JURADO Obligations Reviewer

Civil Law: Obligations and Contracts
BOOK IV obligation, or Solidary, when each obligor may

be held liable for the entire obligation
3. As to Object
a. Determinate, object is specific; Generic, object is
OBLIGATIONS AND CONTRACTS designated by its class or genus
(JURADO) b. Simple, only one undertaking; Multiple, several
undertakings
TITLE I — OBLIGATIONS - Latter may be Conjunctive, when all
undertakings are demandable at the same time;
CHAPTER 1 Distributive, only one undertaking our of
GENERAL PROVISIONS several is demandable
- Distributive obligations may be Alternative,
ART. 1156 obligor is allowed to choose one out of several
• OBLIGATION is the juridical necessity to comply with a obligations which may be due and demandable,
prestation; a legal relation established between one person and or Facultative, obligor is allowed to substitute
another, whereby the latter is bound to the fulfillment of a another obligation for one which is due and
prestation which the former may demand of him demandable
c. Positive, obligor is obliged to give or do something;
• CIVIL OBLIGATION is one which has a binding force in law, Negative, obligor must refrain from giving or doing
and which gives to the obligee or creditor the right of enforcing something
it against the obligor or debtor in a court of justice d. Real, obligation consists in giving something;
Personal, obligation consists in doing or not doing
• NATURAL OBLIGATION is one which cannot be enforced by something
action, but which is binding on the party who makes it in e. Possible, capable of fulfillment in nature as well as
conscience and according to natural law in law; Impossible, not capable of fulfillment either
in nature or in law
• When an action has prescribed under the statute of limitations, a f. Divisible, susceptible of partial performance;
natural obligation still subsists, although the civil obligation is Indivisible, not susceptible of partial performance
extinguished g. Principal, main undertaking; Accessory, merely an
undertaking to guarantee fulfillment of the principal
CIVIL OBLIGATION NATURAL OBLIGATION obligation
4. As to Perfection and Extinguishment
Based on positive law Based on equity and natural a. Pure - obligation is not subject to any condition or
law term and is immediately demandable
b. Conditional - may be Suspensive, the happening or
Enforceable in courts of justice Not enforceable in the courts fulfillment of the condition results in the birth of the
of justice obligation; Resolutory, the happening or fulfillment
of the condition results in the extinguishment of the
obligation
• REQUISITES OF OBLIGATIONS c. With a term or period (a plazo) - when obligation is
1. Juridical or legal tie — binds the parties to the obligation, subject to a term or period which may be Suspensive
and which may arise from either bilateral or unilateral or from a day certain, in which case it is demandable
acts of persons only upon the expiration of the term; Resolutory or
2. Active subject — obligee or creditor, who can demand to a day certain, in which case the obligation
the fulfillment of the obligation terminates upon the expiration of the term
3. Passive subject — obligor or debtor, against whom the
obligation is juridically demandable
4. Fact, prestation or service — constitutes the object of the ART. 1157
obligation • Sources of Obligation
• GR: Form in which the obligation is manifested is not an
essential requisite ART. 1158
• EXCPN: It is only in obligations arising from certain contracts • Unlike other obligations, those derived from law can never be
that it becomes essential presumed
• There is always a concurrence between the law which
• Classification of Obligations establishes or recognizes it and an act or condition upon which
1. As to Juridical Quality the obligation is based or predicated
a. Natural - in accordance with natural law • LAW IS THE SOURCE OF OBLIGATION - when the law
b. Civil - in accordance with civil law establishes the obligation and the act or condition upon which it
c. Mixed - in accordance with both natural and positive is based is nothing more than a factor for determining the
law moment when it becomes demandable
2. As to Parties • ACT IS THE SOURCE OF OBLIGATION, NOT THE LAW -
a. Unilateral, only one party is bound; Bilateral, where when the law merely recognizes or acknowledges the existence
both parties are mutually or reciprocally bound of an obligation generated by an act which may constitute a
b. Individual, only one obligor; Collective, there are contract, quasi-contract, criminal offense or quasi-delict and its
several obligors only purpose is to regulate such obligation
- Latter may be Joint, when each obligor is liable
only for his proportionate share of the
Abesamis, Austinne Joyce D. !1
ART. 1159 - Where the law grants to the injured party the right to
• CONTRACT is a meeting of minds between two persons institute a civil action which is entirely separate and distinct
whereby one binds himself, with respect to the other, to give from the criminal action
something or to render some service (Art. 1305)
• CONSENSUAL CONTRACTS, once perfected, has the force of
law binding the parties to comply therewith in good faith, where ART. 1162
neither one may renege therefrom without the consent of the • Quasi-delicts refer to all of those obligations which do not arise
other from law, contracts, quasi-contracts or criminal offenses
- Contracts that are perfected by mere consent • Art. 2176; Art. 2180
• REAL CONTRACTS, such as deposit, pledge and
commodatum, which are not perfected until the delivery of the • REQUISITES OF LIABILITY
object of the obligation 1. Fault or negligence of the defendant
• RECIPROCAL OBLIGATIONS are those where the parties are 2. Damage suffered or incurred by the plaintiff
mutually or reciprocally obliged to do or to give something 3. Relation of cause and effect between the fault or
• UNILATERAL OBLIGATIONS are those where only one of the negligence of the defendant and the damage by the
parties, the obligor, is obliged to do or to give something plaintiff
• “Compliance in good faith” - performance in accordance with
the stipulations, clauses, terms and condition of the contract
QUASI-DELICTS CRIMES
Only of private concern Affect public interest
ART. 1160
• Art. 2142 N C C b y m e a n s o f Penal Code punishes or
• NEGOTIORUM GESTIO - juridical relation which arises i n d e m n i f i c a t i o n , m e r e l y corrects the criminal act
whenever a person voluntarily takes charge of the agency of repairs damages incurred
management of the business or property of another without any
power or authority from the latter Only one civil liability Generally, there are two
• SOLUTIO INDEBITII - juridical relation which arises whenever liabilities: civil and criminal
a person unduly delivers a thing through mistake to another who
has no right to demand it Includes all acts in which any Not as broad because crimes
kind of fault or negligence are punished only if there is a
intervenes law clearly covering them
ART. 1161
• GR: Every person liable for a felony is also civilly liable
