevention must have been voluntary or creditors rights.
willful in character.
Applicable to suspensive conditions 2. Resolutory Condition: Obligation becomes
and not to resolutory conditions. demandable immediately after its
The article can have no application establishment or constitution. The rights are
to an external contingency which is immediately vested to the creditor, but
lawfully within the control of the always subject to the threat or danger of
obligor. extinction by the happening of the resolutory
condition (Tolentino, 1987).
 CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS

Before Fulfillment After Fulfillment needed to make the obligation demandable is that the
Preservation of creditors Whatever may have sale be consummated and the price thereof remitted
rights (Art. 1188, par. 1) been paid or delivered by to the islands. There were still other conditions that
also applies to one or both of the parties had to concur to effect the sale, mainly that of the
obligations with a upon the constitution of presence of a buyer, ready, able and willing to
resolutory condition the obligation shall have purchase the property under the conditions set by the
to be returned upon the intestate.

OBLIGATIONS
fulfillment of the 6. Impossible Condition: conditions which
condition. There is no are impossible, contrary to good customs, or 99
return to the status quo. public policy and those prohibited by law
However, when condition shall annul the obligations which depend
is not fulfilled, rights are
upon them (Art. 1183).
consolidated and they
become absolute in If pre-existing obligation, only the
character impossible condition is void, but not the
obligation.
3. Potestative Condition If divisible obligation, that part which is
not affected by the impossible or
Exclusively Exclusively Exclusively unlawful condition shall be valid.
upon the upon the upon the If the condition is not to do an
Creditors Will Debtors Will Debtors Will impossible thing, it shall be considered
in case of a in case of a as not having been agreed upon (Art
Suspensive Resolutory 1183, par. 2). Consequently, it becomes
Condition Condition pure and immediately demandable.
(Art. 1182) (Art. 1179, par If attached to a simple or remuneratory
2) donation (Art. 727), or testamentary
Condition and Condition and Condition and disposition (Art. 873), condition is
obligation is obligation are obligation is considered as not imposed while the
valid void because to valid because in
allow such such situation,
obligation is valid.
condition would the position of
be equivalent to the debtor is 7. Positive Condition: Obligation shall be
sanctioning exactly the extinguished as soon as the time expires or
obligations same as the if it becomes indubitable that the event will
which are position of the not take place (Art.1184)
illusory. It also creditor when
constitutes a the condition is
direct suspensive. It
8. Negative Condition: Obligation shall be
contravention of does not render rendered effective from the moment the time
the principle of the obligation indicated has lapsed, or if it has become
mutuality of illusory. evident that the event will not occur
contracts. (Art.1185)
When no period has been fixed, the
4. Casual Condition: The fulfillment of the intention of the parties is controlling,
condition depends upon chance and/or upon and the time shall be that which the
the will of a third person (Art. 1182) parties may have contemplated, taking
into account the nature of the obligation
5. Mixed Condition: The fulfillment of the (Art 1185, par. 2).
condition depends partly upon the will of a
party to the obligation and partly upon
chance and/or will of a third person Effects of Loss, Deterioration, and
Improvement in Real Obligations Pending the
Osmena v. Rama: Defendant executed an Condition (Art. 1189)
endorsement saying that shell pay her debt if the
house in which she lives is sold. Such condition Without With Debtors
depended upon her exclusive will thus it is void. Debtors Fault/Act
Fault/Act
Hermosa v. Longara: The condition that payment Loss Obligation is Obligation is
should be made by Hermosa as soon as he receives extinguished converted into
funds from the sale of his property in Spain is a mixed one of
condition. The condition implies that the obligor indemnity for
already decided to sell the house and all that was damages
CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS
Deterioration Impairment to be Creditor may shouldered by the first infractor. This shall
borne by the choose be determined by the courts. However, if it
creditor between cannot be determined who was the first
bringing an
action for
infractor, the contract shall be deemed
rescission of extinguished and each shall bear his own
the obligation damages (Art.1192).
OR bringing an

OBLIGATIONS
action for UP v. Delos Angeles (1970): The injured party may
specific extra-judicially rescind the contract on account of the
100
performance breach of the other party. However, this is without
with damages prejudice to the option of the other party to resort to
in either case. the courts in order to determine if the rescission made
is valid, if not, the party who rescinded the contract
Improvement Improvement at Improvement will be sentenced to pay damages.
the debtors by the things
expense, the nature or by Where the other party does not oppose the
debtor shall time shall inure extra-judicial declaration of rescission, such
ONLY have to the benefit of declaration shall produce legal effect.
usufructuary the creditor
rights
Effect is retroactive therefore invalidating
and unmaking the juridical tie between the
contracting parties, leaving things in their
Loss, defined: when the thing perishes; goes status before the celebration of the contract.
out of commerce; disappears in such a way that
its existence is unknown or it cannot be
recovered
III. Obligations with a Period

