OBLIGATIONS AND CONTRACTS - PRELIM REVIEWER

OBLIGATIONS AND CONTRACTS - PRELIM REVIEWER Tuesday, December 07, 2010 2:56 PM

Art. 1156. OBLIGATION DEFINITION - An obligation is a juridical necessity to give, to do, or not to do. Elements of an Obligation: Active subject

Obligee or Creditor

Possessor of a right.

Passive subject

Obligor or Debtor

Has the duty of gicing, doing or not doing.

Object or Prestatation Object to give, act to do or not to do Subject matter of the prestation Cause

Vinculum or Juridical Tie

The reason why the obligation exist.

Form

Manner in the obligation.

Art. 1157. SOURCES OF OBLIGATION - The following are the different sources of obligation: 1. 2. 3. 4. 5.

Law Contracts Quasi-Contracts Acts or Ommissions Punishable by Law Quasi-delicts Law

Ex Lege

Duty to pay the taxes or to support one's family.

Contracts

Ex contractu

Duty to repay a loan.

Quasi-contracts

Ex quasi contractu

Duty to refund an "over change" of money.

Crimes or Acts or Omissions punished by Law Ex malefici or ex delicto Quasi-delicts or Torts

Return a stolen carabao.

Ex quasi-delicto or ex-quasi malefacio Repair a damage due to negligence.

Art. 1158. LAW - Obligations derived from law are not presumed. Only those expressly determined in this 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 this Book.

**Governed by the Law itself. **Agrements of the parties not necessary. **Only those expressly provided are enforceable. Art. 1159. CONTRACTS, EX-CONTRACTU, CULPA-CONTACTUAL - Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. So-called Innominate Contracts ("contratos innominados") 1. Do ut des - I give that you may give. 2. Do ut facias - I give that you may do. 3. Facio ut des - i do that you may give. 4. Facio ut facias - I do that you may do. Art. 1160. QUASI-CONTRACTS, DELICTS, QUASI EX-DELICTO - Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of this Book. QUASI-CONTRACTS - Juridical relation resulting from a lawful, voluntary, and unilateral act, and which has for its purpose the payment of indemnity to the end that no one shall be unjustly enriched orr benefited at the expense of another. Kinds of Quasi-Contracts: 1. Negotiorun gestio (Officious Management) - A person voluntarily takes charge of another's abandoned business or property without the owner's authority. 2. Solutio Indebiti (Undue payment) - Something is received when there is no right to demand it and it was unduly delivered thry mistake.

Art. 1161. CRIMES, ACTS OR OMISSIONS PUNISHABLE BY LAW, EX-DELICTU, EX, MALEFACIO, CULPA CRIMINAL - Civil onligations arising from the criminal offenses shall be governed by the penal laws, subject to the provision of Article 2177, and of the pertinent provisi ons of Chapter 2, Preliminary Title, on Human Relations, and of the title XVIII of this book, regulating damages. Gen. Rule - Civil liability is a necessary consequence of criminal liability (Art. 100, RPC) Exceptions: - Crimes without criminal liability: 1. Criminal Contempt 2. Gambling 3. Traffic violations - Offended party reserves the right to institute it separately. - The law so provides independent civil action: 1. Obligations arising acts or omissions claimed to be criminal;

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1. 2. 3. 4.

Obligations arising acts or omissions claimed to be criminal; Violation of constitutional rights and liberties of individuals; Defamation, fraud or physical injuries; Refusal or failure of members of police force to render protection to life or property.

RCP, Rule 111 - When a cirminal action is instituted, the civil action for the recovery of civil liability arising from the offense charged shall be deemed instituted with the criminal action UNLESS the offended party waives the civil action, reserves the right to institute it separately or institutes civil action prior to criminal action. Extent of Civil liability (Art 104, RPC) 1. Restitution 2. Reparation of the damage caused 3. Indemnification for consequential damages.

Art. 1162. QUASI-DELICTS, EX QUASI-MALEFACIO, CULPA AQUILIANA, TORTS - Obligations derived from quasi-delicts shall be governed by the probisions of Chapter 2, Title XVII of this Book, and by special laws. New Sources of Obligation: 1. Unjust Enrichment (Quasi- contract) 2. Unilateral declaration of will 3. Abuse of rights (Quasi-delict) Elements of Negligence 1. Duty on the part of the defendant to protect the plaintiff from injury of which the latter complains 2. Failure to perform such duty 3. An injury to the plaintiff through such failure. Kinds of Negligence 1. Culpa Aquiliana (a quasi-delict) - Negligence as a source of obligation 2. Culpa Contractual - Negligence in the performance of a contract 3. Culpa Criminal - Criminal negligence Distinctions between Culpa Aquiliana and Culpa Contractual CULPA AQUILIANA

CULPA CONTRACTUAL

Negligence as a source of Obligation

Negligence in the performance of a contract

Fault or negligence which constitute an indipendent source of obligation between the Fault or negligence of a debtor as an incident in the parties not previously bound fulfillment of a contract. Negligence should be the approximate cause of damage. Distinctions between Quasi-delicts and Crimes AS TO

QUASI DELICT

CRIMES

Nature of the right violated

Private rights; wrong against the individual

Public rights, wrong against the state

Condition of the mind Criminal intent is not necessary. Possible that there will be no criminal charge but only civil liability.

Criminal intent is necessary.