• Independent civil action - Arts. 31, 32, 33, 34 and 2177 NCC • Art. 2176, where it refers to fault or negligence, covers not only
• Criminal and civil actions arising from the same offense may be acts not punishable by law but also acts criminal in character,
instituted separately whether intentional or voluntary or negligent
- But AFTER criminal action has been commenced, civil • Civil liability arising from crime or culpa criminal and the
action CANNOT be instituted until final judgment has been liability arising from civil negligence or culpa aquiliana can be
rendered in the criminal action prosecuted separately and independently of each other
- But Art. 2177 precludes recovery of damages twice for the
• Civil action has been filed BEFORE criminal action, and the
criminal action is subsequently commenced same negligent act or omission
- Civil action is SUSPENDED in whatever stage it may be • Death of the accused after arraignment and during the pendency
found until final judgment in criminal action has been of the criminal action shall extinguish the civil liability arising
rendered from delict
- However, if no final judgment has been rendered in the civil
action, the same may be consolidated with the criminal
action
• Extinction of the penal action does not carry with it extinction of
the civil, unless the extinction proceeds from a declaration in a
final judgment that the fact from which the civil might aries did
not exist
• Only the civil liability arising from the offense charged is
deemed instituted with the criminal unless the offended party
waives the civil action, reserves his right to institute it
separately, or institutes the civil action prior to the criminal
action
• GR: Civil action to recover damages from the person criminally

liable is not independent from the criminal action
• EXCPN: Where civil action to recover damages is entirely
separate and independent from the criminal action, although the
act or omission which is the basis thereof may be a criminal
offense
- Where the civil action is based on an obligation not arising
from the act or omission complained of as a criminal offense
or felony

CHAPTER 2 1. To perform the obligation specifically
NATURE AND EFFECT OF OBLIGATIONS - Debtor binds himself to deliver to the obligee or
creditor a thing or object which is particularly
ART. 1163 - ART. 1166 designated or physically segregated from all other
• Obligations To Give of the same class
1. Determinate 2. To take care of the thing with the proper diligence of a
2. Generic or Indeterminate good father of a family
- Accessory obligation provided for in Art, 1163 is
• The time when the obligation to deliver the thing and the fruits applicable only to DETERMINATE obligations for
arise depends upon the nature of the obligation itself the purpose of insuring efficacy and performance
- In case it arises from law, quasi-contracts, criminal offenses of the obligation
and quasi-delicts, the obligation to deliver arises from the - EXCPN: If the law or the parties stipulate another
time designated by the provisions of the NCC or of special standard of care
laws creating or regulating them 3. To deliver all accessions and accessories of the thing,
- If it arises from contracts, the obligation to deliver arises, as even though they may not have been mentioned
a GR, from the moment of the perfection of the contract 4. To be liable for damages in case of breach of the
obligation by reason of delay, fraud, negligence or
• PERSONAL RIGHT is a right pertaining to a person to demand contravention of the tenor thereof
from another, as a definite passive subject, the fulfillment of a - Liability does not arise if the breach is due to a
prestation to give, to do or not to do fortuitous event; liability only extends to a breach
- a jus ad rem, a right enforceable only against a definite which is voluntary in character
person or group of persons - ONLY A DETERMINATE THING CAN BE
• REAL RIGHT is a right pertaining to a person over a specific DESTROYED BY A FORTUITOUS EVENT
thing, without a passive subject individually determined against - AN INDETERMINATE OR GENERIC THING
whom such right may be personally enforced CAN NEVER PERISH
- a jus in re, a right enforceable against the whole world - The rule provided for under par. 3, Art. 1165 is
• Before delivery in obligations to give, creditor has merely a applicable only to obligations to give a determinate
personal right against the debtor; once the thing and the fruits thing
are delivered, creditor acquires a real right over them
• Person does not acquire a real right or right of ownership over • If the obligation to give is INNOMINATE or GENERIC, the
the land and the fruits thereof, until the same have been obligations of the DEBTOR are:
delivered to him 1. To deliver a thing which is of neither superior nor inferior
- Ownership of the thing sold shall be transferred to the quality
vendee only upon the actual or constructive delivery thereof - In determination of the quality of thing which is to
be delivered, the purpose of the obligation and
• If the obligation to give is DETERMINATE, rights of the other circumstances shall have to be takin into
CREDITOR are: consideration
1. To compel specific performance 2. To be liable for damages in case of brach of the
- Creditor may compel debtor to make delivery obligation by reason of delay, fraud, negligence or
- If debtor does not comply with his obligation, contravention of the tenor thereof
remedy of the creditor is to file an action against - Includes obligation to reimburse all expenses
the debtor to compel specific performance incurred by the creditor in cases where the latter
- Mere pecuniary inability to fulfill an engagement avails himself of the right to ask a third person to
does not discharge the obligation, nor does it perform the obligation at the expense of the debtor
constitute any defense to a decree for specific - Art. 1263 is based on the maxim that the genus of a
performance thing can never perish (genus nunquam peruit)
2. To recover damages for breach of the obligation • Art. 1174 is NOT applicable
- Right to recover damages in case of breach of
obligation through delay, fraud, negligence or
contravention of the tenor thereof ART. 1167
• Above remedies are not incompatible with each other • In POSITIVE PERSONAL OBLIGATIONS (to do), if the
obligor fails to do that which he has obligated himself to do,
• If the obligation to give is GENERIC, rights of the CREDITOR obligee can have the obligation (1) performed or executed at the
are: expense of the former, and at the same time, (2) demand for
1. To ask performance of the obligation damages by reason of the breach
- Creditor can only ask for the delivery of a thing or
object belonging to the class or genus stipulated • In obligations to do, the obligee does not posses the power to
which must be neither of superior nor inferior compel the obligor to comply with his obligation
quality - Law recognizes the individual’s freedom or liberty to choose
- Creditor cannot compel specific performance by between doing that which he has promised to do and not
demanding the delivery of the thing or object of doing it