II. Reciprocal Obligations Period or Term (Asked in 84, 86 and 91):

Obligations which are established from same
cause, such that one obligation is correlative to
the other. It results in mutual relationship
between the creditor and the debtor. It is
performed simultaneously, so that the
performance of one is conditioned upon the
simultaneous fulfillment of the other.
Tacit Resolutory Condition: if one of the
parties fail to comply with what is incumbent
upon him, there is a right on the part of the other
to rescind the obligation. The power to rescind is
given to the injured party (Tolentino, 1987).
Rescission of Reciprocal Obligations ( Art.
1191, CC)
Right to rescind is implied in reciprocal
obligations thus where one party fails to
comply with this obligation under a contact,
the other party has the right to either
demand the performance or ask for the
resolution of the contract.
Based on the breach of faith committed by
the person who is supposed to comply with
the obligation as compared to the rescission
referred to in Art. 1308 which involves the
damage or lesion, or injury to the economic
interest of a person.
Where both parties have committed a
breach of obligation, the liability will be
Interval of time, which either suspends
demandability or produces extinguishment.
The period must be: future, certain, and possible
(Tolentino, 1987).
Fortuitous event does not interrupt the
running of the period. It only relieves the
contracting parties from the fulfillment of
their respective obligations during the
period.
Kinds of Period (Art. 1193):
1. Ex die - period with a suspensive effect.
Obligation becomes demandable after
the lapse of the period.
2. In diem - period with a resolutory effect.
Obligation is demandable at once but is
extinguished upon the lapse of the
period.
Art. 1180, Civil Code. When the debtor binds himself
to pay when his means permit him to do so, the
obligation shall be deemed to be one with a period,
subject to the provisions of Article 1197.
Term/Period and Condition Distinguished
Term/Period Condition
Interval of time which is Fact or event which is
future and certain future and uncertain
Must necessarily come, May or may not happen
although it may not be
known when
 CIVIL Exerts an influence upon
LAW REVIEWER Exerts an influence upon Chapter III. DIFFERENT KINDS of OBLIGATIONS
the time of demandability the very existence of the
Art.or 1197
extinguishment
does not ofapplyan obligation itself of services and to pure obligations.
to contract
obligation
No retroactive effect Has retroactive effect
The
immediatecourt, however,
demandability to obligations,
of pure prevent
unless there is an
agreement to the contrary unreasonable
may interpretations
fix a reasonable of
time in which the
the
When it is left exclusively When it is left exclusively debtor may pay.

OBLIGATIONS
to the will of the debtor, to the will of the debtor, (Tolentino, 1987)
101
the existence of the the very existence of the
obligation is not affected obligation is affected When Debtor Loses Right to Use Period
Art.1198: I GIV A LA
Benefit of the Period 1. Debtor becomes Insolvent, unless he gives
Presumption: Period in an obligation is presumed to a guaranty or security for his debt, after
be established for the benefit of both the creditor and obligation is contracted
debtor, UNLESS: If from the tenor of the obligation 2. Debtor fails to furnish the Guaranties or
or other circumstances, it shall appear that the securities promised
period has been established in favor of either the 3. Debtor by his own acts Impaired said
creditor or debtor (Art. 1196). guaranties or securities after their
establishment, and when through a
Period for the Benefit of either Creditor or fortuitous event they disappear, unless he
Debtor immediately gives new one equally
satisfactory
Creditor Debtor 4. Debtor Violates any undertaking, in
Creditor may demand Debtor may oppose any consideration of which the creditor agreed to
the fulfillment or premature demand on the period
performance of the the part of the oblige for 5. Debtor attempts to
obligation at any time the performance of the Abscond
but the obligor cannot obligation, of if he so 6. By Law or stipulation
compel him to accept desires, he may 7. Parties stipulate an Acceleration
payment before the renounce the benefit of
Clause
expiration of the period the period by performing
his obligation in advance
In the cases provided, the obligation becomes
immediately due and demandable even if the
When court may fix period period has not yet expired. The obligation is thus
converted into a pure obligation (Tolentino,
1987).
Art. 1197: as general rule, the court is not
authorized to fix a period for the parties (De IV. Alternative and Facultative
Leon, 2003). Obligations
Araneta v. Phil. Sugar Estates, provides:
Alternative Obligations Facultative Obligations
First, the Court shall determine:
If the obligation does not fix a period, but from Several objects are due Only one object is due
its nature and circumstances, it can be inferred May be complied with by May be complied with by
that a period was intended delivery of one of the the delivery of another
If the period is void, such as when it depends objects or by performance object or by the
upon the will of the debtor of one of the prestations performance of another
If the debtor binds himself when his means which are alternatively prestation in substitution
permit him to do so. due of that which is due
Second, it must decide what period was probably Choice may pertain to Choice pertains only to
contemplated by the parties. debtor, creditor, or third the debtor
person
The only action that can be maintained
under Art. 1197 is the action to ask the Loss/impossibility of all Loss/impossibility of the
objects/prestations due to object/prestation due to
courts to fix the term within which the debtor fortuitous event shall fortuitous event is
must comply with his obligation. The extinguish the obligation. sufficient to extinguish
fulfillment of the obligation itself cannot be The loss/impossibility of the obligation
demanded until after the court has fixed the one of the things does not
period for compliance, therewith, and such extinguish the obligation.
period has arrived. Culpable loss of any of Culpable loss of the
the objects alternatively object which the debtor
CIVIL LAW REVIEWER
due before the choice is
made may give rise to
liability on the part of the
debtor
A. Alternative Obligations
Chapter III. DIFFERENT KINDS of OBLIGATIONS
may deliver in Effect of Loss of Objects
substitution before the
substitution is effected Art. 1204: Debtors Choice
does not give rise to any Fortuitous Debtors Fault
liability on the part of the Event
debtor All Lost Debtor isCreditor shall have
released from the a right to indemnity