Legal basis of liability Actionable in any act or omissions wherein fault or negligence intervenes Not as broad as quasi-delict, there must be a law punishing it. Liability for damages

To the injured party

Some do not have civil liability (when nobody is injured)

Forms of redress

Reparation of the injury suffered by the injured party

Fine and punishment

Amount of evidence

Preponderance of evidence

Beyond reasonable doubt

Compromise

Can be compromised as any other civil liability

Can never be compromised.

Requisites of Liability under Quasi-Delicts 1. Wrongful act 2. Damage or injury 3. Direct causal connection. Art. 1163. OBLIGATION TO GIVE - Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. Gen. Rule: Pending delivery, the debtor /passive subject has the obligation to take care of the object with the proper diligence of a good father of a family. Exception: a. Required by Law b. Stipulation of the parties requiring another standard of care.

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b. Stipulation of the parties requiring another standard of care. Art . 1164. RIGHT TO FRUITS - The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acqu ire no real right over it until the same has been delivered to him. ** Non nudis pactis , sed traditione domina rerum trasferentum - Ownership of things is transferred not only by mere agreements but ny delivery. REAL RIGHTS - to give - Power belonging to a person over a specific thing , without a passive subject individually determined , against whom such right may be personally exercised. - Gives a person a direct and immediate power over a thing, which is susceptible of being exercised not only against a determinate person but against the whole world. □ Examples  Rights of Ownership  Rights of Possession PERSONAL RIGHTS - to do or not to do - Power belonging to one person to demand of another , as a definite passive subject, the fulfillment of a prestation.

Art. 1165. DETERMINATE VS INDETERMINATE OBJECT - When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. DETERMINATE OBJECT - To compel specific performance - To recover damages , in case of breach of obligation, exclusive or in addition to specific performance . - Entitlement of fruits, interests from the time obligation to deliver arises. GENERIC OBJECT/PRESTATION - To ask for performance of obligation - To ask that the obligation be omplied with at the expense of the debtor. - To recover damages in case of breach of contract. 1st Par:

Right to compel delivery (determinate/specific prestation)

2nd par:

Action for substituted performance (creditor may ask compliance by 3rd person at debtor's expense )

3rd Par:

Right to damages

Art. 1166. RIGHT TO ACCESSORIES AND ACCESSIONS - The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. Gen. Rule - (DETERMINATE PRESTATION) - Obligation to deliver the object includes with it the accessories and accessions. Exception to the Rule: a. Required by law b. Exclusion is expressly stipulated by the parties

ACCESSORIES - Those things which are used for the preservation of another thing or more important, have for their object the completion of the latter for which they are indispensable or convenient. ACCESSIONS - Includes everything which is produced by a thing, or which is incorporated or attached thereto, either naturally or artificially . NOTE: Provide examples. Art. 1167. OBLIGATION TO DO - If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decree d that what has been poorly done be undone. 1st Par

Failure to do: May be executed by a 3rd person subject for reimbursement by the debtor.

2nd Par Contravention of the tenor of the obligation: action for damages 3rd Par Poorly Done: To undo what has been undone, action for damages??? ** No action for compliance because that would be involuntary servitude (unconstitutional)

Art. 1168. OBLIGATION NOT TO DO - When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. Duties of Obligor: 1. Not to do what should be done. 2. To shoulder the cost to undo what should not have been undone. 3. To pay damages.

Art. 1169. CONCEPT OF DELAY/DEFAULT - Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist:

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However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declare; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing i s to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper m anner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. DELAY (MORA) - Nonperformance of obligation as agreed to time. Gen. Rule: Creditor should make demand before debtor incurs delay. UNILATERAL OBLIGATION - there is no delay when there is no demand. RECIPROCAL OBLIGATION -The performance of one demands/____ the performance of the other. - When to determine the demand period for purposes of computing of payment of interests of charges): a. If extrajudicial - date of demand b. If uncertain - date of filing of complaint - Demand may ba in any form provided it can be proved. - Demand must refer to the prestation that is due and not another. - Even if without demand, debtor incurs delay if he expressly acknowledges his delay. Exceptions to the Rule: 1. Law expressly so declares: a. Obligation itself indicates that there is a period b. Law has a specific period for the performance 2. Express stipulation by the parties - Insertion of the clause "without further notice" 3. Designation of time is the controlling motive. 4. Demand would be useless. a. Caused by some act or fault of the debtor b. Impossibility caused by some fortuitous event ** There can only be delay in POSITIVE Obligations and no delay in NEGATIVE and NATURAL OBLIGATIONS.

KINDS OF MORA 1. MORA SOLVENDI - Delay on the part of the DEBTOR. Requisites of MORA SOLVENDI

a) Prestation is demandable and already liquidated. b) The debtor delays performance (fault is on the debtor) c) That the creditor demands judicially or extrajudicially. - Mere reminder is not a demand because benevelonce and tolerance of the creditor has ended. Effects of MORA SOLVENDI a) Determinate prestation - delay places the risk of the thing on the debtor b) Damages 2. MORA ACCIPIENDE - Delay on the part of the CREDITOR.

Requisites of MORA ACCIPIENDE a) Offer of performance by the debtor who has the required capacity b) Offer must be to comply with the prestation as it should be performed c) Creditor refuses the performance without just cause Effects of MORA ACCIPIENDE a) Responsibility of the debtor of the thing is reduced or limited to fraud and gross negligence. b) Debtor is exempted from the risk of the loss of the thing, which automaticall pass to the creditor. c) All expenses incurred by the debtor for the preservation of the thing after the delay will be chargeable to the creditor. d) The creditor becomes liable for the damages. e) The debtor may relieve himself of the obligation by the consignation of the thing. 3. COMPENSATIO MORAE - Parties to a bilateral contract can regulate the order in whch they shall comply with their reciprocal prestation.