superior quality • It is a PERSONAL ACT (acto personalismo) which
2. To ask that the obligation be complied with at the the courts may not compel compliance as it is
expense of the debtor considered an act of violence to do so
3. To recover damages for breach of the obligation - Remedy is to have the obligation performed or executed at
the expense of the obligor
• If the obligation to give is DETERMINATE, the obligations of • BUT! The remedy CANNOT be availed of when
the DEBTOR are: such prestation consists of an act where the personal
and special qualification of the obligor is the • In Positive obligations, obligor incurs in delay from the time the
PRINCIPAL MOTIVE for the establishment of the obligee DEMANDS, judicial or extrajudicial, from him the
obligation fulfillment of the obligation
- In such case, there is no other remedy except - If the obligor fails to fulfill or perform his obligation, he is in
to proceed against the obligor for damages mora solvendi
• If there has been a performance of the obligation, but in • Demand is NOT NECESSARY in the following cases
contravention of the tenor thereof, the rights of the OBLIGEE 1. When the obligation or law expressly so declares
are: - Art. 1788
1. To have the obligation performed or executed at the 2. When from the nature and circumstances of the
expense of the obligor; obligation it appears that the designation of the time
2. To ask that what has been poorly done be undone; and when the thing is to be delivered or the service is to be
3. To recover damages because of breach of the obligation rendered was a controlling motive for the establishment
of the contract
- Designation of time is of fundamental importance
ART. 1168 in the fulfillment of the obligation; TIME
• In NEGATIVE PERSONAL OBLIGATIONS (not to do), the ELEMENT IS THE ESSENCE OF THE
object of the obligation is fulfilled or realized so long as that CONTRACT
which is forbidden is not done by the obligor 3. When demand would be useless, as when the obligor has
rendered it beyond his power to perform
• If the obligor DOES what has been forbidden him, the remedies
of the obligee are: • Obligor CANNOT possibly incur delay in negative obligations
1. To have it undone at the expense of the obligor
- However, there are certain instances when this • RECIPROCAL OBLIGATIONS are created or established at the
remedy is not available such that the consequences same time, out of the same cause, and which result in mutual
contrary to the object of the obligation will have relationships of creditor and debtor between the parties
been produced which are permanent in character, - Conditional in the sense that fulfillment of an obligation by
and where it would be physically or legally one party depends upon the fulfillment of the obligation by
impossible to undo what has been undone because the other
of the very nature of the act itself, or because of a - GR: Fulfillment by both parties should be
provision of law, or because of conflicting rights of SIMULTANEOUS or at the SAME TIME
third persons - If neither party complies or is ready to comply with what is
2. To ask for damages incumbent upon him, the default of one compensates for the
default of the other — there can be NO legal delay
• In obligations not to do, delay or mora is not possible because • Once obligor/debtor has incurred in delay, he can be held liable
the obligation is either fulfilled or not fulfilled for damages
- ***Liability subsists even if the thing which constitutes the
object of the obligation may have been lost or destroyed
ART. 1169 - ART. 1173 through a fortuitous event
• In general, breach of an obligation may either be voluntary or
involuntary • FRAUD or dolo consists in the conscious and intentional
- VOLUNTARY if the debtor/obligor in the performance of proposition to evade the normal fulfillment of an obligation
his obligation is guilty of default, or fraud, or negligence, or - This fraud is present during the PERFORMANCE of an
in any manner contravenes the tenor thereof obligation
- INVOLUNTARY if he is unable to comply because of an - Must not be confused with Causal or Incidental fraud which
event which cannot be foreseen, or which, though foreseen, is present at the time of the BIRTH of an obligation
was inevitable - CIVIL FRAUD may be classified into:
1. Fraud in the performance of an obligation
• DEFAULT or mora signifies the idea of delay in the fulfillment 2. Fraud in the constitution or establishment of an
of an obligation with respect to time obligation
- Three kinds of default:
1. Mora solvendi - delay of the obligor to perform his Fraud in the
Fraud in the
obligation CONSTITUTION or
PERFORMANCE of an
2. Mora accipiendi - delay of the obligee or creditor to ESTABLISHMENT of an
obligation
accept the delivery of the thing which is the object of obligation
the obligation Present only during the Present only at the time of the
3. Compensatio morae - delay of the parties or obligors performance of a pre-existing birth of an obligation
in reciprocal obligations obligation
- Requisites in order that obligor or debtor may be considered
in default Purpose is to evade the normal Purpose is to secure the
1. Obligation is demandable and already liquidated; fulfillment of an obligation consent of the other party to
2. Obligor/debtor delays performance; and enter into the contract
3. Creditor requires the performance judicially or
extrajudicially Results in nonfulfillment or Results in vitiation of consent
breach of the obligation of the party upon whom it is
employed

Gives rise to a right of the Gives rise to the right of the As to availability of due diligence as a defense
creditor/obligee to recover innocent party to ask for the
damages from the debtor/ annulment of the contract if Proof of diligence in the Proof of diligence in the
obligor the fraud is causal or to selection and supervision of selection and supervision of
recover damages it it is employees is not available as a employees is a defense
incidental defense
• If there is breach by reason of fraud on the part of the obligor/ • Fraud is the conscious and intentional proposition to evade the
debtor, he can be held liable for damages normal fulfillment of the obligation
• What is prohibited is the waiver or renunciation which is made • If there is intent to cause damage or injury, there is fraud; if there
in advance or in anticipation of the fraud, and not that which is is merely abandonment, inattention, carelessness, or lack of
made after fraud has already been committed diligence, there is negligence
- Waiver for future fraud is contrary to law and public policy • When negligence shows bad faith, rules on fraud shall govern
- But waiver for a past fraud is valid since such waiver can be
deemed an act of generosity • Test of negligence: Did the defendant in doing the alleged
- What is renounced is the right of the party to indemnity negligent act use the reasonable care and caution which an
• The extent of damages that can be recovered comprehends all ordinarily prudent person would have used in the same
damages which may be reasonably attributed to the breach or situation?