OBLIGATIONS
obligation for damages based
on the value of the 102
Several prestations are due but the performance last thing which
of one is sufficient (De Leon, 2003). disappeared or
service which
become impossible
Right of Choice
Some Debtor to deliver Debtor to deliver
Art. 1200: to the debtor, UNLESS: that which he that which the
1. when it is expressly granted to the shall choose creditor shall
creditor from among the choose from among
2. when it is expressly granted to a third remainder the remainder
person without damages
One Debtor to deliver Debtor to deliver
Limitations to the right of choice Remains that which that which remains
1. impossible prestations remains
2. unlawful prestations Art. 1205: Creditors Choice
3. those which could not have been the Fortuitous Debtors Fault
object of the obligation Event
4. only one prestation practicable (Art. All Lost Debtor is Creditor may claim
1202) released from the the price/value of
(De Leon, 2003) obligation any of them with
indemnity for
damages
When choice shall produce effect
Art. 1201: Choice shall produce no effect except Some Debtor to deliver creditor may claim
that which he any of those
from the time it has been communicated. The shall choose subsisting without a
effect of the notice is to limit the obligation of the from among the right to damages
object or prestation selected. Notice of selection remainder OR price/value of
or choice may be in any form provided it is the thing lost with
sufficient to make the other party know that the right to damages
selection has been made. It can be: One Creditor may Creditor may claim
o oral Remains claim any of the remaining thing
o in writing those subsisting without a right to
o tacit without a right to damages OR the
o any other equivocal means damages OR price/value of the
Choice of the debtor when communicated to price/value of the thing lost with right
the creditor does not require the latters thing lost with to damages
right to damages
concurrence.
When the choice is rendered impossible
through the creditors fault, the debtor may
bring an action to rescind the contract with B. Facultative Obligation
damages (Art.1203).
Obligation is converted into a simple Only one prestation has been agreed upon but
obligation when: the debtor may render another in substitution
o When the person who has the right of (De Leon, 2003)
choice has communicated his choice
(Art. 1201) Effect of Loss of Substitute
o When only one prestation is practicable
(Art. 1202) Before Substitution is After Substitution is
Made Made
If due to bad faith or The loss or
fraud of obligor: obligor deterioration of the
is liable substitute on account
of the obligors delay,
negligence or fraud
CIVIL LAW REVIEWER
If due to the negligence obligor is liable
of the obligor: obligor is because once
not liable substitution is made,
the obligation is
converted into a simple
one with the substituted
thing as the object of
the obligation.
V. Joint and Solidary Obligations
A. Joint Obligations
One where a concurrence of several creditors,
or of several debtors, or of several creditors and
debtors, by virtue of which, each of the creditors
has a right to demand, and each of the debtors
is bound to render compliance with his
proportionate part of the prestation which
constitute the object of the obligation (Obligacion
Mancomunada).
Presumption: Obligation is presumed joint if
there is a concurrence of several creditors, of
several debtors, or of several creditors and
debtors in one and the same obligation (Art.
1207).
Exceptions:
1. When the obligation expressly stated that
there is solidarity
2. When the law requires the solidarity
3. When the nature of the obligation requires
solidarity
4. When the nature or condition is imposed
upon heirs or legatees, and the testament
expressly makes the charge or condition in
solidum
5. When the solidary responsibility is imputed
by a final judgment upon several defendants
Principal Effects of Joint Liability
1. Demand by one creditor upon the debtor,
produces the effects of default only with
respect to the creditor who demanded and
the debtor on whom the demand was made,
but not with respect to others
2. Interruption of prescription by the judicial
demand of one creditor upon a debtor, does
not benefit the other creditors nor interrupt
the prescription as to other debtors
3. Vices of each obligation arising from the
personal defect of a particular debtor or
creditor does not affect the obligation or right
of the others
4. Insolvency of a debtor does not increase the
responsibility of his co-debtors, nor does it
Chapter III. DIFFERENT KINDS of OBLIGATIONS
authorize a creditor to demand anything
from his co-debtors
5. Defense of res judicata is not extended from
one debtor to another
Joint Divisible Obligation
Art. 1208: Each creditor can demand only for the
OBLIGATIONS
payment of his proportionate share of the
103
credit, while each debtor can be liable only for
the payment of his proportionate share of the
debit
Presumption: Credit or debt shall be presumed
to be divided into as many equal shares as there
are creditors or debtors.
Joint creditor cannot act in representation of
the others, neither can a joint debtor be
compelled to answer for the liability of
others.
Joint Indivisible Obligation
Art. 1209: no creditor can act in representation
of the other; no debtor can be compelled to
answer for the liability of the others.
If there are two or more debtors, the
fulfillment of or compliance with the
obligation requires the concurrence of all the
debtors, although each for his own share
and for the enforcement of the obligation
In case of breach where 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.
In case of insolvency of one of the
debtors, the others shall not be liable for his
shares. To hold otherwise would destroy the
joint character of the obligation.
Joint Divisible Joint Indivisible
Obligations Obligations
In case of breach of In case of breach where
obligation by one of the one of the joint debtors
debtors, damages due fails to comply with his
must be borne by him undertaking, the
alone obligation can no longer
be fulfilled or performed.
Thus action must be
converted into indemnity
for damages.
Plurality of Creditors: If one or some of
the creditors demands the prestation,
the debtor may legally refuse to deliver
to them, he can insist that all the
creditors together receive the thing, and
if any of them refuses to join the others,
the debtor may deposit the thing in court
by way of consignation (Tolentino,
1987).
 CIVIL LAW REVIEWER Chapter III. DIFFERENT KINDS of OBLIGATIONS

B. Solidary Obligation A solidary creditor cannot assign his

An obligation where there is concurrence of
several creditors, or of several debtors, or of
several creditors and several debtors, by virtue
of which, each of the creditors has the right to
demand, and each of the debtors is bound to
render, entire compliance with the prestation
rights without the consent of the others.
(Art. 1213)
Each debtor may pay to any solidary
creditor, but if any demand, judicial or
extrajudicial, has been made by one of
them, payment must be made to him.
(Art. 1214)

