OBLIGATIONS

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

It is a juridical relation or a juridical necessity whereby a person (creditor) may demand from another
(debtor) the observance of a determinative conduct (giving, doing, or not doing), and in case of breach,
may demand satisfaction from the assets of the latter (Makati Stock Exchange v. Campos, G.R. No.
138814, April 16, 2009).

It is a juridical necessity because in case of non-compliance, the courts of justice may be called upon
by the aggrieved party to enforce its fulfillment or, in default thereof, the economic value that it
represents.

GR: The law does not require any form in obligations arising from contracts for their validity or
binding force (NCC, Art. 1356).
XPNs:
1) In relation to Art. 1356, when the form is essential to the validity of the contract as required by
law ( NCC, Art. 1346);
2) When the contract is unenforceable unless it is in a certain form, such as those under the Statute
of Frauds as formulated in Art. 1403.

Obligations arising from other sources (NCC, Art. 1157) do not have any form at all (De Leon, 2010).

ELEMENTS OF AN OBLIGATION
The following are the elements of an obligation (JAPO):
1. Juridical tie or vinculum juris or efficient cause - The efficient cause by virtue of which the debtor
becomes bound to perform the prestation (Pineda, 2000).
NOTE: The vinculum juris is established by:
a. Law;
b. Bilateral acts;
c. Unilateral acts (Tolentino, 2002).
2. Active subject [creditor (CR) or obligee] - The person demanding the performance of the
obligation. It is he in whose favor the obligation is constituted, established or created;
3. Passive subject [debtor (DR) or obligor] - The one bound to perform the prestation to give, to do,
or not to do (Pineda, 2000); and
NOTE: Every obligation has two aspects. From the standpoint of the active subject, the
obligation is a right. However, from the standpoint of the passive subject, it is a debt
(Rabuya, 2017).
4. Object or prestation - The subject matter of the obligation which has a corresponding economic
value or susceptible of pecuniary substitution in case of noncompliance. It is a conduct that may
consist of giving, doing, or not doing something (Pineda, 2000).
NOTE: In order to be valid, the object or prestation must be:
1. Licit or lawful;
2. Possible, physically & judicially;
3. Determinate or determinable; and Pecuniary value or possible equivalent in money.

Absence of any of the first three makes the object void.

NOTE: Some writers add a fifth one: the form in which the obligation is manifested. This
element, however, cannot be considered as essential. There is no particular form required to
make obligations binding, except in certain rare cases (Tolentino, 2002).
From the viewpoint of:
1. Creation
a. Legal – imposed by law (NCC, Art. 1158).
b. Conventional – established by the agreement of the parties.
e.g. contracts.

2. Nature
a. Personal – to do; not to do
b. Real – to give

3. Object
a. Determinate/specific - particularly designated or physically segregated from all others of the
same class
b. Generic – designated merely by its class or genus
c. Limited generic – generic objects confined to a particular class or source
e.g. an obligation to deliver one of my horses (Tolentino, 2002).

4. Performance
a. Positive - to give; to do
b. Negative – not to do
e.g. An obligation not to run for an elective post.

5. Person obliged
a. Unilateral – only one party is bound
b. Bilateral – both parties are bound

6. Existence of burden or condition

a. Pure – not burdened with any condition or term. It is immediately demandable. (Art. 1179)
b. Conditional – subject to a condition which may be suspensive (happening of which shall give
rise to the obligation) or resolutory (happening of which terminates the obligation) (NCC, Art.
1181).

7. Character of responsibility or liability

a. Joint – each debtor is liable only for a part of the whole liability and to each creditor shall belong
only a part of the correlative rights (8 Manresa 194; NCC, Art. 1207).
b. Solidary – debtor is answerable for the whole of the obligation without prejudice to his right to
collect from his co-debtors the latter’s shares in the obligation (NCC, Art. 1207).

8. Susceptibility of partial fulfillment

a. Divisible – obligation is susceptible of partial performance (NCC, Art. 1223; NCC, Art. 1224).
b. Indivisible – obligation is not susceptible of partial performance (NCC, Art. 1225).

9. Right to choose and substitution

a. Alternative – obligor may choose to completely perform one out of the several prestations (NCC,
Art. 1199).
b. Facultative – only one prestation has been agreed upon, but the obligor may render one in
substitution of the first one (NCC, Art. 1206).
10. Imposition of penalty
a. Simple – there is no penalty imposed for violation of the terms thereof (NCC, Art. 1226).
b. Obligation with penalty – obligation which imposes a penalty for violation of the terms thereof
(NCC, Art. 1226; Pineda, 2000).

11. Sanction
a. Civil – gives a right of action to compel their performance.
b. Natural – not based on positive law but on equity and natural law; does not grant a right of action
to enforce their performance, but after voluntary fulfillment by the obligor, they authorize retention
of what has been delivered rendered by reason thereof.
c. Moral – cannot be enforced by action but are binding on the party who makes it in conscience and
natural law.

SOURCES OF OBLIGATIONS
1. Law
2. Contracts
2. Quasi-contracts
3. Delict
4. Quasi-delict

OBLIGATION DERIVED FROM LAW

Obligations derived from law are not presumed. Only those expressly determined in the Code or in
special laws are demandable and shall be regulated by the precepts of the law which establishes
them and as to what has not been foreseen by the provisions of Book IV of NCC (NCC, Art. 1158).
NOTE: If there is conflict between the NCC and a special law, the latter prevails unless the contrary
has been expressly stipulated in the NCC ( NCC, Art. 18; Paras, 2008).
Characteristics of a legal obligation
1. Does not need the consent of the obligor;
2. Must be expressly set forth in the law creating it and not merely presumed; and
3. In order that the law may be a source of obligation, it should be the creator of the obligation itself
(NCC, Art. 1158).

OBLIGATION DERIVED FROM CONTRACTS

Requisites of a contractual obligation
1. It must contain all the essential requisites of a contract (NCC, Art. 1318); and
2. It must not be contrary to law, morals, good customs, public order, and public policy (NCC, Art.
1306).
Rules governing the obligations arising from contracts
GR: These obligations arising from contracts shall be governed primarily by the stipulations,
clauses, terms and conditions of the parties’ agreements.
XPN: Contracts with prestations that are unconscionable or unreasonable (Pineda, 2009).
Binding force of obligation ex contractu
Obligations arising from contracts have the force of law between the parties and should be
complied with in good faith (NCC, Art. 1159). This is known as the “principle of obligatory force of
contracts” (Rabuya, 2017).
Good faith is performance in accordance with the stipulation, clauses, terms and conditions of the
contract (Pineda, 2000).
GR: Neither party may unilaterally evade his obligation in the contract.
XPNs: Unilateral evasion is allowed when the:
1. Contract authorizes such evasion; or
2. Other party assents thereto.

OBLIGATION DERIVED FROM QUASI-CONTRACTS

Quasi-contract
A juridical relation arising from lawful, voluntary and unilateral acts based on the principle that no
one shall be unjustly enriched or benefited at the expense of another (NCC, Art. 2142).
Distinguished from “implied contracts”
An implied contract, in the proper sense, is a contract which arises when the intention of the parties
is not expressed, but an agreement in fact, creating an obligation, is implied or presumed from their
acts, or where there are circumstances which show a mutual intent to contract.
An implied contract requires consent while quasi-contract, being a unilateral contract, does not.
The basis of an implied contract is the will of the parties while the basis of a quasi-contract is law, to
the end that there be no unjust enrichment (Rabuya, 2017).
Characteristics of a quasi-contract (LUV)
1. It must be Lawful;
2. It must be Unilateral; and
3. It must be Voluntary (Pineda, 2000).