nonfulfillment of the obligation, regardless of whether such • Future negligence can be waived, unless the nature of the
consequences are natural or unnatural, probable or improbable, obligation and public policy should require extraordinary
foreseeable or unforeseeable diligence as in the case of common carriers
- Obligee can also recover moral and exemplary damages • Person claiming damages for negligence has the burden of
proving the existence of fault or negligence causative of his
• NEGLIGENCE or culpa consists in the omission of that injury or loss
diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time • The court may increase or decrease the liability of the party at
and of the place fault depending upon the circumstances of each case
- Absence of due care required by the nature of the obligation • If debtor/obligor acted in GF - liable only for the natural and
• Degree of care that must be observed by the obligor in the probable consequences of the breach and which the parties have
performance of his obligation shall depend not only upon the foreseen or could have reasonably foreseen at the time the
nature of the obligation, but also upon the circumstances of obligation was constituted
persons, time and place
• Civil negligence may either be: • If there was CONTRIBUTORY NEGLIGENCE on the part of
a. Culpa contractual - fault or negligence of the obligor by creditor/obligee, the effect is to reduce or mitigate the damages
virtue of which he is unable to perform his obligation which he can recover
arising from a pre-existing contract because of the • If the negligent act or omission of the obligee was a proximate
omission of the diligence cause of the event which led to damage or injury, he cannot
b. Culpa aquiliana - fault or negligence of a person who, recover
because of the omission of the diligence, causes damage *** Determine where the negligence of the obligee/creditor was a
to another proximate cause of the accident or event which led to the injury or
merely contributory to his own injury
CULPA CONTRACTUAL CULPA AQUILIANA • Courts may also equitably mitigate damages in the following
instances:
As to the relationship of the negligence of the defendant 1. Plaintiff himself contravened the terms of contract;
Negligence is merely an Negligence is substantive and 2. Plaintiff has derived some benefit as a result of contract;
incident in the performance of independent 3. In cases where exemplary damages are to be awarded,
an obligation where the defendant acted upon the advice of counsel;
4. Where the loss would have resulted in any event; and
As to the relationship of the parties 5. Where upon the filing of action, defendant has done his
best to lessen the plaintiff’s loss or injury
There is always a pre-existing May or may not be a pre-
contractual relation existing contractual relation • Every debtor who fails in the performance of his obligations is
bound to indemnify the creditor for the damages caused thereby
As to source of obligation
The breach or nonfulfillment Defendant’s negligent act or ART. 1174

of the contract omission itself • FORTUITOUS EVENT is an event which could not be foreseen,
or which, though foreseen, was inevitable
As to proof required for recovery - Unforeseeability or inevitability
- Comprehends “ACTS OF GOD” or those which are
Proof of existence of contract Negligence of the defendant absolutely independent of human intervention
a n d o f i t s b r e a c h o r must be proved - Broad enough to include force majeure or events which arise
nonfulfillment is sufficient from legitimate or illegitimate acts of persons other than the
prima facie to warrant a obligor, such as commotions, riots, wars, robbery, and
recovery similar acts

• Fortuitous events may be produced (1) by nature and (2) by the
act of man • Instances where a person is still civilly liable for failure to
comply with his obligation although he was prevented from
• Classification of fortuitous events doing to by a fortuitous event:
1. As to whether there is human intervention or not 1. When by law, debtor is liable even for fortuitous events;
a. Fortuitous event proper (act of God) - 2. When by stipulation of the parties, debtor is liable even
absolutely independent of human intervention for fortuitous events;
b. Force majeure (fuerza mayor) - arises from 3. When nature of the obligation requires the assumption of
legitimate or illegitimate acts of persons other risk;
than the obligor 4. When object of the obligation is lost and the loss is due
2. As to foreseeability partly to the fault of the debtor;
a. Ordinary fortuitous event - event which usually 5. When object of the obligation is lost and the loss occurs
happens or which could have been reasonably after the debtor has incurred in delay;
foreseen 6. When the debtor promised to deliver the same thing to
b. Extraordinary fortuitous event - event which two or more persons who do not have the same interest;
does not usually happen and which could not 7. When the obligation to deliver arises from a criminal
have been reasonably foreseen offense; and
8. When obligation is generic
• If obligor is unable to comply with his obligation by reason of
fortuitous event
- GR: EXEMPTED FROM ANY LIABILITY ART. 1175
WHATSOEVER; the obligation is extinguished • USURY refers to contracting for or receiving something in
• In order that a fortuitous event may exempt a person from excess of the amount allowed by law for the loan or forbearance
liability, it is necessary that he be free from any previous of money, goods or chattels
negligence or misconduct by reason of which the loss may have • Usury Law (Act No. 2655) and its amendments
been occasioned
• When a person’s negligence concurs with an act of God in
producing damage or injury to another, such person is not ART. 1176
exempt from liability by showing that the proximate cause of the • Extinguishment of interests and prior installments
damage was a fortuitous event
• There should be no human participation amounting to a
negligent act; person seeking exoneration from liability must not ART. 1177
be guilty of negligence • Remedies of creditor to protect credit
• GR can be applied only to determinate obligations and not to 1. To exhaust the property in possession of the debtor;
generic ones 2. To be subrogated to all of the rights and actions of the
debtor save those which are inherent in his person; and
• Essential conditions in order debtor/obligor can be held liable 3. To impugn all the acts which the debtor may have done to
for fortuitous event defraud him
1. Event must be independent of the will of the obligor • Second and third remedies are SUBSIDIARY to the first
2. Event must be either unforeseeable or inevitable
3. Event must be of such a character as to render it • Principal remedy of the creditor is to EXHAUST ALL
impossible for the obligor to fulfill his obligation in a PROPERTIES IN POSSESSION OF THE DEBTOR
normal manner - In conformity with Art. 2236
4. Obligor must be free from any participation in the
aggravation of the injury resulting to the obligee or • ACCION SUBROGATORIA - law expressly grants to the
creditor creditor the right to exercise all of the rights and bring all of the
• THERE MUST BE ENTIRE EXCLUSION OF HUMAN actions which the debtor may have against third persons
AGENCY - Conditions:
- If the loss or destruction of the object of the obligation was 1. Debtor to whom the right or action properly pertains
caused by an act of God, with negligence of the obligor/ must be indebted to the creditor;
debtor mingling with it as an active and cooperative cause, 2. Creditor must be prejudiced by the inaction or
such obligor/debtor is still responsible failure of the debtor to proceed against the third
• In order to relieve such obligor or debtor of any liability, the act person;
of God or fortuitous event must not only be the proximate cause 3. Creditor must have first pursued or exhausted all of
of the loss or destruction, but that it must be the SOLE CAUSE the properties of the debtor which are not exempted