Effect of COMPENSATIO MORAE - One is not compelled to perform his prestation when the other contracting party is not yet prepared to perform his prestation . - Default of one COMPENSATES the default of the other.  CESSATION OF EFFECTS OF MORA/INSTANCES WHERE THERE IS NO DELAY

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1. Renunciation by the creditor a. Express renunciation b. Implied renunciation a) Creditor grants the extension of the time b) Creditor agrees to a NOVATION of the obligation (replacement) 2. Prescription of action ** Natural delay - Equity ** Legal delay - Agreement

Art. 1170. - INSTANCES IN LIABILITY FOR DAMAGES - 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. A. FRAUD (DOLO) - Voluntary execution of the wrongful act, or a willfull ommission, knowing and intending the effects which naturally and necessarily arise from such acts. - Deliberate and intentional evasion of the normal fulfillment of obligations. - Fraud in the performance of pre-existing obligation - Cannot cover mistake and errors of judgement made in good faith, ergo synonymous to bad faith (dishonest purpose or some obliquity and conscious doing of wrong) Kinds of Fraud: 1. Fraud in the performance 2. Fraud in the execution/birth of the contract a. Dolo causante b. Dolo incidente FRAUD

DOLO CAUSANTE

DOLO INCIDENTE

WHEN PRESENT

During the performance of a preexisting obligation

During the perfection of a contract

During the perfection of a contract

PURPOSE

Evade the normal fulfillment of obligation

Secure the consent of another to enter into a contract

Secure the consent of another to enter into contract BUT fraud was not the principal inducement in making the contract

RESULTS IN

Breach of the obligation

Vitiation of consent: voidable contract

Does not result to vitiation of consent

GIVES RISE TO

Right in favor of creditor to recover damages

Right of the innocent party to annul the contract

Gives rise to to a right of the innocent party to claim for damages

Art. 1171. DAMAGES ARISING FROM FRAUD - Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. Note: Renunciation of future fraud is against public policy. Liability for fraud A. Time of Comission Fraud may be past or future. B. Meaning 1. Fraud in obtaining consent 2. Fraud in performing a contract a) Dolo causante (causal fraud) b) Dolo incidente (incidental fraud)

Art. 1172. NEGLIGENCE - Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. Distinction between Fraud and Negligence DOLO

CULPA

There is deliberate intention to cause damage or prejudice

Although voluntary, no deliberate intention

Liability arising cannot be mitigated

Can be reduced

Waiver of action to enforce liability due to future fraud is void. Waiver of action to enforce civil liability due to future culpa may be allowed.

Art. 1173. DEGREES OF CULPA - 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 of the place. When negligence shows bad fai th, the provisions of Articles 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 is expected of a g ood father of a family shall be required.

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**When negligence in bad faith, fault will apply. Gen. Rule: 1. Stipulated by the parties, 2. If without 1, that required by law. 3. If without 2, deligence of a good father of a family. Art. 1174. FORTUITOUS EVENTS - Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. Gen. Rule - No liability on the part of the debtor Exceptions: 1. Specified by law 2. Declaration/stipulation by the parties 3. Assumption of risk

Requisites of Fortuitous Events: 1. Cause of the unforeseen events and unexpected occurrence or the failure of the debtor to comply with his obligation must be independent of the human free will. 2. Impossible to foresee or impossible to avoid. 3. Occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner. 4. Obligor must be free from any participation in the aggravation of the injury resulting to the creditor (no concurrent negligence). Effect of concurrent negligence: - When the effect is found to be partly resulting from the participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules applicable to the acts of God (NPC v CA) Art. 1175. USURIOUS TRANSACTIONS - Usurious transactions shall be governed by special laws.

Rate of interest Art. 1176. RESERVATION - The receipt of the principal by the creditor without reservation with respect to the interest, shall give rise to the presump tion that said interest has been paid. The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumpti on that such installments have been paid.

Gen Rule - If the debt produces interests, payment of the principal shall not be deemed to have been made unless the interests have been covered. - Presumptions are rebuttable. Examples: Principal: P5,000.00 Interest: P50/month 1st Par

C paid P5,000 (Principal) in the month of January. Assumption is that INTEREST (P50.00) is said to have been paid also

2nd Par C paid for P5,050 in the months Jan, Feb and April. Assumption is that March has also been paid. ** Reservation should be made: 1st Par

Receipt should reveal that such payment does not include the interest.

2nd Par Receipt should reveal that payment made on April is for March parment.

Art. 1177. SUCCESSIVE RIGHTS OF THE CREDITOR - The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in hi s person; they may also impugn the acts which the debtor may have done to defraud them. SUCCESSIVE RIGHTS OF THE CREDITOR: 1. Demand for the fulfillment of the specific performance. 2. Right to attahment of the properties which the debtor may own (writ of attachment) 3. Accion subrogatoria 4. Accion pauliana ACCION SUBROGATORIA - Action the creditor may exercise in place of the negligent debtor in order to preserve or recover for the patrimony of the debtor the product of such action, and then obtain therefrom the satisfaction of his own credit.