Principal forms of quasi-contracts

1. Negotiorum gestio (inofficious manager)– Arises when a person voluntarily takes charge of the
management of the business or property of another without any power from the latter (NCC, Art.
2144).
2. Solutio indebiti (unjust enrichment) – Takes place when a person received something from another
without any right to demand for it, and the thing was unduly delivered to him through mistake (NCC,
Art. 2154).

OBLIGATION DERIVED FROM DELICTS

Delict
An act or omission punishable under the law.
Basis

GR: Art. 100 of the Revised Penal Code provides: “Every person criminally liable for a felony is also civilly
liable.”

XPNs: Crimes of treason, rebellion, espionage, contempt and others wherein no civil liability arises
on the part of the offender either because there are no damages to be compensated or there is no
private person injured by the crime (Reyes, 2008).
Implied institution of the civil action in a criminal case
GR: When a criminal action is instituted, the civil action for the recovery of the civil liability arising
from the offense charged shall be deemed instituted with the criminal action (Sec. 1, Rule 111, Rules
of Court).
XPNs: When the offended party:
1. Waives the civil action;
2. Reserves the right to institute it separately; and
3. Institutes the civil action prior to the criminal action (Rule 111, Sec. 1, Rules of Court).

Scope of civil liability (IRR)

1. Restitution;
2. Reparation for damage caused; and
3. Indemnity for consequential damages (Art. 104, RPC).

Acquittal in criminal case

GR: The acquittal of the accused in criminal case on the ground of reasonable doubt does not
preclude the filing of a subsequent civil action and only preponderance of evidence is required to
prove the latter.
XPNs: When the acquittal is on the basis that:
1. The accused did not commit the crime charged; or
2. There is a declaration in the decision of acquittal that no negligence can be attributed to the
accused and that the fact from which the civil action might arise did not exist (NCC, Art. 29).

OBLIGATION DERIVED FROM QUASI-DELICTS

Quasi-delict or tort
An act or omission arising from fault or negligence which causes damage to another, there being no
pre-existing contractual relations between the parties (NCC, Art. 2176).
NOTE: A single act or omission may give rise to two or more causes of action. Thus, an act or
omission may give rise to an action based on delict, quasi-delict or contract.
In negligence cases, prior conduct should be examined, that is, conduct prior to the injury that
resulted, or in proper case, the aggravation thereof.
Elements of a quasi-delict
1. Negligent or wrongful Act or omission;
2. 2. Damage or injury caused to another;
3. 3. Causal relation between such negligence or fault and damage; and
4. 4. No pre-exisitng contractual relationship between the parties (NCC, Art. 2176).

BASIS DELICT QUASI-DELICT

As to the kind of intent
present
As to the whether private or
public interest is concerned
As to the kind of liability
arises
Presence of criminal or Only negligence
malicious intent or
criminal negligence
Concerned with public Concerned with private
interest interest
Generally, the act or The act or omission gives rise
omission gives rise to two only to a civil liability
liabilities: criminal and
civil liability
As to availability of a Criminal liability is not The civil liability can be
compromise subject to a compromise compromised
As to the quantum of Guilt must be proved Guilt may be proved by
evidence is required beyond reasonable doubt preponderance of evidence

NATURE AND EFFECTS OF OBLIGATIONS

Types of real obligations

1. Determinate/specific – particularly designated or physically segregated from all others of the
same class;
2. Indeterminate/Generic – is designated merely by its class or genus;
3. Delimited generic – generic objects confined to a particular class (Tolentino, 2002);
e.g. an obligation to deliver one of my horses.

BASIS SPECIFIC GENERIC

What the obligation
consists of
Required diligence to be
observed
What delivery comprises
of
Effect of breach of
obligation
Effect of fortuitous event
Deliver the thing agreed upon
(NCC, Art. 1165).
Take care of the thing with
the proper diligence of a good
father of a family unless the
law requires or parties
stipulate another standard of
care (NCC, Art.1163).
Deliver all accessions,
accessories and fruits of the
thing even though they may
not have been mentioned
(NCC, Art. 1166).
Pay damages in case of breach
of obligation by reason of
delay, fraud, negligence,
contravention of the tenor
thereof
(NCC, Art. 1170).
Fortuitous event extinguishes
the obligation.
Deliver the thing which is neither of
superior nor inferior quality if
quality and circumstances have not
been stated by the parties. (NCC,
Art. 1246).
If the object is generic, but the
source is specified or delimited, the
obligation is to preserve the source.
Delivery of another thing within the
same genus as the thing promised if
such thing is damaged due to lack of
care or a general breach is
committed.
Pay damages in case of breach of
obligation by reason of delay, fraud,
negligence, contravention of the
tenor thereof
(NCC, Art. 1170).
Obligation is not extinguished
(genus nun quam peruit – genus
never perishes).

Remedies of the creditor in case of failure to deliver the thing due

SPECIFIC GENERIC
 Specific performance. Specific performance
(delivery of anything belonging to the same species).
Rescission (action to rescind under NCC, Ask that the obligation be complied with at the
Art. 1380). debtor’s expense with a right to recover damages.
Resolution (action for cancellation under Resolution or specific performance, with damages in
NCC, Art. 1191). either case (NCC, Art. 1191).
Damages, in both cases (NCC, Art. 1170).
NOTE: May be exclusive or in addition to the above-mentioned remedies

Right of the creditor to the fruits

The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same has been delivered to him (NCC, Art. 1164).

Nature of the right of the creditor with respect to fruits

1. Before delivery – personal right
2. After delivery – real right

PERSONAL RIGHT REAL RIGHT

The right or power of a person (creditor) to
demand from another (debtor), as a
definite passive subject, the fulfillment of
the latter’s obligation to give, to do, or not
to do.
There is a definite active
subject and a definite passive
subject.
Binding and enforceable only against a
particular person.
The right or interest of a
person over a specific thing
(i.e. ownership, possession,
mortgage), without a
definite subject against whom the right may be
personally enforced.
There is only a definite active
subject without any passive
subject.
Directed against the whole
World.

BREACHES OF OBLIGATIONS

Degree of diligence required

1. That agreed upon;
2. In the absence of such, that which is required by the law;
3. GR: In the absence of the foregoing, diligence of a good father of a family

XPNs:
a. Common carriers requiring extraordinary diligence (NCC, Arts. 1998-2002).
b. Banks require the highest degree of deligence, being imbued with public interest.

Diligence of a good father of a family

That reasonable diligence which an ordinary prudent person would have done under the same
circumstances.

Forms of breach of obligations

1. Voluntary – debtor is liable for damages if he is guilty of:
a. Default (mora)
b. Fraud (dolo)
c. Negligence (culpa)
d. Breach through contravention of the tenor thereof (NCC, Art. 1170).
2. Involuntary – debtor is unable to perform the obligation due to fortuitous event thus not liable for
damages.

Effects of breach of obligation

If a person obliged to do something fails to do it, or if he does it in contravention of the tenor of the
obligation or what has been poorly done be undone, the same shall be executed at his cost (NCC, Art.
1167).
When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall
also be undone at his expense (NCC, Art.1168).