from execution
• EXCPNS - Obligor/debtor is still held liable despite the - Creditor merely acts in the name and for the account of the
occurrence of a fortuitous event: debtor after exhausting all of the assets of the latter
1. Liability is expressly specified by law (ex. Arts. 552, par. - Rights which are purely personal CANNOT be included
2; 1165, par. 3; 1268; 1942; 1979; 2147; 2148; and 2159 within the scope of this remedy
NCC);
2. Declared by stipulation of the parties; and • ACCION PAULIANA - right available to the creditor by virtue
3. Nature of the obligation requires the assumption of risk of which he can secure the rescission of any act of the debtor
• If obligor enters into an obligation which by its very nature which is in fraud and to the prejudice of his rights as a creditor
involves the assumption of risks, he shall be liable to the obligee - It is subsidiary in character
for breach even in case of fortuitous events - It can only be availed of in the absence of any other legal
- Obligations arising from insurance contracts and workmen’s remedy to obtain reparation for the injury
compensation acts
ART. 1178
• GR: Rights of obligations or rights acquired by virtue of an
obligation are TRANSMISSIBLE in character
• EXCPNS:
1. Not transmissible by their nature;
2. Where there is a stipulation of the parties that they are not
transmissible; and
3. Not transmissible by operation of law

CHAPTER 3 - The juridical relation which is established as a result of the
DIFFERENT KINDS OF OBLIGATIONS obligation is subject to the threat of extinction
- Obligation is immediately demandable after its
Section 1. — Pure and Conditional Obligations establishment but the rights are always subject to the
THREAT OR DANGER OF EXTINCTION
ART. 1179 - ART. 1180
• P U R E O B L I G AT I O N i s o n e w h o s e e ff e c t i v i t y o r
extinguishment DOES NOT depend upon the fulfillment or ART. 1182
nonfulfillment of a condition or upon the expiration of a term or • Potestative condition whose fulfillment depends exclusively
period upon the will of the CREDITOR - condition and obligation are
- Characterized by the quality of immediate demandability VALID
• Postestative condition whose fulfillment depends exclusively
• CONDITION is a future and uncertain fact or event upon which upon the will of the DEBTOR - condition and obligation are
an obligation is subordinated or made to depend VOID
• CONDITIONAL OBLIGATION is one whose effectivity is • If the condition is resolutory and at the same time potestative,
subordinated to the fulfillment or nonfulfillment of a future and the obligation and condition are valid even though the
uncertain fact or event fulfillment of the condition is made to depend upon the sole will
- EVENT MUST BOTH BE FUTURE AND UNCERTAIN of the debtor
• If proof or uncertainment of the fact or event will surely come to • The rule that the conditional obligation shall be void is
pass, although it may be unknown when - it constitutes a term or applicable only to an obligation which depends for its perfection
period upon a condition which is potestative to the debtor and not to a
• If past event is unknown to the parties as well as to the whole pre-existing obligation
world, so that the proof of ascertainment thereof may or may not
happen or come to pass - it constitutes a condition
ART. 1183
• Classification of conditions: • Impossible conditions ANNUL the obligation which depends
1. Suspensive - fulfillment of the condition results in the upon them
acquisition of rights arising out of the obligation - However, if the obligation is a pre-existing obligation and
2. Resolutory - fulfillment of the condition results in the does not depend upon the fulfillment of the condition for its
extinguishment of rights arising our of the obligation perfection, only the condition is void
3. Postestative - fulfillment of the condition depends upon • If an impossible condition is attached to a donation or
the will of a party to the obligation testamentary disposition, the condition is considered not
4. Casual - fulfillment of the condition depends upon imposed and the donation or testamentary disposition itself is
chance and/or the will of a third person valid
5. Mixed - fulfillment of the condition depends partly upon
the will of a party to the obligation and partly upon
chance and/or the will of third person ART. 1184 - ART. 1185
6. Possible - condition is capable of realization according to • Intention of the parties, taking into consideration the nature of
nature, law, public policy or good customs the obligation, shall govern if no time has been fixed for the
7. Impossible - condition is not capable of realization fulfillment of the condition
according to nature, law, public policy or good customs
8. Positive - condition involves performance of an act
9. Negative - condition involves omission of an act ART. 1186
10. Divisible - condition is susceptible of partial realization • DOCTRINE OF CONSTRUCTIVE FULFILLMENT OF
11. Indivisible - condition is not susceptible of partial SUSPENSIVE CONDITIONS
realization - Requisites:
12. Conjunctive - there are several conditions, all of which 1. Necessary that obligor must have actually prevented
must be realized the obligee from complying with the condition
13. Alternative - there are several conditions, but only one 2. Prevention must have been voluntary or willful in
must be realized character
14. Express - condition is stated expressly - Can be applied only to SUSPENSIVE CONDITIONS
15. Implied - condition is tacit
ART. 1187 - ART. 1188

ART. 1181 • In suspensive conditions, obligee/creditor has an expectant right
• SUSPENSIVE CONDITION (condition precedent) - future and to the eventual fulfillment of the obligation that the law accords
uncertain event upon the happening or fulfillment of which to him the right to avail of all remedies for the protection or
rights arising out of the obligation are acquired preservation of such right
- Obligation shall become effective only upon the fulfillment • Once the event which constitutes the condition is fulfilled, the
of the condition obligation arises or becomes effective and demandable
- What is acquired upon the constitution of the obligation is - Its effects must logically RETROACT to the moment when
only a MERE HOPE or EXPECTANCY which is protected the essential elements which gave birth to the obligation
by the law have taken place
- Principle of Retroactivity can only apply to consensual
• RESOLUTORY CONDITION (condition subsequent) - future contracts
and uncertain event upon the happening or fulfillment of which
rights which are already acquired by virtue of obligation are
extinguished or lost ART. 1189
• Rules only refer to conditional obligations to give a determinate • Even after the injured party has chosen fulfillment and such
thing fulfillment should become impossible, he can still ask the
rescission or resolution of the obligation
ART. 1190 • Contract of lease is governed by Art. 1659 where the courts have
• Right which is recognized in par. 1, Art. 1188 is also available to no discretionary power
the debtor in obligations with a resolutory condition
• If resolutory condition is not fulfilled, such rights are • Rescission of a contract can no longer be demanded when he
consolidated; they become absolute in character who demands it is no longer in a position to return whatever he
• If it is fulfilled, the rights are extinguished; there is a return to a may be obliged to restore; neither can it be demanded when the
status quo thing which is the object of the contract is already legally in the
• When a party to the obligation is obliged to return whatever he possession of a third person who did not act in bad faith
may have received including the fruits thereof by reason of the - The only remedy of the injured party is to proceed against
fulfillment of the condition, he has the right to demand the party responsible for the transfer or conveyance for
reimbursement for all expenses which he may have incurred in damages