OBLIGATIONS
which constitutes the object of the obligation 2. Passive (solidarity among debtors): Each 104
(Obligacion Solidaria). debtor can be made to answer for the
others, with the right on the part of the
Indivisibility Solidarity debtor-payor to recover from the others their
Refers to the prestation Refers to the legal tie or respective shares.
which constitutes the vinculum, and Creation of a relationship of mutual
object of the obligation consequently to the guaranty among co-debtors
subjects or parties of
The total remission of the debt in favor
the obligation
Plurality of subjects is not Plurality of subjects is of a debtor releases all the debtors
required indispensable All the debtors are liable for the loss of
In case of breach, When there is liability the thing due, even if such loss is
obligation is converted into on the part of the caused by the fault of only one of them
indemnity for damages debtors because of the and for delay, even if it is caused by just
because the indivisibility of breach, the solidarity one of them
the obligation is terminated among the debtors The interruption of prescription as to
remains
one debtor affects all the others; but the
renunciation by one debtor of
The indivisibility of an obligation does not necessarily prescription already had does not
give rise to solidarity. Nor does solidarity itself imply prejudice the others
indivisibility. (Art. 1211) 3. Mixed: Solidarity among creditors and
debtors
Kinds of Solidary Obligations Solidarity is not destroyed by the fact
1. Active (solidarity among creditors): Each that the obligation of each debtor is
creditor has the authority to claim and subject to different conditions or periods.
enforce the rights of all, with the resulting The creditor can commence an action
obligation of paying everyone of what against anyone of the debtors for the
belongs to him. compliance with the entire obligation
Creation of a relationship of mutual minus the portion or share which
agency among co-creditors. corresponds to the debtor affected by
the condition or period.

_ _ _

Effects of Modes of Extinguishment

Assignment of Loss or
Compensation &
Rights in Solidary Novation Remission Impossibility
Confusion
Obligations
The solidary If prejudicial, the If it is partial, the If entire If not debtors
creditor cannot solidary creditor rules regarding obligation, fault, the
assign his right who effected the application of obligation is totally obligation is
because it is novation shall payment shall extinguished. extinguished
predicated upon reimburse the apply (w/o) If for the benefit If thru debtors
mutual others for prejudice to the of one of the OR fortuitous
confidence, damages incurred right of other debtors covering event after delay,
UNLESS, the (1) by them; creditors who his entire share, the obligation is
the assignment is If beneficial and have not caused he is completely converted into
to a co-creditor; secured by one, the confusion or released from the indemnity for
(2) assignment is he shall be liable compensation to creditor/s. damages but the
with consent of to the others for be reimbursed to If for the benefit solidary character
co-creditor the share the extent that of one of the of the obligation
(obligation & their rights are debtors and it remains.
benefits) which diminished or covers only part
 corresponds to affected of his share, his
them If total, the character as a
If by substituting obligation is solidary debtor is
the debtor, the extinguished, not affected.
solidary creditor what is left is the
who effected the ensuing liability
novation is liable for reimbursement
for the acts of the
new debtor in
deficiency or

OBLIGATIONS
damages 105
If by subrogating
a third person in
creditors rights,
the obligation is
not in reality
extinguished as
the relation
between the other
creditors and the
debtor/s is
maintained.

The creditor may proceed If two or more solidary

Effects of Prejudicial and Beneficial Acts against any one of the debtors offer to pay, the
(Art.1212) solidary debtors or all creditor may choose
1. Each one of the solidary creditors may do simultaneously (Art. which offer to accept.
1216) (Art. 1217)
whatever may be useful or beneficial to the
A creditors right to The solidary debtor who
others, but not anything which may be proceed against the made the payment shall
prejudicial to the latter. surety exists have the right to claim
2. As far as the debtors are concerned, a independently of his right from his co-debtors the
prejudicial act performed by a solidary to proceed against the share which corresponds
creditor is binding. principal to them with interest,
3. As between the solidary creditors, the UNLESS barred by
creditor who performed such act shall incur prescription or illegality.
(Art. 1218)
the obligation of indemnifying the others for
damages.
When a solidary debtor pays the entire
Defenses Available to a Solidary Debtor ( Art. obligation, the resulting obligation of the co-
1222) debtors to reimburse him becomes joint.
1. Those derived from the nature of the If payment was made before the debt
obligation became due, no interest during the
2. Those personal to him intervening period may be demanded. (Art.
3. Those pertaining to his own share 1217 par. 2)
4. Those personally belonging to other co- When one of the solidary debtors cannot
debtors but only as regards that part of the reimburse his share to the debtor paying the
debt for which the latter are responsible. obligation due to insolvency, such share
shall be borne by all his co-debtors, in
Effects proportion to the debt of each. (Art. 1217,
par. 2)
Demand Upon a Payment by a Debtor
Solidary Debtor Inchausti v. Yulo, (1914): Debtors obligated
The demand made Full payment made by themselves solidarily, so creditor can bring its action
against one of them shall one of the solidary against any of them. Remission of any part o fthe
not be an obstacle to debtors extinguishes the debt, made by the creditor in favor of one of the
those which may obligation. (Art. 1217) solidary debtors, inures to the benefit of the rest of
subsequently be directed them.
against the others so
long as the debt has not
been fully collected. (Art.
1216)
VI. Divisible and Indivisible Obligations only when the non- If
performance is due to the fault th
A. Divisible Obligations or fraud of the debtor. e
pri
One which is susceptible of partial performance; nc
that is, the debtor can legally perform the ip
obligation by parts and the creditor cannot al
demand a single performance of the entire ob
obligation (Tolentino, 1987). lig
ati
B. Indivisible Obligations on
is
One which cannot be validly performed in parts vo
(Tolentino, id,
1987). pe
Divisibility/indivisibility refers to the na
performance of the prestation and not to the l
thing which is the object thereof. The thing cl
may be divisible, yet the obligation may be au
indivisible. se
When the obligation has for its object the sh
execution of a certain number of days of all
work, the accomplishment of work by al
metrical units, or analogous things which by so
their nature are susceptible of partial be
performance, it shall be divisible (Art.1225, vo
par. 2). id.
When there is plurality of debtors and H
creditors, the effect of divisibility/indivisibility o
of the obligation depend upon whether the w
obligation is joint or solidary. ev
A joint indivisible obligation give rise to er,
indemnity for damages from the time anyone th
of the debtors does not comply with is e
undertaking. nu
(Art. 1224) llit
y
Effect of
Creditor cannot be compelled partially to receive th
the prestation in which the obligation consists; e
neither may the debtor be required to make the pe
partial payment (Art. 1248), UNLESS: na
The obligation expressly stipulates the l
contrary cl
The different prestations constituting the au
objects of the obligation are subject to se
different terms and conditions do
The obligation is in part liquidated and in part es
unliquidated no
t
ca
VII. Oblligations with a Penal rry
Clause wi

