CHAPTER 3, SEC. 1 (Arts. 1179-1192)

CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS SECTION 1 – PURE AND CONDITIONAL OBLIGATIONS (Arts. 1179-1192) STUDY GUIDE : 1.

Kinds of obligation according to demandability : (a) (b)

Pure obligation – no term & no condition; demandable at once (Art. 1179, par. 1) Conditional obligation – subject to the fulfillment of a condition

2.

Condition – (a) future and uncertain; OR (b) past but unknown

3.

Kinds of condition as to effect : (Art. 1181) (a) Suspensive – the fulfillment gives rise to an obligation (b) Resolutory – the fulfullment extinguishes an obligation

4.

Kinds of condition as to cause or origin : (Art. 1182) (a) Potestative – depends upon the will of one of the parties NOTE : If the potestative condition (a) depends upon the sole will of the debtor AND (b) is suspensive in nature, the conditional obligation shall be VOID. (Art. 1182, 1st sentence) (b) Casual – depends upon chance OR upon the will of a third person (c) Mixed – depends partly upon chance and partly upon the will of a third person 5.

Kinds of condition as to form : (a) Possible – capable of fulfillment (b) Impossible - not capable of fulfillment (Art. 1183) (b.1.) Physically – cannot exist or cannot be done [par. 1] (b.2.) Legally – contrary to “LaMoG-PuPu” [par. 2]

6.

(b.1.) Positive – TO DO an impossible thing  conditional obligation VOID (b.2.) Negative – NOT TO DO an impossible thing  conditional obligation VALID

2 kinds of suspensive conditions as to mode : (a) Positive – that an event WILL happen at a determinate time (b) Negative – that an event WILL NOT happen at a determinate time

EFFECT ON OBLIGATI ON

The designated time expires or elapses WITHOUT the event taking place.

The designated time has not expired but it becomes definite that the event will not take place.

POSITIVE NEGATIVE

Extinguished (Art. 1184) Effective (Art. 1185)

Extinguished (Art. 1184) Effective (Art. 1185)

7.

Art. 1186 – When the debtor voluntarily performs any act to prevent the happening of a suspensive condition, the same results in the constructive fulfillment of the suspensive condition.

8.

Art. 1187 – Retroactive effect of fulfillment of suspensive condition (a) In real obligations (par. 1) (a.1.) re the thing – once the condition is fulfilled, its effects retroact to the day when the obligation was constituted. (a.2.) re fruits and interests : (a.2.1.) reciprocal obligations – no retroactive effect; fruits and interests received are deemed mutually compensated (a.2.2.) unilateral obligations – no retroactivity as they are gratuitous (b) In personal obligations (par. 2) – subject to court’s determination

9.

Art. 1188 – Rights pending fulfillment of suspensive condition (a)

Creditor – to bring appropriate actions to preserve his rights (par. 1) Reason : to prevent the debtor from deliberately destroying, hiding or alienating the object of the obligation pending fulfillment of the condition. REMEMBER : By the same token, this right may be exercised by the debtor in obligations subject to a resolutory condition. (a.1.) (a.2.) (a.3.) (a.4.)

(b)

EXAMPLES : sue in court initiate the recording of his expected right ask for security if the debtor is about to be insolvent ask the court to prevent alienation or concealment pendente conditionae

Debtor – recovery of what has been paid by mistake (par. 2)

Debtor’s right to recover what has been paid BEFORE fulfillment of suspensive condition UPON fulfillment of suspensive condition NON-fulfillment of suspensive condition

Payment by mistake When creditor is in : good bad faith faith YES

YES + F/I

Deliber ate payme nt NO

NO

NO + F/I

NO

YES

YES + F/I

YES

10. Art. 1189 – Loss, deterioration and improvement of the object of an obligation pending fulfillment of a suspensive condition in a specific real obligation. (a)

Loss – physical, legal & civil loss (Art. 1189, No. 2)

(b)

Deteriorate – value is reduced or impaired

Effect of : (Art. 1189) LOSS DETERIORATI ON

IMPROVEMEN T

DEBTOR’S INTENT Without Fault With Fault Extinguished (No. 1) Damages incurred (No. 2) Creditor’s remedies : Creditor bears (No. 4) impairment (No. 3) (a) rescission + damages OR (b) fulfillment + damages (a) By nature or by time – Creditor benefits from improvement (No. 5) (b) At debtor’s expense – Debtor will have the rights of a usufructuary (No. 6); no right to indemnity but he may remove improvements without damage to the property and/or set-off improvements against damage to the property. (Arts. 579 & 580, NCC)

11. Art. 1190 – Effects of fulfillment of resolutory condition (a) In real obligations (par. 1) (a.1.) the obligation is extinguished (a.2.) there should be restitution, not only of the thing received, but also of the fruits or interests thereon (b) In personal obligations (par. 3) – subject to court’s determination (c) In case of loss, deterioration or improvement of the thing after fulfillment of the resolutory condition but before restitution is effected (par. 2) – the party who is bound to return in a resolutory conditional obligation shall have the same rights and duties as that of the debtor under Art. 1189. 12. Art. 1191 – The right to rescind in reciprocal obligations in case of breach or non-fulfillment (a)

(b)