production, gathering and preservation of the said fruits - If third person acquired it in bad faith, injured party can still
go after the property; if it cannot be recovered, the remedy is
to proceed against the third person who had acted in bad
ART. 1191 faith for damages
• In contract of sale, obligation of the vendee to pay the price is a
correlative of the obligation of the vendor to deliver the thing
sold ART. 1192
• Although reciprocal obligations are bilateral in character, they • Effect of breach by both parties
must not be confused with those obligations in which parties are
mutually, but not reciprocally obligated
Section 2. — Obligations with a Period
• GR: If one of the parties fails to comply with what is incumbent
upon him, there is a right on the part of the other to rescind the ART. 1193
obligation • TERM or PERIOD is an interval of time, which, exerting an
- Since it has the effect of extinguishing rights which are influence on an obligation as a consequence of a juridical act,
already acquired or vested, it is resolutory in character either suspends its demandability or produces its extinguishment
• Right to rescind belongs to the injured party alone • OBLIGATIONS WITH A PERIOD - those whose demandability
- However, it is essential that it must be invoked or extinguishment is subject to the expiration of a terms or
JUDICIALLY period
- Mere failure to comply with what is incumbent upon him
does not ipso jure produce the rescission or resolution of he
obligation TERM or PERIOD CONDITION
- Party must invoke judicial aid by filing the proper action for
As to requisites
rescission
- It is the judgment of the court and not the mere will of the Interval of time which is F a c t o f e v e n t w h i c h i s
vendor which produces the rescission of the contract FUTURE and CERTAIN FUTURE and UNCERTAIN
• Where the contract itself contains a resolutory provision by
virtue of which the obligation may be cancelled or extinguished As to fulfillment
by the injured party in case of breach, judicial permission to
cancel or rescind the contract is no longer necessary Interval of time which must Future and uncertain fact or
• Art. 1191 can be applied only to reciprocal contracts which necessarily come, although it event which may or may not
contain NO resolutory conditions may not be known when happen
• It CANNOT be applied to contracts of partnership where one of
the partners fails to pay the whole amount which he has bound As to influence on obligation
himself to contribute to the common fund
- Arts. 1786 and 1788 shall apply Merely exerts an influence Exerts an influence upon the
• It CANNOT be applied to sales of real property or sales of u p o n t h e T I M E O F VERY EXISTENCE of the
personal property by installments D E M A N D A B I L I T Y o r obligation itself
- Governed by Recto Law and Maceda Law EXTINGUISHMENT of an
obligation
• GR: Rescission will not be permitted for a slight or casual
breach of the contract, but only for such breaches as are As to retroactivity of effects
SUBSTANTIAL and FUNDAMENTAL as to defeat the object Does not have retroactive Has retroactive effects
of the parties in making the agreement effect unless there is an
agreement to the contrary
• Remedies of the injured party:
1. Ask for the fulfillment of the obligation with payment of As to the effect of will of debtor
damages
2. Rescission of the obligation with payment of damages When term or period is left When condition left
• Remedies are ALTERNATIVE; injured party cannot exclusively to will of debtor, exclusively to will of debtor,
seek both existence of obligation is not very existence of obligation is
affected affected

• Classification of term or period: • Potestative condition cannot be left to the will of the debtor
1. Suspensive (ex die) - obligation becomes demandable because it affects the very existence of the obligation itself
only upon the arrival of day certain • Potestative term or period can be left to the will of the debtor
2. Resolutory (in diem) - obligation is demandable at once, because its influence does not go as far as to determine the
although it is terminated upon the arrival of a day certain existence of the obligation since what is delegated to the debtor
3. Legal - granted by law is merely when the obligation shall be fulfilled
4. Conventional - stipulated by the parties - But to prevent it from being ineffective by nonfulfillment,
5. Judicial - fixed by courts the courts must fix the duration of term or period
6. Definite - date or time is known beforehand
7. Indefinite - can only be determined by an event which • Fulfillment of the obligation itself cannot be demanded until
must necessarily come to pass, although it may not be after the court has fixed the period for its compliance and such
known when period has expired
• In an action to fix duration of term or period, the following shall
• If event will necessarily happen or come to pass, although it may be alleged in the complaint:
not be known when, the event constitutes a day certain - 1. Facts showing that a contract was entered into imposing
obligation is one WITH A PERIOD on one of the parties an obligation in favor of the other;
• If uncertainty consists in whether the event will happen or come and
to pass, event constitutes a condition - obligation is 2. Facts showing that the performance of the obligation was
CONDITIONAL left to the will of the obligor, or clearly showing or from
• If term or period is suspensive - what is suspended by the term is which an inference can be reasonably drawn that a period
NOT the acquisition of the right of the effectivity of the was intended
obligation but merely its DEMANDABILITY
- Obligation itself becomes effective upon its constitution or
establishment, but once term of period expires it becomes ART. 1198
demandable • Insolvent includes any case in which it would not be possible
financially for the debtor to comply with his obligation
• In obligations with term or period a stipulation to the effect that • If guaranty or security is paired through fault of debtor, he shall
in case of a fortuitous event the contract shall be deemed lose his right to the benefit of the period
suspended during the term or period DOES NOT mean that the - If impaired without his fault, he shall retain his right
happening of the fortuitous event shall stop the running of the • If guaranty or security disappears through any cause, even
term or period without fault of debtor, he shall lose his right to benefit of the
- Effect is to relieve the contracting parties from the period
fulfillment of their respective obligations during the term or - However, debtor shall not lose his right if he gives a new
period guaranty or security which is equally satisfactory
ART. 1194 - ART. 1195 Section 3. — Alternative and Facultative Obligations

• Only applies in obligations to give
• If payment or delivery was made voluntarily or with knowledge • Characteristic feature of an ALTERNATIVE OBLIGATION is
of the period or of the fact that obligation has not yet become that various objects being due, the payment or performance of
due and demandable - NO RIGHT TO RECOVER whatsoever one of them, determined by the election which, as a GR, pertains
to obligor/debtor, is sufficient
• Characteristic feature of FACULTATIVE OBLIGATION is that
ART. 1196 only one object or prestation is due, but the obligor/debtor may
• Reasons why creditor cannot be compelled to accept payment: deliver another object or perform another prestation in
1. Payment of interest substitution
2. Creditor may want to keep his money invested safely
instead of having it in his hands
3. Under Usury Law, there is a special prohibition of ART. 1199 - ART. 1200
payment of interest in advance for more than one year • In alternative obligations, GR: right of choice belongs or
pertains to DEBTOR
- Once choice is made and communicated to the creditor, the
ART. 1197 obligation becomes simple
• Judicial term or period • EXCPNS:
• When the courts may fix term: 1. When right of choice has been expressly granted to the