Requisites of Accion Subrogatoria a. Insolvency of the debtor b. Malicious or negligent inaction of the debtor c. The credit of a person against the third person is certain, demandable and liquidated d. Debtor's right against the 3rd person must be patrimonial. (inheritable) ACCION PAULIANA - Creditors have the rights to revoke acts which the debtor may have done to defraud them.

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Requisites of Accion Pauliana 1. Credit should be prior to the alienation 2. Debtor has a subsequent contract giving advantage to a third person 3. Fraudelent act 4. 3rd person who received is an accomplice Distinction of Accion subrogatoria versus Pauliana ACCION SUBROGATORIA

ACCION PAULIANA

Not essential that credit is prior to the alienation Credit should be prior to the alienation Intent to defraud creditors is required

If contract rescinded is onerous, there must be fraudelent intent

No period of prescription

Period of prescription is 4 years.

Art. 1178. TRANSMISSIBILITY OF RIGHTS - Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. Gen Rule - All rights acquired by virture of an obligation are transmissible Exception 1. Express stipulation 2. Nontransmissibility by their nature 3. Non transmissbility by law

Example: A- debtor; B-creditor  If A dies, B can claim against the estate of A.  If B dies, B's right to claim is transmissible to his heirs.

CHAPTER III: DIFFERENT KINDS OF CIVIL OBLIGATIONS

PRIMARY OBLIGATION

Pure, with a term, alternative and facultative, joint and solidary, divisible and indisible, with a penal clause.

SECONDARY OBLIGATION

Unilateral and bilateral, real and personal, determinate & generic, positive and negative, legal, conventional and penal, individual and collective, accessory and principal, simple or multiple, possible and impossible.

Art. 1179. PURE VS CONDITIONAL OBLIGATION - Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happ ening of the event. PURE - Performance does not depent on anything. CONDITIONAL - Aquisition of rights/extinguishment of right depends on the event which consitutes condition. □ 2 KINDS OF CONDITION a) Suspensive - Obligation arises by the happening of the event b) Resolutory - Obligation is extinguished by the happening of the event

Gen. Rule - PURE obligation is DEMANDABLE AT ONCE. - Resolutory is DEMANDABLE AT ONCE. Conditions: 1. Future and Uncertain event 2. Possible 3. Unknown past 4. Term - not certain but must necessarily happen.

Art. 1180. OBLIGATION DEPENDENT ON TIME - 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. ** Creditor has to ask the court to fix a period. **Court can not force the debtor to comply. **Both parties can still agree to change the period fixed by the court. **Correlate with Art. 1197.

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Art. 1181. CONDITIONAL OBLIGATION - In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. ** Correlate with 1179.

Art. 1182. KINDS OF CONDITION (cause or origin)- When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in c onformity with the provisions of this Code. Kinds of Condition as to cause or origin: 1. POTESTATIVE - Depends upon the will of one of the parties. ** If fulfillment depends solely on the will of the DEBTOR - VOID ** If fulfillment depends solely on the will of the CREDITOR - VALID **Resolutory Potestative (Facultative) - VALID 2. CASUAL - Depends exclusively upon chance or will of the third person or other factors and not upon the contracting parties. ** Always valid 3. MIXED - Depends upon the will of the contracting parties and other circumstance.

Art. 1183. IMPOSSIBLE CONDITIONS - Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. The condition not to do an impossible thing shall be considered as not having been agreed upon. Gen Rule - Obligations are extinguished. Exceptions: 1. Pre-existing obligation 2. Divisible obligation 3. Simple and renumentary obligation 4. Testamentary disposition 5. Negative impossible things Impossibility may either be: 1. Physical 2. Juridical - contrary to law, morals, good customs, and public policy,and those which restricts constitutional rights.

Art. 1184. POSITIVE OBLIGATIONS - The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place. ** Effective for a determinate time. ** Obligation expires when the time has lapsed or if it has become indubitable that the event will not take place. ** If there is no perio, rule on PAR 2 of ART 1185 is controlling. Art. 1185. NEGATIVE CONDITIONS - The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur. If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated, beari ng in mind the nature of the obligation. 2nd Par Taking into account the nature of the obligation, the time which the parties contemplated is controlling.

Art. 1186. CONSTRUCTIVE OR PRESUMED FULFILLMENT - The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Constructive Fulfillment - With intention of the obligor/creditor to prevent fulfillment of the condition with actual prevention of the compliance. Reason: One must not be made to be excused by his own fault.

Art. 1187. RECIPROCAL OBLIGATIONS - The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fr uits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shal l appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention o f the person constituting the same was different. In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that ha s been complied with. Gen Rule: Retroacts to the DAY the OBLIGATION was CONSTITUTED.

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PAR. 1 1. RECIPROCAL Example: A will sell the car to B if A passes the Bar Exam - Fruits and interests shall retain in each possession. (This will be deemed constituted. 2. UNILATERAL OBLIGATION: Example: A will give B 100K if A passes the Bar Exam - Fruits and interests should be with A. Art. 1188. ACTION TO PRESERVE AND RECOVER - The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition.

1st Par

Action to preserve creditors rights

2nd Par Right to debtor to recover what was paid by mistake

Ex. Ask for security if the debtor is about to be insolvent; ask the court to prevent alienation or concealment pendente conditionae. Note: if payment was not by mistake: 1. If the condition is fulfilled, no recovery because of retroactivity 2. If the condition is not fulfilled, there should be a recovery unless a pure donation was intended.