Penal Clause: An accessory undertaking to

assume greater liability in case of breach (De
Leon, 2003). It is attached to an obligation in
order to ensure performance. The enforcement
of the penalty can be demanded by the creditor
 th it the nullity of the principal obligation a. If creditor has chosen fulfillment of the
(Art.1230). principal obligation and performance thereof
become impossible without his fault, he may
Purposes of Penalty still demand the satisfaction of the penalty.
b. If there was fault on the part of the debtor,
1. Funcion coercitiva de garantia - to insure the performance of the
creditor may demand not only satisfaction of
obligation.
penalty but also the payment of damages.
2. Funcion liquidatoria - to liquidate the amount of
c. If creditor chooses to demand the

OBLIGATIONS
damages to be awarded to the injured party in case of breach of the
satisfaction of the penalty, he cannot
principal obligation (compensatory).
afterwards demand the fulfillment of the 106
3. Function estrictamente penal - to punish the
obligation.
obligor in case of breach of the principal obligation
(punitive).
Proof of Actual Damage
Effects of Penalty Art. 1228: Proof of actual damages is not
1. The penalty shall substitute the indemnity for damages and necessary is applicable only to the general rule
payment of interest in case of non-compliance (Art. 1226), stated in Art. 1226 and not to the exceptions.
UNLESS: The penalty is exactly identical with what is
a. There is a stipulation to the contrary known as liquidated damages in Art. 2226.
b. The obligor refuses to pay the penalty c. The obligor
is guilty of fraud When Penalty may be Reduced
2. Debtor cannot exempt himself from the Art. 1229:
performance of the principal obligation by paying the 1. If the principal obligation has been partly
stipulated penalty unless this right has been expressly complied with.
2. If the principal obligation has been irregularly
reserved for him (Art. 1227).
complied with.
3. Creditor cannot demand the fulfillment of the principal 3. If the penalty is iniquitous or unsconscionable
obligation and demanding the satisfaction of the penalty at even if there has been no performance.
the same time unless the right has been clearly granted to
him (Art. 1227). Tacit or implied grant is admissible.
CIVIL LAW REVIEWER Chapter IV. EXTINGUISHMENT of OBLIGATIONS
singular. There must be full and faithful compliance
Chapter IV. Extinguishment of with the terms of the contract.
Obligations
B. Payment by Cession (Art. 1255)
I. PAYMENT OR PERFORMANCE
II. LOSS OF THE THING DUE OR IMPOSSIBILITY Act whereby a debtor abandons all his property
OF PERFORMANCE to his creditors, so that the latter may apply the

OBLIGATIONS
III. CONDONATION OR REMISSION OF THE
proceeds (of its sale) to their credits.
DEBT 107
IV. CONFUSION OR MERGER OF RIGHTS
V. COMPENSATION C. Dation in payment (Art. 1245)
VI. NOVATION
Delivery and transmission of ownership of a
thing by the debtor to the creditor as an
I. Payment or Performance accepted equivalent of the performance of the
obligation (dacion en pago).

Dation in payment Payment by cession

Art. 1232, Civil Code. Payment means not only
delivery of money but also performance, in any In favor of only one There are various
manner, of the obligation. creditor creditors
Payment extinguishes the Extinguishes credits
See Diagrams of Prof. Labitag at the end obligation to the extent of only up to the extent of
the value of the thing proceeds from sale of
section of Obligations.
delivered, unless the assigned property,
parties agree that the unless otherwise
SPECI AL FORMS OF PAYMENT obligation be totally agreed upon
extinguished
A. Application of Payment (Art. 1252) Transfer of ownership of Only possession and
Designation of the debt to which should be thing alienated to creditor administration with
applied a payment made by a debtor who owes authorization to convert
several debts to the same creditor property to cash with
which the debts shall
be paid
Rules on Application
Not necessarily in state of Assignment
1. Preferential right of debtor - debtor has the financial difficulty presupposes
right to select which of his debts he is insolvency of debtor.
paying. Assignment of only some Assignment involves all
2. The debtor makes the designation at the specific thing the property of the
time he makes the payment debtor.
3. If not, the creditor makes the application, by D. Tender of payment and consignation
so stating in the receipt that he issues,
unless there is cause for invalidating the 1. Tender of payment: Manifestation made by
contract. debtor to creditor of his desire to comply
4. If neither the creditor nor debtor exercises with his obligation, with offer of immediate
the right to apply, or if the application is not performance
valid, the application is made by operation of Preparatory act to consignation
law. Extrajudicial in character
5. If debt produces interest - payment not
deemed applied to the principal unless 2. Consignation: Deposit of the object of
interests are covered. obligation in a competent court in
6. When no application can be inferred from accordance to the rules prescribed by law,
the circumstances of payment, it is applied whenever the creditor unjustly refuses
to: to the most onerous debt of the debtor; or payment or because of some circumstances
if debts due are of the same nature and which render direct payment to the creditor
burden, to all the debts in proportion impossible or inadvisable.
7. Rules of application of payment may not be Principal act which constitutes a form of
invoked by a surety or solidary guarantor. payment.
Judicial in character.
Reparations Commission vs. Universal Deep Sea
Fishing Corp. (1978): Rules on application of payment
cannot be made applicable to a person whose
obligation as a mere surety is both contingent and
CIVIL LAW REVIEWER
When Tender and Refusal Not Required (Art.
1259)
1. Creditor is absent or unknown, or does not
appear at the place of payment
2. Creditor is incapacitated to receive the thing
due at time of payment
3. Without just cause, creditor refuses to give
receipt
4. Two or more persons claim the same right to
Chapter IV. EXTINGUISHMENT of OBLIGATIONS
2. After approval of the court or acceptance by
the creditor, with the consent of the latter -
Obligation remains in force, but guarantors
and co-debtors are liberated. Preference of
the creditor over the thing is lost.
3. After approval of the court or acceptance by
the creditor, and without creditors consent -
Obligation subsists, without change in the
liability of guarantors and co-debtors, or the