Kinds of obligations according to the person obliged : (a.1.) Unilateral – when only one party is obliged to comply with a prestation (a.2.) Bilateral – when both parties are debtors and creditors of each other (a.2.1.) Reciprocal – the parties’ obligations arise from the same cause; the obligation or promise of each party is the cause or consideration for the obligation or promise of the other. (a.2.2.) Non-reciprocal – the performance of one party is not dependent upon the simultaneous performance by the other. Remedies of the aggrieved party in a reciprocal obligation in case the other party does not comply with his undertaking : (par. 2) (b.1.) specific performance + damages; OR

(b.2.) rescission/cancellation of contract + damages REMEMBER : The remedies provided in Art. 1191, par. 2 are alternative, and not cumulative. HOWEVER : An action for rescission may still be availed of even after an action for specific performance has been preferred IF fulfillment should have become impossible. BUT : Once an action for rescission is chosen, specific performance can no longer be demanded. (c) Limitations on the right to rescind : (c.1.) Only substantial (not trivial or slight) breaches can cause rescission. (c.2.) If there is just cause for fixing the period within which the debtor can comply, the court will not decree the rescission claimed. (par. 3) (c.3.) If the property, subject of the contract, is not in the hands of an innocent third party who has lawful possession of the same. (par. 4) 13. Art. 1192 – Rule if both parties have committed a breach (a) If the first infractor is known – the liability of the first infractor shall be proportionately reduced. (1st sentence) (b) If the first infractor is not known – the contract shall not be enforced. Each party shall bear his own loss/damages. (2nd sentence)

APPLICATION/PROBLEMS : 1. On May 5, 2008, Jim entered into an agreement with Jet. Under the agreement, Jim obliged himself to deliver to Jet an antigue ruby ring worth P50,000 anytime that Jet wants it and demands delivery. On June 5, 2008, Jet makes up his mind and insists on the delivery of the ruby ring from Jim. Jim, however, denies liability and claims that the condition, that is – “anytime Jet wants it,” was potestative in nature. Hence, the same condition upon which Jim’s obligation was made to depend upon, as well as the obligation itself, is void. Does Jim’s argument have legal basis? Is he under obligation to deliver to Jet the rubi ring as promised?  Clue: Art. 1182. 2. On March 15, 2008, Donna and Celia entered into an agreement. In their agreement, Donna obliged herself to purchase from Celia a house and lot located in Makati for P3.5M. Donna’s husband had been detailed by their office from Baguio City to Makati effective May 1, 2008. Hence, the family was relocating permanently to Makati. For this reason, it was agreed by the parties that by April 15, 2008, Celia should have vacated and readied the house for occupancy to allow Donna and her family to move in. On April 13, 2008, when Donna contacted Celia, she was informed that Celia had not even taken initial steps to vacate the subject property. Hence, Donna was left with no other recourse but to accept the proposal of an agent for the acquisition of a two-bedroom condominium unit at the

Avida Towers in Makati which was available for occupancy as of April 15, 2008. Celia, however, demanded that Donna make good her commitment to purchase Celia’s Makati house and lot as per their March 15, 2008 agreement. Is Donna bound to comply with her obligation?  Clue: Art. 1184. 3. Angelo hired Engr. Luis to construct a 50-kilometer road within his private subdivision. It was agreed that Engr. Luis was to finish the construction in 3 months. The contract price agreed upon was P2M. After six weeks, however, and without justification, Angelo ordered the construction stopped with the work barely half-finished. Engr. Luis was left with no choice but to follow the owner’s instruction for work stoppage. Engr. Luis, however, charged Angelo for the complete contract price of P2M. Angelo refused to pay the entire amount on the ground that the project was only then half-finished. Decide on the parties’ claims.  Clue: Art. 1186. 4. On February 11, 2006, Francis and Josh entered into a transaction with regard to a 1-hectare farm lot in Laguna owned by Francis. The parties agreed that should Josh pass the Nursing Board Examination on September 30, 2008, Francis will sell the said farm lot to Josh for P1.5M. On March 15, 2007, Josh sold the farm lot to Reuben for P2M. On October 23, 2007, Francis sold the farm lot to Peter. On September 30, 2008, Josh passed the Nursing Board Examination. Who is now the rightful owner of the 1-hectare farm lot in Laguna?  Clue: Correlate Arts. 1187 & 1188. 5. On April 4, 2007, I gave you Shaun, my favourite sheep, on the condition that you will never go to the casino. On September 20, 2007, Shaun gave birth to 5 healthy lambs. On January 2, 2008, however, I saw you going to the casino again. So, on January 3, 2008, I demanded for the return of Shaun and her 5 lambs. You gave me Shaun but you refused to give me her babies and in fact sold the 5 lambs last Christmas. Do you think your refusal is justified under the factual circumstances?  Clue: Correlate Arts. 1189 & 1190. 6. On December 20, 2005, Rudy and Dan entered into a lease contract. It was agreed that Dan would lease an office space from Rudy for 5 years starting January 1, 2006 to December 31, 2010. In consideration therefor, Rudy was to collect a monthly rental of P10,000 from Dan. Starting January 1, 2008, however, or after 2 years of the contract, Dan discontinued remittance of his monthly rental payments despite repeated demands from Rudy. Hence, on March 1, 2008, Rudy asked Dan to vacate the premises if he could not afford to pay. On March 15, 2008, Dan turned over the office space to Rudy. Now, Rudy demands from Dan payment of rents for the remaining three years of the contract, i.e., from January 1, 2008 to December 31, 2010. Is Rudy well within his rights to claim said rental payments for the unexpired term of their lease contract?  Clue: Art. 1191, par. 2