Art. 1189. EFFECT OF OBLIGATION - When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the c ondition: (1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished; (2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered; (3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor; (4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case; (5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; (6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.

LOSS

WITHOUT FAULT

WITH FAULT

Obligation is extinguished

Value of the thing + damages (Art. 1170)

DETERIORATION Creditor bears the impairment

Creditor can demand in two ways: 1. Fulfillment + damages; OR 2. Rescision + damages

IMPROVEMENT (by nature) Benefits the creditor (retroactivity of conditional obligations

(by the debtor) - Usufructory Rights, the debtor can: 1. take away the improvement provided this will not cause destruction to the pricipal object. 2. usufruct

Gen Rule - where the improvement is not susceptible of being taken away, usufruct (together with accessories). There should be consent by both parties.

Art. 1190. RESOLUTORY CONDITION - When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received. In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid do wn in the preceding article shall be applied to the party who is bound to return. As for the obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed as regar ds the effect of the extinguishment of the obligation.

1st Par

Fulfillment of condition: return to each

2nd Par Loss, deterioration, improvement (Art 1191) 3rd Par Obligations to do and not to do (1187) : REVERSAL OF PERSONALITY

Art. 1191. RIGHT TO RESCIND - The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in eit her case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Art icles 1385 and 1388 and the Mortgage Law. RIGHT TO RESCIND - Right to cancel or resolve the contract or reciprocal obligation in ase of non-fulfillment on the part of one. Given to the injurred party who may choose to demand Fulfillment or Rescision.

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- Given to the injurred party who may choose to demand Fulfillment or Rescision. Gen. Rule: POWER TO RESCIND is IMPLIED in RECIPROCAL ones. 1. This right is not absolute, the injurred party should apply to the court a decree of rescision. Exceptions: 1. If the obligation has NOT BEEN PERFORMED yet, extrajudicial declaration of the party willing to perform would suffice, can refuse to perform if the other party is not yet ready to comply. 2. If the INJURED PARTY has already PERFORMED, CANNOT extrajudicially rescind IF the other party OPPOSES the RESCISION. In this case, the court may: a. Fix a date for the debtor to perform b. Rule for rescision.

Art. 1192. BREACH OF BOTH PARTIES - In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. 1. Liability of first infractor 2. If it can't be determined, court will leave them as they are.

Art. 1193. OBLIGATIONS WITH A PERIOD - Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to be that which must necessarily come, although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section. Requisites of a Period: 1. Future 2. Certain 3. Possible

A DAY CERTAIN - a day which will necessarily come. Ex. Dying Difference between period and condition: AS TO

CONDITION

PERIOD

Fulfillment

Event is uncertain future, unknown past, must be possible

Event is Certain, future and possible.

Influence on the obligation

Gives rise or extinguishes the obligation.

No effect on existence but only in their demadability or performance. (Does not carry with it retoractive effect.

Time

May refer to unknown past

Always to the future

Will of the debtor

It depends on the will of the debtor.

If dependent on the debtor, this merely impowers the court to fix a period.

Kinds of Period: 1. Sources: a. Legal b. Conditional/Stipulated by the parties c. Judicial - fixed by court 2. Effects: - same with conditional a. Resolutory b. Suspensive 3. Definiteness a. Definite - fixed date or time b. Indefinite 4. Expression a. Express b. Implied - when parties "intended to" ** Phrases as "As soon as" - Period, while "IF" - conditional

Art. 1194. LOSS, DETERIORATION, IMROVEMENT - In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in Article 1189 shall be observed.

Art. 1195. PAYMENT BEFORE MATURITY - Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests. UNJUST PAYMENT (Solutio indebiti) - Sought to be avoided thus this article is applied. JUST PREPAYMENT Apply the Doctrine of Estoppel

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- Apply the Doctrine of Estoppel - With knowledge on the period. When to recover: - Before the debt matures (principal) - After debt matures (interest) - if creditor is in bad faith. - right prescribes 5 years after premature payment. Art. 1196. BENEFIT OF THE DESIGNATION OF THE PERIOD - 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, unless from the tenor of the same or other circumstances it should appea r that the period has been established in favor of one or of the other. Gen Rule - Benefit of both parties. Exception - Tenor of the obligation as to who will be favored. ** Note: On or Before

Debtor benefited

Upon demand Creditor benefited Definite date

Both

Art. 1197. INSTANCES WHERE THE COURT FIXES THE PERIOD - If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. The courts shall also fix the duration of the period when it depends upon the will of the debtor. In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the p arties. Once fixed by the courts, the period cannot be changed by them. Instances where the court fixes the period: 1. No period fixed in the obligation. 2. If it depends upon the will of the debtor Instances where the Courts cannot fix a period: 1. When period is fixed by law 2. Obligation is payable on demand 3. Term is specified by parties

** Correlate this article with Art. 1180.

Art. 1198. INSTANCES WHERE THE DEBTOR LOSE THE RIGHT TO MAKE USE OF THE PERIOD - The debtor shall lose every 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, and when through a fortuito us event they disappear, unless he immediately gives new ones equally satisfactory; (4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; (5) When the debtor attempts to abscond. Instances where the debtor loses the right to make use of the period: 1. Insolvency - EXCEPTION: guarantee or security 2. Failure to furnish the guarantee or security 3. Impairment of guarantee by his own acts or by FE - EXCEPTION: present a new one equally satisfactory. 4. Violation of any undertaking 5. Attempt to abscond.