Instances where the remedy under Art. 1168 is not available

1. Where the effects of the act which is forbidden are definite in character – even if it is possible for
the creditor to ask that the act be undone at the expense of the debtor, consequences contrary to
the object of the obligation will have been produced which are permanent in character.
2. Where it would be physically or legally impossible to undo what has been undone – because of:
A. The very nature of the act itself;
B. A provision of law; or
C. Conflicting rights of third persons.

NOTE: In either case, the remedy is to seek recovery for damages (NCC, Art. 1168).

A. DELAY (MORA) OR DEBTOR’S DEFAULT

Those obliged to deliver or to do something incur in delay from the time the obligee (creditor)
judicially or extrajudicially demands from them the fulfillment of their obligation.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready
to comply in a proper manner with what is incumbent upon him. From the moment one of the
parties fulfills his obligations, delay by the other begins (NCC, Art. 1169). (2002 BAR)
Kinds of delay
1.Ordinary delay – this is the mere failure to perform an obligation at the stipulated time.
2. Extraordinary delay or legal delay – this delay already equates to non-fulfillment of the obligation
and arises after the extrajudicial or judicial demand has been made upon the debtor (Pineda, 2000).

Kinds of legal delay or default

1 Mora solvendi – default on the part of the debtor/obligor
a. Ex re – default in real obligations (to give);
b. Ex personae – default in personal obligations (to do);
2. Mora accipiendi – default on the part of the creditor/oblige;
3. Compensatio morae – default on the part of both the debtor and creditor in reciprocal obligations.
MORA SOLVENDI
Requisites (PDF-MJ)
1. Obligation Pertains to the debtor;
2. Obligation is Determinate, due and demandable, and liquidated;
3. Obligation has not been performed on its Maturity date;
4. There is Judicial or extrajudicial demand by the creditor; and
5. Failure of the debtor to comply with such demand.

Non-applicability of mora solvendi

Mora solvendi does not apply in natural obligations because performance is optional or voluntary
on the debtor’s part. It does not grant a right of action to enforce their performance nor does it
apply in negative obligations because one can never be late in not giving or doing something.

Q: “A” borrowed P2,000 from “B” on December 1, 1956. He executed a promissory note
promising to pay the indebtedness on December 1, 1958. Upon the arrival of the designated
date for payment, is demand necessary in order that “A” shall incur in delay?
A: YES. In order that the first exception provided for in Art. 1169 of the NCC can be applied, it is
indispensable that the obligation or the law should expressly add that the obligor shall incur in
delay if he fails to fulfill the obligation upon the arrival of the designated date or that upon the
arrival of such date demand shall not be necessary (Bayla v. Silang Traffic Co., G.R. Nos. L-48195 and
48196, May 1, 1942).

Effects of mora solvendi

1. Debtor may be liable for damages (NCC, Art. 1155) or interests; and

NOTE: The interest begins to run from the filing of the complaint when there is no extrajudicial
demand.

2. When the obligation has for its object a determinate thing, the debtor may bear the risk of loss of
the thing even if the loss is due to fortuitous event.

3. Rescission or resolution

MORA ACCIPIENDI
Requisites
1. Offer of Performance by a capacitated debtor;
2. Offer must be to Comply with the prestation as it should be performed; and
3. Refusal of the creditor without just cause (Pantaleon v. Amex, supra).

Effects of mora accipiendi

1 Responsibility of debtor is limited to fraud and gross negligence;
2 Debtor is exempted from risk of loss of thing; creditor bears risk of loss;

3 Expenses by debtor for preservation of thing after delay is chargeable to creditor;

4 If the obligation bears interest, debtor does not have to pay it from time of delay;
5 Creditor liable for damages; and
6 Debtor may relieve himself of obligation by consigning the thing.
COMPENSATIO MORAE
Reciprocal obligations
Reciprocal obligations are those which arise from the same cause, wherein each party is a debtor
and a creditor of the other, such that performance of one is conditioned upon the simultaneous
fulfillment of the other from the moment one of the parties fulfills his obligation, delay by the other
party begins (ASJ Corporation v. Evangelista, G.R. No. 158086, February 14, 2008).
Delay in reciprocal obligations
One party incurs in delay from the moment the other party fulfills his obligation, while he himself
does not comply or is not ready to comply in a proper manner with what is incumbent upon him.
Demand is only necessary in order for a party to incur delay when the respective obligations are to
be performed on separate dates.
Effect of non-compliance of both parties in reciprocal obligations
If neither party complies with his prestation, default of one compensates for the default of the
other.

B. FRAUD (Deceit or Dolo)

It is an intentional evasion of the faithful performance of the obligation (8 Manresa 72).

KINDS OF FRAUD
Basis Fraud in the performance Fraud in the perfection
Time of It occurs after the valid execution It occurs before or simultaneous
occurrence of the contract. It is employed in with the creation or perfection of
the performance of a pre-existing the obligation.
obligation.
Consent Consent is free and not vitiated. Consent is vitiated by serious
deception or misrepresentation.
Effect It is not a ground for annulment of It is a ground for annulment of
the contract. the contract.
Remedy Action for damages only. Action for annulment with
damages.

Remedies of the defrauded party

1. Specific performance (NCC, Art. 1233); or
2. Resolution of the contract (Art. 1191); and
3. Damages, in either case.

C. CULPA OR NEGLIGENCE
The fault or negligence of the obligor consists in the omission of that diligence which is required by the
nature of the obligation and corresponds with the circumstances of the persons, of the time and the
place. When negligence shows bad faith, the provisions of Art. 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that
which expected of a good father of a family shall be required (NCC, Art. 1173).

FRAUD V NEGLIGENCE

BASIS FRAUD NEGLIGENCE

As to the intention to
cause damage
As to the mitigation of
liability
As to the waiver of future
fraud
There is deliberate
intention to cause
damage.
Liability cannot be
mitigated.
Waiver for future fraud is
void.
There is no deliberate intention to
cause damage or injury even if the
act was done voluntarily.
Liability may be mitigated.
GR: Waiver for future negligence
may be allowed in certain cases.
XPN: Nature of the obligation or
public policy requires
extraordinary diligence (e.g.
common carrier).

Effect of good faith or bad faith of the obligor

If the obligor acted in good faith, he is responsible for the natural and probable consequences of the
breach of contract and which the parties have reasonably foreseen at the time of the constitution of
the obligation.
If the obligor is guilty of fraud, bad faith, malice or wanton attitude, he shall be responsible for all
damages which may be reasonably attributed to the non-performance of the obligation.

Contributory negligence of the creditor

GR: It reduces or mitigates the damages which he can recover.
XPN: If the negligent act or omission of the creditor is the proximate cause of the event which led to the
damage or injury complained of, he cannot recover

Kinds of negligence or culpa

1. Culpa contractual (contractual negligence) - negligence which results from the breach of contract;
2. Culpa aquiliana (civil negligence or tort or quasi-delict) acts or omissions that cause damage to
another, there being no contractual relation between the parties (NCC, Art. 2176);
3. Culpa criminal (criminal negligence) – those which results in the commission of a crime or a
delict.