1. If obligation does not fix a period, but from its nature and creditor
circumstances it can be inferred that a period was 2. When it been expressly granted to a third person
intended by the parties
2. If duration of period depends upon the will of the debtor • Limitations upon right of choice are provided in par. 2, Art. 1200
3. If debtor binds himself to pay when his means permit him
to do so
• However, mere silence of the obligation with regard to the term ART. 1201
or period for its fulfillment does not necessarily mean that the • Rule is applicable whether right of choice is exercised by debtor,
courts are empowered to fix the duration thereof or creditor or by a third person
- Cannot be applied to contracts for services in which no • No special form is required for communication or notification
period was fixed by the parties • CONSENT OR CONCURRENCE OF CREDITOR TO THE
- Cannot be applied to pure obligations CHOICE OR SELECTION MADE BY DEBTOR IS NOT
NECESSARY BEFORE THE CHOICE OR SELECTION CAN
FACULTATIVE ALTERNATIVE
PRODUCE EFFECT
- To require the creditor’s consent would destroy the very OBLIGATIONS OBLIGATIONS
nature of alternative obligations As to objects due
• Once the choice is made, the obligation ceases to be alternative
from the moment the selection has been communicated to the Only ONE object is due SEVERAL objects are due
other party
- From that moment, both debtor and creditor are bound by As to compliance
the selection
May be complied with by May be complied with by
delivery of another object or delivery of one of the objects
ART. 1202 performance of another or performance of one of the
• When only ONE prestation can be performed because all of the prestation in SUBSTITUTION prestations which are
others are impracticable, the debtor loses his right of choice of that which is due ALTERNATIVELY due
altogether
- Obligation loses its alternative character; it becomes a As to choice
SIMPLE OBLIGATION
Right of choice pertains only Right of choice may pertain
to the DEBTOR even to creditor or to a third
ART. 1200, par. 2 ART. 1202 person
There are still tow or more There is only one prestation As to effect of fortuitous loss
prestations which can be which can be performed
performed Loss or impossibility of object Loss or impossibility of all
or prestation which is due objects or prestations which
Obligation is still Obligation is converted to a without any fault of debtor is are due without any fault of
ALTERNATIVE because SIMPLE one because debtor s u ff i c i e n t t o e x t i n g u i s h debtor is necessary to
debtor can still exercise his loses his right of election obligation extinguish obligation
right of election
As to effect of culpable loss
Culpable loss of object which Culpable loss of any of the

ART. 1203 debtor may deliver in objects which are alternatively
• Since debtor’s right of choice is rendered ineffective through substitution before the due before choice is made may
creditor’s fault, his only possible recourse will be to bring an substitution is effected DOES give rise to liability on part of
action to rescind the contract with damages NOT give rise to liability on debtor
part of debtor
ART. 1204 - ART. 1205
• GR: Art. 1204; EXCPN: Art. 1205 • Art. 1201 can be applied by analogy
• Once the creditor has been notified of the substitution, obligation
• If right of choice belongs to DEBTOR and loss or impossibility ceases to be facultative; it is converted to a simple obligation to
is due to a FORTUITOUS EVENT deliver thing or perform prestation which has been substituted
- Provisions of Arts. 1174, 1262 and 1266 are applicable
- Debtor cannot be held liable for damages • BEFORE substitution is made, loss or deterioration of the thing
- Debtor must comply with obligation by delivering or intended as a substitute, through negligence of obligor, does
performing that which he shall choose from among the NOT render him liable
remainder • Once the SUBSTITUTION HAS BEEN MADE, debtor shall be
- If all things, except one, are lost, or all of the prestations, liable for the loss or destruction of the substitute on account of
except one, cannot be performed by reason of a fortuitous his delay, negligence or fraud
event, the debtor must comply with obligation by delivering
or performing that which remains
- If all things are lost or all prestations cannot be performed by Section 4. — Joint and Solidary Obligations
reason of fortuitous event, debtor is released from obligation
• If loss or impossibility is due to fault of DEBTOR • JOINT OBLIGATION (obligación mancomunada) - an
- Art. 1204 applies obligation where there is a concurrence of several creditors, or
of several debtors, or of several creditors and debtors, by virtue
• If right of choice belongs to CREDITOR and loss or of which each of the creditors has a right to demand, and each of
impossibility is due to FORTUITOUS EVENT the debtors is bound to render, compliance with his
- Arts. 1174, 1262 and 1266 apply PROPORTIONATE PART of the prestation which constitutes
- Debtor cannot be held liable the object of the obligation
• If loss or impossibility is due to fault of DEBTOR
- Nos. 2 and 3, par. 2, Art 1205 apply • SOLIDARY OBLIGATION (obligación solidaria) - an
obligation where there is a concurrence of several creditors, or
of several debtors, or of several creditors and several debtors, by
ART. 1206 virtue of which each of the creditors has a right to demand, and
• Facultative Obligations each of the debtors is bound to render, ENTIRE COMPLIANCE
with the prestation which constitutes the object of the obligation

As to requisites
ART. 1207
• GR: Presumption is that obligation is JOINT Plurality of subjects is not P l u r a l i t y o f s u b j e c t s i s
• EXCPNS: Collective obligations are SOLIDARY required indispensable
1. When obligation expressly states that there is solidarity
2. When law requires solidarity As to effect of breach
- Arts. 927, 1824, 1911, 2146, 2157 and 2194
3. When nature of the obligation requires solidarity When obligation is converted When there is liability on part
- Those arising from criminal offenses and torts into one of indemnity for of the debtors because of
damages because of breach, breach, the solidarity among
• It is not necessary that the agreement shall use the word indivisibility of the obligation the debtors remains
“solidary” in order that the obligation will be so; it is enough is terminated
that it will say that each one of them can be obligated for the
aggregate value of the obligation
- “jointly and severally”, “individually and collectively”
- Choice is left to the creditor to determine against whom he ART. 1211
will enforce collection • ACTIVE SOLIDARITY (solidarity of creditors) - tie or
vinculum existing among several creditors of one and the same
obligation by virtue of which each of them, in relation to his co-
ART. 1208 creditors, possesses the character of creditor only with respect to
• JOINT DIVISIBLE OBLIGATIONS - each creditor can demand his share in the obligation, but in relation to the common debtor/
only for the payment of his PROPORTIONATE share of the s, represents all of the other creditors
credit, while each debtor can be held liable for the payment of
- Effect is the creation of MUTUAL AGENCY among
his PROPORTIONATE share of the debt solidary creditors by virtue of which each is empowered to
• Joint creditor cannot act in representation of the others; neither exercise not only the rights which correspond to him, but
can a joint debtor be compelled to answer for the liability of the also all the rights which correspond to the other creditors
others
• If there is any defense which is purely personal to one of the • PASSIVE SOLIDARITY (solidarity of debtors) - tie or
debtors, he alone can avail of such defense vinculum existing among several debtors of one and the same
• Payment or acknowledgment by one of the joint debtors will not obligation by virtue of which each of them, in relation to his co-