Art. 1199. ALTERNATIVE OBLIGATIONS - A person alternatively bound by different prestations shall completely perform one of them. The creditor cannot be compelled to receive part of one and part of the other undertaking. Gen Rule: - Presumption is ALTERNATIVE. DISJUNCTIVE - 2 or more prestations the debtor may choose from among. - Use of OR. A. ALTERNATIVE - Only one must be performed among the choices B. FACULTATIVE - One principal prestation but 2 or more substitute. CONJUNCTIVE 2 or more prestations must be performed.

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- 2 or more prestations must be performed. - Use of AND Art. 1200. RIGHT OF CHOICE - The right of choice belongs to the debtor, unless it has been expressly granted to the creditor. The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the ob ject of the obligation. Gen Rule - Debtor has the right to choose Exception - Express stipulation

Limitations to the Rule: 1. Not impossible 2. Not unlawful 3. Should be the object of the obligation Effects of Notice of Choice: 1. Limit the obligation to the object selected. 2. Becomes SIMPLE/PURE OBLIGATION 3. Becomes IRREVOCABLE. Art. 1201. CHOICE - The choice shall produce no effect except from the time it has been communicated.

** Notice may be in any form. **Unliateral declaration of will - the other party need not consent on the choice made by one. **Right to choose is not lost by the mere fact that the party entitled to choose delays in making his choice. **If the debtor is unable to choose, there are two instances that may arise: 1. SUBSTITUTED PERFORMANCE - when the debtor does not want to make a choice, the creditor may ask the court for a 3rd party to choose. 2. Right to choose goes to the creditor because this constitutes a waiver of the right of the debtor. EXCEPTION to the RULES above: - Debtor has chosen a prestation which could not have been the object of the obligation, creditor's consent thereto would bring about a NOVATION of the obligation. For Plurality: Joint

all of them must guve their consent.

Solidary The choice of one is the choice of the rest.

Art. 1202. ALTERNATIVE - SIMPLE OBLIGATION. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one is practicable. **If all prestations are impossible or unlawful, obligation is VOID. ** If only one is praticable, obligation is converted to simple/pure obligation.

Example: A - water from Mars, B - 1 kilo of shabu, C- car

Art. 1203. CREDITOR IS AT FAULT - If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages.

Logic: Because the debtor has been deprived of the right to choose.

Art. 1204. RIGHT TO INDEMNITY FOR DAMAGES - The creditor shall have a right to 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 im possible. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service which la st became impossible. Damages other than the value of the last thing or service may also be awarded. 1st Par

1. All objects have been lost 2. Compliance has become impossible

2nd Par Indemnity: VALUE of the LAST thing lost + DAMAGES

3rd Par Damages other than the value of the last thing or service may also be awarded ** Apllies only to cases where the debtor has the right to choose. ** FE causes the loss of the thing communicated, obligation is extinguished.

Art. 1205. CREDITOR HAS THE RIGHT OF CHOICE - When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. Until then the responsibility of the debtor shall be governed by the following rules:

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Until then the responsibility of the debtor shall be governed by the following rules: (1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that which the cre ditor should choose from among the remainder, or that which remains if only one subsists; (2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the former, has disappeared, with a right to damages; (3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any o ne of them, also with indemnity for damages. The same rules shall be applied to obligations to do or not to do in case one, some or all of the prestations should become i mpossible. Pending selection by creditor, the object is still at the possession of the debtor, the debtor MUST preserve all prestations. IF: 1. One is lost due to FE, obligation still subsists, the creditor may choose on the remaining 2; 2. If loss is due to FAULT of the debtor, creditor may: a. Choose from among the remaining + damages b. Value of the object lost + damages 3. If ALL are lost through the fault of the debtor, the creditor may choose for the value of any object + damages.

Art. 1206. FACULTATIVE - When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative. The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him l iable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud . **Only one prestation bu allows for substitution.

Gen Rule: - If the inteded substitute is lost, it doesn't matter Exception: - If the debtor chose to deliver the substitute which was subsequently lost, debtor is still liable. - If loss is due to FE, extinguished. Distinction between Alternative and Facultative Obligations: AS TO

ALTERNATIVE

FACULTATIVE

Contents of the obligation

Variuos prestations all of which constitute parts of the obligation

Only the principal constitutes the obligation, the accessory being only the means to facilitate payment

Nullity of prestations

Nullity of one prestation does not invalidate the obligation Nullity of the principal invalidates the obligation. which is still in force in respect to those which have no vice

Choice

Creditor can choose from the remainder

Obligation is extinguished. Creditor can't demand substitute.

Debtor, BUT may be given to the creditor

Only the DEBTOR

Effect of loss Extinguishment: Impossibility of ALL (fortuitous events)

Extinguishment: Impossibility of the PRINCIPAL, and when the substitution has been made and the substitute object was lost.

Effect of loss (fault Debtor is not liable if there are still available of debtor) If choice belongs to creditor, loss of one alternative gives rise to liability.

Debtor is liable for loss of PRINCIPAL.