BASIS CULPA CULPA AQUILIANA/ CULPA CRIMINAL

CONTRACTUAL CULPA EXTRA- (DELICT)
(CONTRACT) CONTRACTUAL
(QUASI-DELICT)
Existence of Negligence is merely Negligence is Negligence is
negligence an incident in the substantive and substantive and
performance of an independent. independent.
obligation.
Contractual relations There is always a pre- GR: There is no pre- There is no pre-
existing contractual existing contractual existing contractual
relation. relation. relation.
Source of obligation The source of The source of The source of
obligation of defendant obligation is obligation is an act or
to pay damages is the defendant’s negligence omission punishable
breach or non- itself. by law.
fulfillment of the
contract.
Proof of negligence Proof of the existence The negligence of the Accused shall be
of the contract and of defendant must be presumed innocent
its breach or non- proved. until the contrary is
fulfillment is sufficient proved beyond
prima facie to warrant reasonable doubt.
recovery.
Defense available Defense of “good father Defense of “good father Defense of “good father
of a family” in the of a family” in the of a family” in the
selection & supervision selection & supervision selection & supervision
of the employees is not of the employees is a of the employees is not
a proper complete proper and complete a proper defense.
defense though it may defense. The employee’s guilt is
mitigate damages. automatically the
Respondeat superior or employer’s civil guilt, if
command the former is insolvent.
responsibility or the
master and servant
rule.
Proof needed Preponderance of Preponderance of Proof of guilt beyond
evidence. evidence. reasonable doubt.

D. CONTRAVENTION OF TENOR OF OBLIGATION (VIOLATIO)

The act of contravening the tenor or terms or conditions of the contract. It is also known as
“violatio,” i.e. failure of common carrier to take its passenger to their destination safely (Pineda,
2000).
Under NCC, Art. 1170, the phrase “in any manner contravene the tenor” of the obligation includes any
illicit act which impairs the strict and faithful fulfillment of the obligation, or every kind of defective
performance. Such violation of the terms of contract is excused in proper cases by fortuitous events.

FORTUITOUS EVENT / CASO FORTUITO

An occurrence or happening which could not be foreseen, or even if foreseen, is inevitable (NCC, Art.
1174). (2002, 2008 BAR)
Requisites: (CODE)
1. Cause of breach is independent of the will of the debtor;
2. The Event is unforeseeable or unavoidable;
3. Occurrence renders it absolutely impossible for the debtor to fulfill his obligation in a normal
manner - impossibility must be absolute not partial, otherwise not force majeure; and
4. Debtor is free from any participation in the aggravation of the injury to the creditor.

NOTE: The fortuitous event must not only be the proximate cause but it must also be the only and sole
cause. Contributory negligence of the debtor renders him liable despite the fortuitous event (Pineda,
2000).
Liability for loss due to fortuitous event
GR: There is no liability for loss in case of fortuitous event.
XPNs: (SLaP-BGC)
1. Law;
2. Nature of the obligation requires the assumption of risk;
3. Stipulation;
4. The debtor is guilty of dolo, malice or bad faith, has Promised the same thing to two or more
persons who does not have the same interest (NCC, Art. 1165);
5. The debtor Contributed to the loss (Tan v. Inchausti & Co., G.R. No. L-6472, March 7, 1912);
6. The possessor is in Bad faith (NCC, Art. 552); or
7. The obligor is Guilty of fraud, negligence or delay or if he contravened the tenor of the obligation
(Juan Nakpil v. United Construction Co., Inc. v. CA, G.R. No. L-47851, April 15, 1988).

Effects of fortuitous events

1. On determinate obligation – The obligation is extinguished.
2. On generic obligation – The obligation is not extinguished (genus nun quam peruit – genus never
perishes).

REMEDIES
In case of breach of obligation, the following are the remedies available:
1. Specific performance, or substituted performance by a third person in case of an obligation to
deliver a generic thing, and in obligations to do, unless it is a purely personal act; or
2. Rescission (or resolution in reciprocal obligations);
3. Damages, in any case;
4. Subsidiary remedies of creditors:
a. Accion subrogatoria
b. Accion pauliana
c. Accion directa

1. SPECIFIC PERFORMANCE
Remedies in connection with specific performance
1. Exhaustion of the properties of the debtor (not exempt from attachment under the law)
2. Accion subrogatoria (subrogatory action) – An indirect action brought in the name of the debtor
by the creditor to enforce the former’s rights except:
a. Personal rights of the debtor;
b. Rights inherent in the person of the debtor;
c. Properties exempt from execution.

e.g. family home

3. Accion pauliana (rescissory action) – An action to impugn or assail the acts done or contracts
entered into by the debtor in fraud of his creditor.

Substitute performance
It is a remedy of the creditor in case of non-performance by the debtor where another party performs
the obligation or the same is performed at the expense of the debtor.
 2. RESCISSION (RESOLUTION) (NCC, ART. 1191)
It refers to the cancellation of the contract or reciprocal obligation in case of breach on the part of
one, which breach is violative of the reciprocity between the parties. This is properly called
resolution. (2005, 2008 BAR)
NOTE: The rescission under Art. 1380 is rescission based on lesion or fraud upon creditors.
Applicability
Rescission or resolution is applicable in reciprocal obligations, since it is implied therein.
Characteristics of the right to rescind
1. Can be demanded only if plaintiff is ready, willing and able to comply with his own obligation and
defendant is not;
2. Not absolute;
3. Needs judicial approval in the absence of a stipulation allowing for extra-judicial rescission, in
cases of non-reciprocal obligations;
4. Subject to judicial review if availed of extra-judicially;
5. May be waived expressly or impliedly; and
6. Implied to exist in reciprocal obligations therefore need not be expressly stipulated upon.

Fulfillment or rescission of the obligation

GR: The injured party can only choose either fulfillment or rescission of the obligation, and not
both.
XPN: If fulfillment has become impossible, Article 1191 allows the injured party to seek rescission even
after he has chosen fulfillment (Ayson-Simon v. Adamos, G.R. No. L-39378, August 28, 1984).

3. DAMAGES
Liability for damages
Those liable under Art. 1170 shall pay damages only if aside from the breach of contract, prejudice
or damage was caused (Berg v. Teus, G.R. No. L-6450, October 30, 1954).
NOTE: If action is brought for specific performance, damages sought must be asked in the same
action; otherwise the damages are deemed waived (Daywalt v. Augustinian Corp, G.R. No. L-13505,
February 4, 1919).
Kinds of damages (MENTAL)
3. Moral
4. Exemplary
5. Nominal
6. Temperate
7. Actual
8. Liquidated

4. SUBSIDIARY REMEDIES
ACCION SUBROGATORIA
An action whereby the creditor, whose claim has not been fully satisfied, may go after thedebtor
defendant debtor’s debtor (3rd person) (NCC, Art. 1177).
Accion subrogatoria is different and distinct from active subjective subrogation governed by
Articles 1300 to 1304. In the latter, there is change of creditors whereas in the former there is no
change of creditors; the creditor merely acts in the name and for the account of the debtor after
exhausting the assets of the latter but not enough to satisfy the claims of the creditor.
Requisites (IPIN)
1. The debtor’s assets must be Insufficient to satisfy claims against him;
2. The creditor must have Pursued all properties of the debtor subject to execution;
3. The right of action must Not be purely personal; and
4. The debtor whose right of action is exercised must be Indebted to the creditor.

Effects of subrogatory action

1. The creditor may exercise the subrogatory action in behalf of the debtor not only up to the
amount of his credit but in its totality.

NOTE: The excess (if any) must be returned to the debtor.

2. The bringing of action does not entitle the creditor to preference.
3. The defendant (the debtor of the debtor) may avail himself of all defenses available against the
creditor.

NOTE: In order to exercise action subrogatoria, a previous approval of the court is not necessary
(Tolentino, 1991).