OBLIGATIONS
collect creditors right of preference. 108
5. Title of the obligation has been lost
Art. 1259, Civil Code. Expenses of consignation,
Effects of Withdrawal by Debtor when properly made, shall be charged against the
Arts. 1260- 1261 creditor.
1. Before approval of the court - Obligation
remains in force.

Requisites and Effects

Application of
Cession Dation Tender and Consignation
Payment
Requisites Requisites Requisites Requisites
1. Plurality of 1. Plurality of debts 1. Should not be 1. There is a debt due
debts 2. Plurality of prejudicial to 2. consignation is made because
2. Debts are of creditors other creditors of some legal cause
the same kind 3. Partial insolvency 2. Should not 3. previous notice of consignation
3. Debts are owed of the debtor constitute a was given to those persons
to the same 4. Abandonment of pactum interested in the performance
creditor and by the totality of the commissorium of the obligation
the same debtors 4. amount or thing due was
debtor properties for the placed at the disposal of the
4. All debts must benefit of the court
be due creditors 5. after the consignation has been
5. Payment made 5. Acceptance by made, the persons interested
is not sufficient the creditors were notified thereof
to cover all
debts
Effects Effects Effects Effects
Payment of debt Assignment liberates Extinguishment of If accepted by the creditor or
designated as to debtor up to the debt from as an declared properly made by the
corresponding amount of the net equivalent of the Court:
amount proceeds of the sale performance of the 1. Debtor is released in same
of his assets obligation manner as if he had performed
Assignment does not the obligation at the time of
vets title to the consignation
property in the 2. Accrual of interest is
creditors, suspended from the moment of
who are only consignation.
authorized to sell it. 3. Deterioration or loss of the
thing or amount consigned,
occurring without the fault of
debtor, must be borne by
creditor from the moment of
deposit
4. Any increment or increase in
the value of the thing after
consignation inures to the
benefit of the creditor
II. Loss or Impossibility the part lost was of such extent Loss of
(Asked in 83, 84, 85, and as to make the thing useless. the thing
94) when in
possessi
A. Loss on of the
debtor:
A thing is lost when it perishes, goes out of Loss was
commerce or disappears in such a way that its due to the
existence is unknown or it cannot be recovered debtors
(Art. 1189, par. 2) fault.
Burden of
Effects of Loss explaining
the loss of
Obligation to Deliver a Obligation to Deliver a the thing
Specific Thing Generic Thing falls upon
Extinguishment of the Loss of a generic thing him,
obligation if the thing was does not extinguish an UNLESS,
destroyed w/o fault of the obligation, UNLESS, due to a
debtor and before he has Delimited generic
things: kind or class is
natural
incurred delay.
limited itself, and the calamity:
whole class perishes earthquak
e, flood,
storm, etc.
rd
Action against 3 persons - creditor shall have
all the rights of action the debtor may have Subjective
rd impossibili
against 3 persons by reason of the loss. ty: Where
there is no
Presumption: The loss was due to the debtors physical or
fault, UNLESS: legal loss,
1. Law provides that the debtor shall be liable but the
even if the loss is due to fortuitous events thing
(Arts. 1942, 1979, 2147, 2159) belongs to
2. Obligor is made liable by express another,
stipulation the
3. Nature of the obligation requires an performanc
e by the
assumption of risk
debtor
4. Fault or negligence concurs with the becomes
fortuitous event impossible.
5. Loss occurs after delay The debtor
6. Debtor has promised to deliver the same must
thing to two or more different parties indemnify
7. Obligation arises from a criminal act the creditor
8. Borrower in commodatum: saves his own for
things and not the thing of the creditor damages.
during a fortuitous event