Art. 1207. SOLIDARY OBLIGATION - The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires sol idarity. Gen Rule: - JOINT □ Concurrence of several debtors/creditors does not necessarily assume that all of them an demand to fulfill. Exceptions: 1. Law 2. Stipulated by the parties 3. Nature of the obligation 4. Charge of condition is imposed upon heirs 5. Imputed by final judgement upon several litigants

SOLIDARY - Compliance of the obligation an be done in its entirety. (right to reimbursement) JOINT - Compliance is in parts, proportionate. Words used to indicate Joint obligation: 1. Mancomunada 2. Mancomunada simple 3. Pro rata 4. "we promise to pay" used by two or more signers

Art. 1208. JOINT OBLIGATION - If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does

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not appear, the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors, the cre dits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits.

**Refer above Words used to indicate JOINT Obligations 1. Mancomunada solidaria 2. Joint and several 3. In solidum 4. "I promise to pay" ... Followed by the signature of two or more persons. 5. Individually and collectively Effects of Joint Obligations 1. Extent of liability of the debtor a. Only with respect to his particular share b. Defect of one debtor does not affect the obligation or the others c. Insolvency of one does not increase the responsibility of the others nor does it authorize a creditor demand anything from his codebtors d. Joint divisible obligation - defense res judicata does is not extended to the others 2. Extent of the Right of the Creditor a. Demand by one creditor upon one debtor produces the effects of default only with respect to the creditor who demanded and the debtor on whom the demand was made. b. Interruption of prescription of the judicial demand of one creditor upon the debtor does not benefit the other creditors nor interrupt the prescription as to the other debtors. Art. 1209. INDIVISIBLE JOINT OBLIGATION - If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall n ot be liable for his share. **To each his own.

1. Demand must be made upon all creditors. - Creditor must proceed to all the debtors. 2. If one is insolvent, the other is not liable. Effects of Joint Indivisible Obligation: 1. Creditors prejudiced only by their collective acts 2. Co-debtors bot liable for the share of the insolvent debtor. 3. Creditors must proceed against all the joint debtors. 4. If one does not comple, obligation is converted to MONETARY Consideration. One will be liable for his proportionate share. 5. Debtor must deliver to all creditors.

Art. 1210. INDIVISIBLIT - SOLIDARITY - The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. Divisible vs Indivisible - object of the obligation Joint vs Solidary - juridical tie that binds the obligation May be: 1. Joint Divisible 2. Joint Indivisible 3. Solidary Divisible 4. Solidary Indivisible

Art. 1211. SOLIDARY DESPITE DIFFERENT TERMS AND CONDITIONS - Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions.

Example: A- Pay P5,000 on Dec 21, 2010

B- Pay P5,000 on Dec 21, 2011

C- Pay P10,000 on Dec 21, 2012

If X demands on Jan. 1, 2011, A will only If X demands on Jan 1, 2012, A and B must pay pay P5,000 + damages for the delay. P10,000 plus damages for the delay.

If X demands on Jan 1, 2013, A, B, or C must pay P20,000 + damages for the delay.

If A is insolvent, B/C may pay, subject of A/B may pay the whole P10,000 subject for reimbursement by A. reimbursement of the other co-debtor who did not pay

A/B/C may pay the whole P20,000 subject for reimbursement of the other co-debtor who did not pay.

Art. 1212. SOLIDARY CREDITORS - Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter. Example: D1 and D2 are debtors of C1, C2 and C3 who are solidary creditors (P30,000)

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Prejudicial Act - Prohibited. - Valid as to the debtor but bot with respect to the co-creditors whose rights subsists and can be enforced against the creditor who performed prejudicial acts - Example: - Remission, novation, compensation, merger/confusion ** Correlate with Art 1215.

Art. 1213. ASSIGNMENT OF RIGHT - A solidary creditor cannot assign his rights without the consent of the others.

Gen. Rule - Solidary creditor cannot assign his rights. Exceptions - If with CONSENT of the other co-creditors, he can assign his rights to a Third Party - Assignee is the co-creditor Example: - C1 assigned his right to X (TP). - Assignment should be with the consent of C2, C3 and C4 for it to be valid.

Art. 1214. DEMAND OF CREDITOR - The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him. Gen rule - The debtor may pay any one of the solidary creditors. Exception - If there is demand, payment must be made to solidary creditor who made the demand (judicial or extrajudicial). **payment to any other will not extinguish the obligation except insofar as the payee's share is concerned. Art. 1215. EXTINGUISHMENT - Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of Article 1219. The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them.

- Will be discussed on the Chapter on Extinguishment.

Art. 1216. CREDITOR TO DEBTOR - The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.

Art. 1217. EFFECTS OF PAYMENT - Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. 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. 1st Par

Anyone of the solidary debtor can pay; extinguishment of the obligation

2nd Par Reimbursement by the other co-debtors; share + interest from the time of maturity of obligation) 3rd Par By insolvency of one debtor he can not reimburse his share, converted into joint obligation as to co-debtors.

Art. 1218. PRESCRIPTIVE PERIOD - Payment by a solidary debtor shall not entitle him to reimbursement from his co -debtors if such payment is made after the obligation has prescribed or become illegal.

Period of Prescription is: Written 10 years Verbal

6 years

Art. 1219. REMISSION OR CONDONATION - The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected. ** If remission or condonation is prior to payment, it brings abour the desired effect. Example: D1, D2, and D3 owes C1 P3,000. C1 condoned/remitted the liability of D1. D2 paid P2,000. - D2 cannot ask for reimbursement from D1. If D3 is insolvent, D1 will bear half the share of D3, thus D1 must pay P500.

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- If D3 is insolvent, D1 will bear half the share of D3, thus D1 must pay P500. Art. 1220. EFFECT OF REMISSION - The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors. **Correlate with Art 1219.