ACCION PAULIANA
Accion pauliana
An action where the creditor files in court for the rescission of acts or contracts entered into by the
debtor designed to defraud the former (NCC, Art. 1177).
NOTE: When the creditor could not collect in any manner, accion pauliana may be resorted by him
to rescind a fraudulent alienation of property (Regalado, v. Luchsinger and Co., 5 Phil 625, GR L-2250,
February 17, 1906).
Requisites (PAPIL)
1. Defendant must be Indebted to plaintiff;
2. The fraudulent act performed by the debtor subsequent to the contract gives Advantage to
another;
3. The creditor is Prejudiced by such act;
4. The creditor must have Pursued all properties of the debtor subject to execution; and
5. The creditor has no other Legal remedy.

ACCION DIRECTA
Accion directa
The right of a person to go directly against another who is not a privy to the contract (NCC, Arts.
1652, 1608, 1729 & 1893).
NOTE:
1. Subsidiary liability of sublessee for the rent (NCC, Art. 1652);
2. Right of sellers a retro to redeem property from persons other than the buyer a retro (NCC, Art.
1608);
3. Subsidiary liability of owners to laborers and material men (NCC, Art. 1729);
4. The principal may sue the substitute of the agent with respect to the obligations which the
substitute has contracted under the substitution (NCC, Art. 1893).

KINDS OF CIVIL OBLIGATIONS

PURE AND CONDITIONAL OBLIGATION
Pure obligation
An obligation whose performance does not depend upon a future or uncertain event, or upon a past
event or upon a past event unknown to the parties, demandable at once (NCC, Art. 1179).
NOTE: Other obligations which are demandable at once are:
1. Obligations with a resolutory condition; and
2. Obligations with a resolutory term or period [NCC, Arts. 1179 (2) and 1193 (2)].
The most distinctive characteristic of a pure obligation is its immediate demandability. This quality,
however, must not be understood in such a way as to lead to absurd interpretations which would
literally require the obligor or debtor to comply immediately with his obligation. A distinction must
be made between:
1. The immediate demandability of the obligation; and
2. Its performance or fulfillment by the obligor or debtor. Although the obligee or creditor can
demand the performance of the obligation immediately, the quality of immediate demandability is
not infringed or violated when a reasonable period is granted for performance (Jurado, 2009).

Conditional obligation
An obligation subject to a condition and the effectivity of which is subordinated to the fulfillment or
non-fulfillment of a future and uncertain event, or upon a past event unknown to the parties (Pineda,
2000).

Condition
A condition is an event which is future and uncertain, upon which the efficacy or extinguishment of
an obligation depends.
It has two requisites: first, futurity; and second, uncertainty.

Uncertain but past event as a condition

An uncertain but past event itself can never constitute a condition because in order to be classified
as a condition, the requisites of futurity and uncertainty are required. Neither can it constitute a
term or period because in order to be classified as a term or period, the requisites of futurity and
certainty are required. But the proof or ascertainment of the fact or event, as distinguished from the
fact or event itself may either constitute a condition or a term depending upon the circumstances of
each case (Jurado, 2009).

Constructive fulfillment of a condition

The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment (NCC, Art.
1186).

Suspensive condition
A condition the fulfillment of which will give rise to the acquisition of a right. While the condition
has not arrived yet, in the meantime, the rights and obligations of the parties are suspended.

NOTE: In suspensive condition or condition precedent, the efficacy or the obligatory force is
subordinated to the happening of a “future and uncertain event”; if the suspensive condition does not
take place the parties would stand as if the conditional obligation never existed (Gaite v. Fonacier, GR L-
11827, July 31, 1961; Cheng v. Genato, 300 SCRA 722, GR 129760, December 29, 1998; Pineda, 2000).

Rights of the parties before the fulfillment of the condition

1. Creditor – May bring the appropriate actions for the preservation of his right (NCC, Art. 1188),
such as:
a. Action for prohibition/restraining the alienation of the thing pending the happening of the
suspensive condition;
b. Petition for the annotation of the creditor’s right with the proper registry;
c. Action to demand security if the debtor has become insolvent;
d. Action to set aside alienations made by the debtor in fraud of creditors;
e. Action against adverse possessors to interrupt the running of prescriptive period.

2. Debtor – May recover what, during the same time, he has paid by mistake in case of a suspensive
condition (NCC, Art. 1188).

Effect of loss, deterioration and improvement in an obligation to deliver a determinate thing subject
to a suspensive condition

BASIS WITH DEBTOR’S FAULT WITHOUT DEBTOR’S FAULT

Loss Obligation is not extinguished. Obligation extinguished.
Debtor pays damages.
Deterioration Creditor may choose between Impairment borne by creditor.
rescission of obligation or
fulfillment (with indemnity for
damages in either case).
Improvement
c. By the thing’s nature or through time – inure to the benefit of the
creditor;
d. At the debtor’s expense – debtor shall have no right other than that
granted to a usufructuary.

Resolutory condition (1999 BAR)

A condition where the rights already acquired are lost upon fulfillment of the condition. It is also
known as condition subsequent.

Effects of fulfillment of resolutory condition

I. Real obligations:
a. The parties shall return to each other what they have received (mutual restitution).
b. Obligation is extinguished.
c. In case of loss, deterioration or improvement of the thing, NCC, Art. 1189, with respect to the
debtor, shall be applied to the party who is bound to return (NCC, Art. 1190).

II. Personal obligations – the courts shall determine, in each case, the retroactive effect of the
condition that has been complied with. (NCC, Art. 1187; NCC, Art. 1190).

Suspensive condition v. Resolutory condition

BASIS SUSPENSIVE CONDITION RESOLUTORY CONDITION
Effect of fulfilment Obligation arises or becomes
effective.
Effect of non- If not fulfilled, no juridical
fulfillment relation is created.
When rights are Rights are not yet acquired,
acquired but there is hope or
expectancy that they will
soon be acquired.
Obligation is extinguished.
If not fulfilled, juridical relation is
consolidated.
Rights are already vested, but
subject to the threat or danger of
extinction.

Potestative Condition (1997, 2000, 2003 BAR)

A condition which depends upon the will of one of the contracting parties (NCC, Art. 1182).

Effects of potestative conditions upon the obligation

If the condition is potestative in the sense that its fulfillment depends exclusively upon the will of the
debtor, and the same is suspensive, both the condition and obligation are VOID.

Casual Condition
It is the performance or the fulfillment of the condition which depends upon chance and/or the will
of a third person.

Mixed Condition
It is the performance or fulfillment of the condition which depends partly upon the will of a party to
the obligation and partly upon chance and or the will of a third person.

NOTE: Casual and mixed conditions are valid, unlike purely potestative conditions.

OBLIGATIONS WITH A PERIOD

Obligation with a period or a term
Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that
day comes (NCC, Art. 1193).
Term or period
A certain length of time which determines the effectivity or the extinguishment of the obligations.
Requisites of a valid period or term
1. Future;
2. Certain;
3. Possible, legally and physically (Paras, 2008).

“Day certain”
It is understood to be that which must necessarily come, although it may not be known when.
Kinds of terms or periods
1. Ex die – this is a term or period with suspensive effect. The obligation begins only from a
day certain, in other words upon the arrival of the period.

2. In diem – a period or term with a resolutory effect. Up to a certain extent, the obligation remains
valid, but upon the arrival of said period, the obligation terminates.
3. Legal – a period granted under the provisions of the law.
4. Conventional or voluntary – period agreed upon or stipulated by the parties.
5. Judicial – the period or term fixed by the courts for the performance of an obligation or for its
termination.
6. Definite – the exact date or time is known and given.
7. Indefinite – something that will surely happen but the date of happening is unknown.