In Reciprocal Obligations B.
Extinguishment of the obligation due to loss of Impossibi
the thing or impossibility of performance affects lity of
both the creditor and debtor; the entire juridical Performa
relation is extinguished. nce (Arts.
1266-
Partial loss 1267,
Art. 1264: Partial loss due to a fortuitous event CC)
does not extinguish the obligation; thing due
shall be delivered in its present condition, When
without any liability on the part of the debtor, prestation
UNLESS, the obligation is extinguished when becomes
legally or
physically
impossible (by fortuitous event or force majeure), the debtor
is released.Impossibility must have occurred without fault of
debtor, and after the obligation has been constituted.
PARTIAL IMPOSSIBILITY
1. Courts shall determine whether it is so important as to
extinguish the obligation.
2. If debtor has performed part of the obligation when
impossibility occurred, creditor must pay the part done
as long as he benefits from it.
3. If debtor received full payment from creditor, he must return
excess amount corresponding to part which was impossible
to perform.
Doctrine of Unforeseen Events
When the service has become so difficult as to be manifestly
beyond the contemplation of all the parties, the obligor may be
released in whole or in part (De Leon, 2003).
Requisites:
1. Event could not have been foreseen at the
time of the constitution of the contract.
2. Event makes performance extremely difficult
but not impossible.
3. Event not due to any act of the parties.
OBLIGATIONS
4. Contract is for future prestation.
109
III. Condonation or Remission of the
Debt
CONDONATION: An act of liberality, by virtue of
which, without receiving any equivalent, creditor
renounces the enforcement of the obligation.
The obligation is extinguished either in whole or
in such part of the same which to remission
refers.
Requisites Effects
1. Debt must be existing and demandable Arts. 1275- 1277:
2. Renunciation must be gratuitous; without 1. The obligation is extinguished from the time
any consideration the characters of the debtor and creditor are
3. Debtor must accept the remission merged in the same person.
2. In joint obligations, confusion does not
Effect extinguish the obligation except as regards

OBLIGATIONS
Art. 1273: Renunciation of the principal debt the corresponding share of the creditor or
shall extinguish the accessory obligations, but 110
debtor in whom the two characters concur.
remission of the latter leaves the principal 3. In solidary obligations, confusion in one of
obligation in force. the solidary debtors extinguishes the entire
obligation.
Presumptions 4. Obligation is not extinguished when
Arts. 1271, 1272, 1274: confusion takes place in the person of
Whenever the private document in which the subsidiary debtor (e.g. guarantor), but
debt is found in the possession of the merger in the person of the principal debtor
debtor, it shall be presumed that the creditor shall benefit the former.
delivered it voluntarily, unless contrary is
proved.
Delivery of a private document evidencing V. Compensation
credit, made voluntarily by the creditor to the
debtor, implies the renunciation of the action COMPENSATION: Offsetting of two obligations
of creditor against the latter. which are reciprocally extinguished if they are of
the same value, or extinguished to the
Kinds
concurrent amount if of different values. (Asked
1. As to form (Art. 1270)
in 80, 81, 98, and 02)
Express: made formally; in accordance
with forms of ordinary donations Compensation Confusion
Implied: inferred from the act of the
parties There must always be 2 Involves only one
2. As to extent obligations obligation
Total: entire obligation
Partial: may refer only to amount of There are 2 persons who are There is only one
indebtedness, or to an accessory mutually debtors and person whom the
obligation, or to some other aspect of creditors of each other in 2 characters of the
the obligation separate obligations, each creditor and debtor
3. As to constitution arising from the same cause. meet
Inter vivos: effective during the lifetime
of the creditor Kinds
Mortis causa: effective upon death of the 1. As to extent
creditor; must be contained in a will or Total: Debts are of the same amount
testament Partial: Amounts are not equal
2. As to origin
Legal: takes place by operation of law
IV. Confusion or Merger of Rights Conventional: parties agree to
compensate their mutual obligations
even when some requisite in Art. 1279 is
CONFUSION: The meeting in one person of the lacking (Art. 1282).
qualities of creditor and debtor of the same Judicial: decreed by court when there is
obligation. counterclaim; effective upon final
judgment (Art. 1283).
Requisites Facultative: when it can be claimed by
1. It should take place between principal debtor one of the parties who, however, has the
and creditor right to object to it.
2. It must be complete and definite- Parties
must meet all the qualities of creditor and
debtor in the obligation/ in the part affected.
 Requisites Effects
1. Each obligor is 1. Effects rise from the
bound principally, moment all the
VI. Novation
and at the same time requisites concur. NOVATION: Extinguishment of an obligation by
a principal creditor of 2. Debtor claiming its the substitution or change of the obligation by a
the other benefits must prove subsequent one which extinguishes or modifies
2. Both debts must compensation; once the first either by changing the object or principal
consist in a sum of proven, effects conditions, or by substituting the person of the