Art. 1221. EFFECT OF LOSS OR IMPOSSIBLITY - If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors, the obligation shall be extinguished. If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor. If through a fortuitous event, the thing is lost or the performance has become impossible after one of the solidary debtors h as incurred in delay through the judicial or extrajudicial demand upon him by the creditor, the provisions of the preceding paragraph shall apply. (1147a) If without fault (FE or FM)

No liability: obligation is extinguished

If without fault but after default/delay With liability: value, damages and interest Co-debtors have right against the guilty debtor

If with fault

Liability: value, damages and interest Co-debtors have right against the guilty debtor

Art. 1222. DEFENSES AVAILABLE TO SOLIDARY DEBTORS - A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect t o those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible . (1148a) Defenses Available to the Solidary Debtors are: 1. Nature of the Obligation - Complete defense  Vices of consent  Cause of obligation has prescribed  Entire obligation is void  Voidable 2. Personal to the Debtor - Complete defense (GEN RULE)  Minority  Insanity  Fraud - Partial Defense  Special terms or conditions affecting his part of the obligation  Non-fulfillment of condition imposed regarding his share 3. Personal to the Creditor - Avail himself thereof only as regards that part of the debt for which the latter is responsible.  Example: the co-debtor's share is not yet due, so you can only compel me to give my share. Effects of the Defenses: 1. If from Nature: all co-debtors will be benefited 2. If personal to the debtor: only him will be benefited 3. If personal to the co-creditor: partial defense

Art. 1223. DIVISIBLE/INDIVISIBLE OBLIGATION - The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title. Divisible - One capable of partial performance Indivisible - Deliver in its entirety Kinds of Indivisibility 1. Conventional - Common agreement Example: Payment of P10,000 in a lumpsum basis - Becomes indivisible 2. Natural or absolute - Nature of the object Example: car 3. Legal - Law so provides ** A debt shall not be be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered as the case may be. Exceptions: a. Obligation has been substantially performed in good faith (Art. 1234)

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Exceptions: a. Obligation has been substantially performed in good faith (Art. 1234) b. When the creditor accepts performance, knowing its completeness, and without protest, the obligation is deemed fully performed. (Art.1234)

Art. 1224. INDIVISIBLE JOINT OBLIGATION - 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 in demnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. **Correlate with Art. 1209. **Debtors ready to fulfill shall not be liable.

Art. 1225. PRESUMPTIONS OF INDIVISIBLE OBLIGATIONS - For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work by metri cal units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible. However, even though the object or service may be physically divisible, an obligation is indivisible if so provided by law or intended by the parties. In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each parti cular case. (1151a)

1st Par

Indivisible

2nd Par Divisible

Definite and not susceptible to partial performance Ex. Singing 1. Execute work for a # of days 2. Accomplishment by metrical units 3. Purpose is to pay a certain amount

Ex.

3rd Par From Divisible - Indivisible IF: provided by law or stipulated by the parties

Ex. P5000 to be paid in lumpsum basis

4th Par

Ex.

To do and not to do

Determined by the character of the prestation

Art. 1226. PENAL OBLIGATIONS - In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refu ses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. (1152a)

PENAL CLAUSE - Is an accessory undertaking to assume greater responsibility in case of breach. - Mere non-performance of the principal obligation gives rise to damages. Gen Rule: - Penalty takes the palce of indemnity for damages and payment of interest Exceptions: 1. Express stipulation despite the presence of the penalty clause. 2. Debtor refuses to pay the penalty imposed. 3. Debtor is guilty of fraus in the fulfillment of the obligation.

REASONS FOR IMPOSING PENAL CLAUSE 1. To ensure compliance - Makes heavier the obligation 2. Serve as a substitute - For indemnity and payment of interest 3. Serve as a punishment - Serve as a punishment for non-fulfillment Kinds of Penalty 1. First Classification: a. Legal Penal Clause - Imposed by law b. Conventional Penal Clause - Agreed by the parties 2. Second Classification a. Subsidiary - Only the penalty may be asked. b. Joint - When both the principal contract and the penal clause may be enforced in non-performance.

Art. 1227. RULE ON PENALTY AND PRINCIPAL - The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligat ion and the satisfaction of the penalty at the same time, unless this right has been clearly granted him. However, if after the creditor has decided to r equire the fulfillment of the obligation, the performance thereof should become impossible without his fault, the penalty may be enforced. Gen. Rule: - The debtore can not exempt himself from performance Exceptions: Express stipulation by the parties. (Fulfillment becomes Alternative)

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Exceptions: - Express stipulation by the parties. (Fulfillment becomes Alternative) Gen Rule: - Creditor cannot demand both fulfillment and the penalty. Exception: - Express grant of such right.

Art. 1228. PROVING ACTUAL DAMAGES NOT NEEDED - Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. Art. 1229. REDUCTION OF THE PENALTY BY THE COURTS - The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. Reasons for Reduction of Penalty: 1. When the obligation has been partly complied with by the debtor. 2. Obligation is irregularly complies 3. Penalty is iniquitous or unconscionable, even if htere has been no performance at all. Art. 1230. NULLITY OF PENAL CLAUSE - The nullity of the penal clause does not carry with it that of the principal obligation. The nullity of the principal obligation carries with it that of the penal clause. - If Principal is Null, Penalty is void - If Penalty is Void, Principal still exist.

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