Benefit of the period

GR: Whenever in an obligation a period is designated, it is presumed to have been established for
the benefit of both the creditor and the debtor
XPN: When it appears from the tenor of the period or other circumstances that it was established
for the benefit of one of the parties (NCC, Art.1196).

Effect of the term/period

1. When it is for the benefit of the creditor – Creditor may demand the performance of the obligation
at any time but the debtor cannot compel him to accept payment before the expiration of the
period.

e.g. “on demand”

2. When it is for the benefit of the debtor – Debtor may oppose any premature demand on the part of
the creditor for performance of the obligation, or if he so desires, he may renounce the benefit of
the period by performing his obligation in advance.

Effect of a fortuitous event to an obligation with a period

It only relieves the contracting parties from the fulfillment of their respective obligation during the
term or period.

Instances where the court may fix the period (1991, 1997, 2003 BAR)
1. If the obligation does not fix a period, but from its nature and circumstances it can be inferred
that a period was intended by the parties.
2. If the duration of the period depends upon the will of the debtor (1997, 2003 BAR).
2. In case of reciprocal obligations, when there is a just cause for fixing the period.
3. If the debtor binds himself when his means permit him to do so.

Instances where the debtor loses his right to make use of the period
1. When after the obligation has been contracted he becomes insolvent, unless he gives a guaranty
or security for the debt;
2. When he does not furnish to the creditor the guaranties or securities which he has promised;
3. When by his own acts he has Impaired said guaranties or securities after their establishment;
4. When through a fortuitous event they disappear, unless he immediately gives new ones or
equally satisfactory;
5. When the debtor violates any undertaking, in consideration of which the creditor agreed to the
period; and
1. When the debtor attempts to abscond (NCC, Art. 1198).
ALTERNATIVE /FACULTATIVE OBLIGATIONS
Facultative obligations v. Alternative obligations
BASIS
Number of prestation
Manner of compliance
Right to choose
Effect of fortuitous loss
Effect of culpable loss
Liability of the debtor
Void prestation
Impossibility of prestation
Loss of substitute
Alternative obligation
FACULTATIVE OBLIGATIONS
Only one object is due
May be complied with by
substitution of one that is due
Choice pertains only to debtor
Fortuitous loss extinguishes the
obligation
Culpable loss obliges the debtor
to deliver substitute prestation
without liability to debtor
When substitution has been
made and communicated to the
creditor, the obligor is liable for
the loss of the thing on account
of delay, negligence or fraud
If principal obligation is void,
the creditor cannot compel
delivery of the substitute
If there is impossibility to
deliver the principal thing or
prestation, the obligation is
extinguished, even if the
substitute obligation is valid
Loss of the substitute before the
substitution is made through
the fault of the debtor doesn’t
make him liable
ALTERNATIVE OBLIGATIONS
Several objects are due
May be complied with by
fulfilling any of those
alternately due
GR: Choice pertain to debtor
XPN: Expressly granted to
creditor or third person
Fortuitous loss of all
prestations will extinguish the
obligation
Culpable loss of any object due
will give rise to liability to
debtor
The creditor shall have the
right of indemnity for damages
when, through the fault of the
debtor, all the things which are
alternatively the object of the
obligation have been lost or the
compliance of the obligation
has become impossible.
If one prestation is void, the
others that are free from any
vices of consent preserve the
validity of the obligation
If some prestations are
impossible to perform except
one - this one must be
delivered.
If all prestations are impossible
to perform, the obligation is
extinguished
Where the choice is given to the
creditor, the loss of the
alternative through the fault of
the debtor renders him liable
for damages
It is one where the debtor is alternatively bound by different prestations but the complete
performance of one of them is sufficient to extinguish the obligation.

Facultative obligation
It is one where the debtor, who has a reserved right to choose another prestation or thing, is bound to
perform one of the several prestations due or to deliver a thing as substitute for the principal.

Right to choose prestation in an alternative obligation

GR: The right of choice belongs to the debtor
XPN: Unless it has been expressly given to the creditor (NCC, Art. 1200).

Limitations on debtor’s right to choose

1. The debtor must absolutely perform the prestation chosen. He cannot compel the creditor to
receive part of one and part of the other undertaking.
2. The debtor shall have no right to choose those prestation which are impossible, unlawful or
which could not have been the object of the obligation (NCC, Art. 1200).
3. The debtor shall lose the right to choice when among the prestation whereby he is alternatively
bound, only one is practicable (NCC, Art. 1202).
4. The selection made by the debtor (or the creditor when it has been expressly granted to him)
cannot be subjected by him to a condition or a term unless the creditor (or debtor in case the choice
is with the creditor) consents thereto (Tolentino, 2002).

Effectivity of the choice in alternative obligations

The choice made takes effect only upon communication of the choice to the other party and from
such time the obligation ceases to be alternative (NCC, Art. 1201; NCC, Art. 1205).
NOTE: The notice of selection or choice may be in any form provided it is sufficient to make the
other party know that the election has been made (Tolentino,2002).

When alternative obligation becomes a simple obligation

1. When the debtor has communicated the choice to the creditor.
2. When debtor loses the right of choice among the prestations whereby the debtor is alternatively
bound, only one is practicable (NCC, Art. 1202).

NOTE: The choice made by the debtor does not require the concurrence of the creditor. Otherwise,
it would destroy the very nature of the right to select given to the debtor.

Impossibility of choice due to creditor’s acts

When choice is rendered impossible through the creditor’s fault, the debtor may bring an action to
rescind the contract with damages (NCC, Art. 1203).

Effects of loss of objects in alternative obligations

DUE TO DUE TO DEBTOR’S FAULT

FORTUITOUS EVENT
Choice Belongs to Debtor
All are lost Debtor released from the Creditor shall have a right to be indemnified for
obligation. damages based on the value of the last thing
 which disappeared/ last service which became
impossible.

Some but not all Debtor shall deliver that Debtor shall deliver that which he shall choose
are lost which he shall choose from among the remainder without damages.
from among the
remainder.
Only one remains Deliver that which remains.
Choice Belongs to Creditor
All are lost Debtor released from the Creditor may claim the price/value of any of
obligation. them with indemnity for damages.
Some but not all Creditor may choose from Creditor may claim any of those subsisting OR
are lost among the remainder or he may choose any of those were lost, but it is
that which remains if only the price/value of with right to damages that
one subsists. can be claimed.
Only one remains Deliver that which remains. In case of fault of
debtor, creditor has a right to indemnity for
damages.

JOINT AND SOLIDARY OBLIGATIONS

Joint obligations
One where the credit or debt shall be presumed to be divided into as many equal shares as there are
creditors or debtors, the credit or debts being considered distinct from one another (NCC, Art. 1208).
Each debtor is liable only for a proportionate part of the debt and each creditor to his proportionate
share to the credit.

Solidary obligations
It is where each of the debtors obliges to pay the entire obligation while each one of the creditors
has the right to demand from any of the debtors, the payment or fulfillment of the entire obligation
(NCC, Art. 1207; Pineda, 2000).
Other terms for solidary obligations are:
(a) joint solidarily;
(b) jointly and severally; or
(c) in solidum.