OBLIGATIONS
money, or if the retroact from the
things due are debtor, or by subrogating a third person in the 111
moment when the
FUNGIBLE, of the requisites concurred.
rights of the creditor. A juridical act of dual
same kind & quality 3. Both debts are functionit extinguishes an obligation, and at
3. Both debts are due extinguished to the the same time, it creates a new one in lieu of the
4. Debts are liquidated concurrent amount, old. (Asked in 78, 88, 94 and 01)
and demandable eventhough the
5. There must be no creditors and debtors Requisites
retention or are not aware of the
controversy over 1. A previous valid obligation
compensation.
either of the debts, 2. Agreement of all the parties to the new
4. Accessory
commenced by 3
rd
obligations are also obligation
persons and extinguished. 3. Extinguishment of the old obligation
communicated in 4. Validity of the new obligation
due time to the
debtor Novation is not presumed.
6. Compensation is not Express novation: Parties must expressly
prohibited by law
disclose their intent to extinguish the old
obligation by creating a new one.
Compensation is prohibited in: Implied novation: No specific form is
1. Contracts of depositum required. There must be incompatibility
2. Contracts of commodatum between the old and new obligation or
3. Future support due by gratuitous title contract.
4. Civil liability arising from a penal (Asked in 79, 82, 88, and 94)
offense
5. Obligations due to the government California Bus Line v. State Investment (2003): In the
6. Damage caused to the partnership by a absence of an unequivocal declaration of
partner extinguishment of the pre-existing obligation, only
proof of incompatibility between the old and new
ASSIGNMENT OF CREDIT (Art. 1285): obligation would warrant a novation by implication.
No effect and does not bind the debtor unless and until The restructuring agreement merely provided for a
the latter is notified of the assignment or learns of it. new schedule of payments and authority giving Delta
to take over management and operations of CBLI in
case it fails to pay installments. There was no change
Without in the object of prior obligations.
With Debtors With Debtors
Debtors
Consent Knowledge
Knowlege Test of Incompatibility
Debtors Debtor may set Debtor may Whether or not the old and new obligation can
consent to up setup stand together, each one having an independent
assignment of compensation compensation
existence. No incompatibility exists when they
credit of debts of all credits
constitutes a (maturing) (maturing) prior can stand together. Hence, there is no novation.
waiver of before the to the Incompatibility exists when they cannot stand
compensation, assignment of assignment and together. Hence, there is novation.
unless he credit but not of also latter ones
reserved his subsequent until he had Effects
right to ones knowledge of
compensation. the assignment. In General If Original If New
Facultative compensation: Compensation which Obligation is Obligation is
Void Void
can only be set up at the option of a creditor, when
1. Old Novation is void if New obligation is
legal compensation cannot take place because some obligation is the original void, the old
legal requisites in favor of the creditor are lacking. extinguished obligation was obligation
Creditor may renounce his right to compensation, and and replaced void, except subsists, unless
he himself may set it up.As opposed to conventional by the new when annulment the parties
compensation, facultative compensation is unilateral one may be claimed intended that the
and does not depend upon the agreement of the stipulated. only by the former realations
parties.
 Expromision Delegacion
Initiative for change does Debtor (delegante) offers
debtor, or when not emanate from the or initiates the change,
shall be
ratification debtor, and may and the creditor
extinguished in rd
validates acts any event. (Art. Even be made without (delegatorio) accepts 3
that are voidable. 1297) his knowledge. person (delegado) as
(Art. 1298) 1. New obligation consenting to the
1. Original void: No novation substitution
obligation is void: 2. New obligation Requisites Requisites
No novation voidable:
2. Original 1. Consent of the 1. Consent of old
Novation is

OBLIGATIONS
obligation effective
creditor and the new debtor, new debtor,
voidable: debtor and creditor 112
Effective if 2. Knowledge or
contract is ratified consent of the old
before novation debtor is not
required
Accessory obligations are also extinguished, Effects Effects
but may subsist only insofar as they may 1. Old debtor is 1. Insolvency of the
rd
benefit 3 persons who did not give their released new debtor revives
consent to the novation OR may not be 2. Insolvency of the the obligation of the
affected upon agreement between the new debtor does not old debtor if it was
parties. revive the old anterior and public,
obligation in case the and known to the old
old debtor did not debtor.
Original or new obligation with suspensive or agree to expromision 2. New debtor can
resolutory condition 3. If with knowledge demand
Art. 1299: If original obligation was subject to a suspensive or and consent of old reimbursement of
resolutory condition, the new obligation shall be under the debtor, new debtor the entire amount he
same condition, unless it is otherwise stipulated. can demand has paid, from the
reimbursement the original debtor. He
entire amount paid may compel creditor
and w/ subrogation to subrogate him to
Compatible Conditions Incompatible
of creditors rights all of his rights.
Conditions
4. If without knowledge
Fulfillment of both Original obligation is of the old debtor,
conditions: new extinguished, while new debtor can
obligation becomes new obligation exists demand
demandable Demandability shall reimbursement only
Fulfillment of be subject to up to the extent that
condition concerning fulfillment/ the latter has been
the original nonfulfillment of the benefited w/o
obligation: old condition affecting it subrogation of
obligation is revived; creditors rights
new obligation loses
force
rd
Fulfillment of 2. Subrogation of a 3 person in the rights
condition concerning of the creditor
the new obligation: a. Conventional subrogation: by
no novation; agreement of the parties;
requisite of a
previous valid and rd
effective obligation Requisites: the consent of the 3
lacking person, and of the original parties (Art.
OBJECTIVE NOVATION 1301).
1. Change of the subject matter
2. Change of causa or consideration Conventional Assignment of credit
subrogation
3. Change of the principal conditions or terms
Debtors consent is Debtors consent is not
necessary required
SUBJECTIVE NOVATION Extinguishes an Refers to the same right
1. Substitution of the Debtor: Consent of obligation and gives which passes from one
creditor is an indispensable requirement rise to a new one person to another, without
both in expromision and delegacion. modifying or extinguishing
the obligation
 Defects/ vices in the Defects/ vices in the old
old obligation are obligation are not cured
cured

b. Legal subrogation: by operation of law

Legal subrogation is not presumed,
except in the following circumstances:

OBLIGATIONS
1. When creditor pays another creditor 113
who is preferred, even without the
debtors knowledge
rd
2. When a 3 person not interested in
the obligation pays with the express
or tacit approval of the debtor
3. When, even without the knowledge
of the debtor, a person interested in
the fulfillment of the obligation
without prejudice to the effects of
confusion as to the latters share
effects of confusion as to the latters
share

Effects

Total Partial
1. Transfers to the 1. A creditor, to whom
person subrogated partial payment has
the credit with all the been made, may
rights thereto exercise his right for
appertaining, either the remainder, and
against the debtor or shall be preferred to
rd
3 persons. the person
2. Obligation is not subrogated in his
extinguished, even if place in virtue of the
the intention is to partial payment.
pay it.
3. Defenses against the
old creditor are
retained, unless
waived by the debtor