Joint obligation v. Solidary obligation

JOINT SOLIDARY OBLIGATION

OBLIGATION
Presumption by law
Liability of each debtor
Right of the creditor to the
fulfillment of the
obligation
Presumed by law. Not presumed. Must be expressly
(NCC, Art. 1208) stipulated by the parties, or when the
law or the nature of the obligation
requires solidarity (NCC, Art. 1207).
Proportionate part of Obliged to pay the entire obligation.
the entire debt.
Each creditor, if there Each creditor has the right to demand
are several, is entitled from any of the debtors, the payment or
fulfillment of the entire obligation
 only to a proportionate (Tolentino, 1999).
part of the credit.

Character of an obligation
GR: When two or more creditors or two or more debtors concur in one and the same obligation, the
presumption is that the obligation is joint.

XPNs:The obligation shall only be solidary when: (LEN-CJ)

1. Law requires solidarity;
2. Expressly stipulated that there is solidarity;
3. Nature of the obligation requires solidarity;
e.g. Civil liability arising from crime.
4. Charge or condition is imposed upon heirs or legatees and the will expressly makes the charge or
condition in solidum (Manresa); or
5. Solidary responsibility is imputed by a final Judgment upon several defendants (Gutierrez v.
Gutierrez, 56 Phil 177, GR 34840, September 31, 1931).

Consequences of a joint obligation

1. Each debtor is liable only for a proportionate part of the entire debt.
2. Each creditor, if there are several, is entitled only to a proportionate part of the credit.
2. The demand made by one creditor upon one debtor, produces effects of default only as between
them.
3. Interruption of prescription caused by the demand made by one creditor upon one debtor, will
NOT benefit the co-creditors or the co-debtors.
4. Insolvency of a debtor will not increase the liability of his co-debtor.
5. Vices of each obligation emanating from a particular debtor or creditor will not affect the others.
6. In indivisible or joint obligation, the defense of res judicata of one does not extend to the others
(8 Manresa, 200-201);
7. The delay on the part of only one of the joint debtors does not produce effects with respect to the
others, and if the delay is produced through the acts of only one of the joint creditors, the others
cannot take advantage thereof.

JOINT INDIVISIBLE OBLIGATIONS

The obligation is joint because the parties are merely proportionately liable. It is indivisible because
the object or subject matter is not physically divisible into different parts. In other words, it is joint
as to liabilities of the debtors or rights of the creditors but indivisible as to compliance (De Leon,
2010).
A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the
debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their
promises shall not contribute to the indemnity beyond the corresponding portion of the price of the
thing or of the value of the service in which the obligation consists (NCC, Art. 1224).
Effects of different permutations of joint indivisible obligations
1. If there are two or more debtors, compliance with the obligation requires the concurrence of all
the debtors, although each for his own share. The obligation can be enforced only by preceding
against all of the debtors.
2. If there are two or more creditors, the concurrence or collective act of all the creditors, although
each of his own share, is also necessary for the enforcement of the obligation.
3. Each credit is distinct from one another; therefore a joint debtor cannot be required to pay for
the share of another with debtor, although he may pay if he wants to.

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 (NCC, Art. 1209).
Effect of breach of a joint indivisible obligation by one debtor
If one of the joint debtors fails to comply with his undertaking, and the obligation can no longer be
fulfilled or performed, it will then be converted into one of indemnity for damages. Innocent joint
debtor shall not contribute to the indemnity beyond his corresponding share of the obligation.

SOLIDARY OBLIGATIONS
Each one of the debtors is obliged to pay the entire obligation, and each one of the creditors has the
right to demand from any of the debtors the payment or fulfillment of the entire obligation.

JUDICIAL EFFECTS OF ACTIVE AND PASSIVE SOLIDARITY

Active Solidarity
The essence of active solidarity consists in the authority of each creditor to claim and enforce the
rights of all, with the resulting obligation of paying every one what belongs to him; there is no
merger, much less a renunciation of rights, but only mutual representation. It is thus essentially a
mutual agency. Its juridical effects may be summarized as follows:
1. Since it is a reciprocal agency, the death of a solidary creditor does not transmit the solidarity to
each of his heirs but to all of them taken together;
2. Each creditor represents the others in the act of receiving payment, and in all other acts which
tend to secure the credit or make it more advantageous. Hence, if he receives only a partial
payment, he must divide it among the other creditors. He can interrupt the period of prescription or
render the debtor in default, for the benefit of all other creditors;
3. One creditor, however, does not represent the others in such acts as novation (even if the credit
becomes more advantageous), compensation and remission. In these cases, even if the debtor is
released, the other creditors can still enforce their rights against the creditor who made the
novation, compensation or remission;
4. The creditor and its benefits are divided equally among the creditors, unless there is an
agreement among them to divide differently. Hence, once the credit is collected, an accounting and
a distribution of the amount collected should follow;
5. The debtor may pay to any solidary creditor, but if a judicial demand is made on him, he must pay
only to the plaintiff; and
6. Each creditor may renounce his right even against the will of the debtor, and the latter need not
thereafter pay the obligation to the former.

Passive Solidarity
In passive solidarity, the essence is that each debtor can be made to answer for the others, with the
right on the part of the debtor-payor to recover from the otehrs their respective shares. In so far as
the payment is concerned, this kind of solidarity is similar to a mutual guaranty. Its effects are as
follows:
1. Each debtor can be required to pay the entire obligation; but after the payment, he can recover
from the co-debtors their respective shares;
2. The debtor who is required to pay may set up by way of compensation his own claim against the
creditor, in this cae, the effect is the same as that of payment;
3. The total remission of a debt in favor of a debtor releases all the debtors ; but when this
remission affects only the share of one debtor, the other debtors are still liable for the balance of the
obligation;
4. All the debtors are liable for the loss of the thing due, even if such loss is caused by only one of
them, or by fortuitous event after one of the debtors has incurred in delay;
5. The interruption of prescription as to one debtor affects all the others; but the renunciation by
one debtor of the prescription already had does not prejudices the others, because the
extinguishment of the obligation by prescription extinguishes also the mutual representation
among the solidary debtors; and
6. The interest due by reason of the delay by one of the debtors are borne by all of them.

BASIS SOLIDARITY INDIVISIBILITY

As to the kind of unity it
refers to
As to the requirement of
plurality of parties or
subjects
As to the effect of breach
As to the effect of death
of a party
Refers to the vinculum
existing between the
subjects or parties.
Requires the plurality of
parties or subjects.
In case of breach, the
liability of the solidary
debtors although converted
into one of the indemnity
for damages remains
solidary.
Death of solidary debtor
terminates the solidarity,
the tie or vinculum being
intransmissible to the heirs.
Refers to the prestation or object
of the contract.
Does not require plurality of
subjects or parties.
In case of breach, it is converted
to one of indemnity for damages
and the indivisibility of the
obligation is terminated and so
each debtor is liable only for his
part of the indemnity.
Heirs of the debtor remain
bound to perform the same
prestation.

Q: Joey, Jovy and Jojo are solidary debtors under a loan obligation of P300,000.00 which has
fallen due. The creditor has, however, condoned Jojo's entire share in the debt. Since Jovy
has become insolvent, the creditor makes a demand on Joey to pay the debt.
a. How much, if any, may Joey be compelled to pay?
b. To what extent, if at all, can Jojo be compelled by Joey to contribute to such payment?

A:
a. Joey can be compelled to pay only the remaining balance of P200,000, in view of the remission
of Jojo’s share by the creditor (NCC, Art. 1219).

b. Jojo can be compelled by Joey to contribute P50,000. When one of the solidary debtors cannot,
because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall
be borne by all his co-debtors, in proportion to the debt of each [NCC, Art. 1217(3)].

Since the insolvent debtor's share which Joey paid was P100, 000, and there are only two remaining
debtors - namely Joey and Jojo - these two shall share equally the burden of reimbursement. Jojo may
thus be compelled by Joey to contribute P50, 000.
To whom payment should be made in a solidary obligation
GR: To any of the solidary creditors.
XPN: If demand, judicial or extra-judicial, has been made by one of the creditors, payment should be
made to him (NCC, Art. 1214).

In cases of solidary creditors, one may act for all

Each one of the solidary creditors may execute acts which may be useful or beneficial to the others,
but he may not do anything which may be prejudicial to them (NCC, Art. 1212).
NOTE: Prejudicial acts may still have valid legal effects, but the performing creditor shall be liable
to his co-creditors (Pineda, 2000).

Effects of assignment of rights in a solidary obligation

GR: Solidary creditor cannot assign his right because it is predicated upon mutual confidence,
meaning personal qualification of each creditor had been taken into consideration when the
obligation was constituted (NCC, Art. 1213).
XPNs:
1. Assignment to co-creditor; or
2. Assignment is with consent of co-creditor.

DIVISIBLE AND INDIVISIBLE OBLIGATIONS

Divisible obligations
Those which have as their object a prestation which is susceptible of partial performance with the
essence of the obligation being changed.

Indivisible obligations
Those which have as their object a prestation which is not susceptible of partial performance, because
otherwise the essence of the obligation will be changed. The obligation is clearly indivisible because the
performance of the contract cannot be done in parts, otherwise, the value of what is transferred is
diminished (Nazareno v. CA, G.R. No. 138842, October 18, 2000).

DIVISIBLE INDIVISIBLE
Susceptibility of an obligation to be Non-susceptibility to be performed
performed partially. partially
Partial performance is tantamount to non-
performance.

Test of divisibility
Whether or not the prestation is susceptible of partial performance, not in the sense of performance
in separate or divided parts, but in the sense of the possibility of realizing the purpose which the
obligation seeks to obtain. If a thing could be divided into parts and as divided, its value is impaired
disproportionately, that thing is indivisible (Pineda, 2000).

Obligations that are deemed indivisible

1. Obligations to give definite things;
2. Those which are not susceptible of partial performance;
3. Even the object or service may be physically divisible, an obligation is indivisible if so provided
(i) by law or (i) intended by the parties (NCC, Art. 1225).
Obligations that are deemed divisible
When the object of the obligation involves:
1.Certain number of days of work;
2.Accomplishment of work by metrical unit;
3.Analogous things which are by their nature susceptible of partial performance (NCC, Art. 1225).

Factors to determine whether an obligation is divisible of indivisible

a) The will or intention of the parties (express or implied);
b) The objective or purpose of the stipulated prestation;
c) The nature of the thing ; and
d) The provisions of law affecting the prestation.

Effect of illegality of a part of a contract

1. Divisible contract – illegal part is void and unenforceable. Legal part is valid and enforceable (NCC,
Art. 1420).
2. Indivisible contract – entire contract is indivisible and unenforceable.

Partial performance in indivisible obligation

GR : In indivisible obligations, partial performance is equivalent to non-performance.
XPNs : (See NCC, Articles 1234 & 1235).
1. Where the obligation has been substantially performed in good faith, the debtor may recover as if
there had been complete performance, minus the damages suffered by the creditor ; and
2. Where the creditor accepts performance knowing its incompleteness and without protest, the
obligation is deemed fully performed.

OBLIGATIONS WITH A PENAL CLAUSE

An obligation with a penal clause is one with an accessory undertaking by virtue of which the
obligor assumes a greater liability in case of breach of the obligations (Jurado, 2009).
Penal clause
A penal clause is an accessory undertaking to asume greater liability in case of breach. It is attached
to an obligation in order to insure performance. The penalty is generally a sum of money. But it can
also be any othe thing stipulated by the parties, inlcuding an act or abstention.
Double functions:
1. To provide for liquidated damages; and
2. To strengthen the coercive force of the obligation by the threat of greater responsibility in case of
breach.

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

Kinds of penalties
1. As to origin
a. Legal - It is legal when it is constituted by law.
 b. Conventional - It is constituted by agreement of the parties.
2. As to purpose
a. Compensatory - It is compensatory when it is established for the purpose of indemnifying
the damages suffered by the obligee or creditor in case of breach of the obligation.
b. Punitive - It is punitive when it is established for the purpose of punishing the obligor or
debtor in case of breach of the obligation.

3. As to effect
a. Subsidiary - It is subsidiary when only the penalty may be demanded in case of breach of
the obligation;
b. Joint - It is joint when the injured party may demand the enforcement of both the penalty
and the principal obligation.

Q: Can the debtor just choose penalty over non-fulfillment?

A: GR: The debtor cannot exempt himself from the performance of the obligation by paying the
penalty (NCC, Art. 1227).
XPN: When the right has been expressly reserved to the debtor (NCC, Art. 1227).

Creditor cannot demand both the fulfillment of the principal obligation and the penalty
GR: The creditor cannot demand the fulfillment of the obligation and the satisfaction of the penalty
at the same time (NCC, Art. 1227).
XPNs:
1. When the right has been clearly granted to him;
2. If the creditor has decided to require the fulfillment of the obligation, the performance thereof
should become impossible without his fault, the penalty may be enforced (NCC, Art. 1227).

NOTE: The creditor need not present proof of actual damages suffered by him in order that the
penalty may be demanded (NCC, Art. 1228). In this jurisdiction, there is no difference between a
penalty and liquidated damages, so far as the results are concerned. Whatever differences exist
between them as a matter of language, they are treated the same legally (Rabuya, 2017).

Effect of incorporating a penal clause in an obligation

GR: The penalty fixed by the parties is a compensation or substitute for damages in case of breach.
XPNs: Damages shall still be paid even if there is a penal clause if:
1. There is a stipulation to the contrary;
2. The debtor refuses to pay the agreed penalty;
3. The debtor is guilty of fraud in the fulfillment of the obligation (NCC, Art. 1126).

NOTE: The nullity of the penal clause does not carry with it that of the principal obligation. For
example, the penal clause may be void because it is contrary to law, morals, good custom, public
order or public policy. In such case, the principal obligation subsists if valid.
GR: The nullity of the principal obligation carries with it that of the penal clause (NCC, Art. 1230).
XPNs: The penal clause subsists even if the principal obligation cannot be enforced:
1. When the penalty if undertaken by a third person precisely for an obligation which is
unenforceable, voidable, or natural, in which case it assumes the form of a guaranty which is valid
under NCC, Art. 2052; and
2. When the nullity of the principal obligation itself gives rise to the liability of the debtor for
damages.
Instances where penalty may be reduced by the courts (PIU)
1. Partial performance of the obligation
2. Irregular performance of the obligation
3. Penalty is Unconscionable even if there has been no performance.

Q: When can the creditor demand the enforcement of the penalty?

A: Only when the non-performance is due to the fault or fraud of the debtor. But the creditor does
not have to prove that there was fault or fraud of the debtor. The non-performance gives gives rise
to the presumption of fault; and in order to avoid the payment of penalty, the debtor has the burden
of proving an excuse – either that the failure of the performance was due to force majeure or to the
acts of the creditor himself.
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NOTE: When there are several debtors in an obligation with a penal clause, the divisibility of the
principal obligation among the debtors does not necessarily carry with it the divisibility of the penalty
among them.