stop the running of the period of prescription as to the others debtors, possesses the character of debtor only with respect to
• Principle of mutual agency is not applicable in joint obligations his share in the obligation, but in relation to the common
creditor/s, represents all of the other debtors
- Insofar as the creditor/s are concerned, each solidary debtor
ART. 1209 is the debtor of the entire amount
- However, with respect to his co-debtors, he is a debtor only
• JOINT INDIVISIBLE OBLIGATIONS
1. No creditor can act in representation of others to the extent of his share in the obligation
2. No debtor can be compelled to answer for the liability of
- Liability of each debtor is for the payment of the entire
others obligation, with consequent right to demand reimbursement
• If there are two or more DEBTORS, the fulfillment of or from the others for their corresponding shares once payment
compliance with the obligation requires the concurrence of all of has been made
the debtors, although each for his own share
- Obligation can be enforced only by proceeding against all of SOLIDARY DEBTOR SURETY
the debtors
• If there are two or more CREDITORS, the concurrence or Liable not only for the Liable for payment of debt of
collective act of all creditors, although each for his own share, is payment of debt of another another
also necessary for the enforcement of obligation but also for the payment of
debt which is properly his
• If one of the debtors fails to comply with with his undertaking, own
the obligation can no longer be fulfilled or performed
- It is converted into indemnity for damages
- However, debtors who may have been ready to fulfill or Pays the entire amount of the Pays the entire amount of the
obligation with a right to obligation with a right to
perform what is incumbent upon them shall not contribute to demand reimbursement from
the indemnity beyond the corresponding portion of the price demand reimbursement from
his co-debtors of the shares principal debtor of entire
of the thing or value of the service in which the obligation amount that he has paid
consists which correspond to them
Extension of time granted to Extension granted to principal

ART. 1210 one of the solidary debtors debtor would release the surety
w i t h o u t k n o w l e d g e o r from the obligation
INDIVISIBILITY SOLIDARITY
consent of other solidary
As to nature debtors would not have the
effect of releasing the latter
Prestation which constitutes Legal tie or vinculum and to from their obligation
the object of the obligation the subject or parties of the
obligation
• The vinculum or bond may be either uniform or varied,
depending upon whether they are bound in the same manner and
by the same conditions or periods or not - solidarity is not
destroyed • COMPENSATION - figurative operation of weighing two
obligations simultaneously in order to extinguish them to the
extent that the amount of one is covered by the amount of the
ART. 1212 other
• As far as debtor/s are concerned, a prejudicial act performed by
a solidary creditor shall be valid and binding because of the • CONFUSION - merger of the qualities of creditor and debtor in
principle of mutual representation among creditors one and the same person with respect to one and the same
• As far as solidary creditors are concerned, creditor who obligation
performed the prejudicial act shall incur the obligation of
indemnifying the others for damages • REMISSION - act of pure liberality by virtue of which the
creditor, without having received any compensation or
equivalent, renounces his right to enforce the obligation, thereby
ART. 1213 extinguishing the same either in its entirety or in the part or
• If the assignment is made to anyone of the other solidary aspect thereof to which the remission refers
creditors without the consent of the others, there is no violation - As far as the solidary debtors are concerned, effects of
because there can be no invasion of personal or confidential remission are:
relationship existing among the creditors 1. If remission covers entire obligation - obligation is
• If the assignment is made to a third person without the consent totally extinguished and entire juridical relation
of others, there would be a violation of the precept among debtors is terminated altogether
- The other solidary creditors, as well as the debtor/s, are NOT - If whole obligation is condoned through the
BOUND to recognize the validity or efficacy of assignment efforts of a solidary debtor for his benefit, he is
- This is without prejudice to liability of creditor-assignor to not entitled to any reimbursement from his co-
the other solidary creditors for damages which may have debtors
been incurrred 2. If remission is for benefit of one of the debtors and
covers his entire share in the obligation - he is
completely released from the creditor/s, but he is still
ART. 1214 bound to his co-debtors
• In case of mixed solidarity, judicial/extrajudicial demand would 3. If remission is for benefit of one of the debtors and
prohibit the debtor upon whom the demand is made from covers only a part of his share in the obligation, his
making a payment to any creditor other than the one who made character as solidary debtor is not affected; continues
the demand both with respect to the creditor/s and with respect to
- Prohibition does not extend to other debtors upon whom no other debtors
demand has been made and so each of such debtors can still • Whether remission covers entire share of a solidary debtor in the
validly tender payment to a creditor other than to creditor obligation or only a part thereof, the creditor/s proceed against
who made the demand any one of the other solidary debtors for the payment of the
entire obligation, such debtor can always avails himself of the
defense of PARTIAL REMISSION
ART. 1215 • Above rules cannot be applied in case the debt had already been
• NOVATION - change or substitution of an obligation by another, totally paid by anyone of the solidary debtors before remission
resulting in extinguishment or modification, either by: was effected
a. Changing its object or principal condition, or - Otherwise, there would always be the possibility that the
b. By substituting another in place of debtor, or creditor might fraudulently condone the share of a solidary
c. By subrogating a third person in the rights of creditor debtor whom he desires to favor even after the debt had
- While it extinguishes the obligation, it creates a new one in already been totally paid by another solidary debtor
lieu of the old
- If novation is effected by changing object or principal • If one of solidary creditors is able to collect entire amount of
condition, new obligation is: debt from one or some or all of the solidary debtors, the
1. Prejudicial - solidary creditor who effected novation obligation is totally extinguished, although there arises a
shall reimburse the others for damages incurred by consequent obligation on his part to render an account to his co-
them creditors
2. Beneficial - creditor who effected novation is able to - He can be held liable to the others for the share in the
secure performance of new obligation, such creditor obligation corresponding to them
shall be liable to others for the share which
corresponds to them, not only in the obligation, but
also in the benefits ART. 1216
- If novation is effected by substituting another person in • Creditor’s right to proceed against the surety exists
place of the debtor, solidary creditor who effected the independently of his right to proceed against the principal
novation is liable for the acts of the new debtor in case there - As a rule, the creditor has the right to proceed even against
is a deficiency in performance or in case damages are the surety alone; it is not necessary for a creditor to proceed
incurred by other solidary creditors as a result of substitution against a principal in order to hold the surety liable
- If novation is effected by subrogating a third person in the - Surety is primarily liable and his remedy is to pay the debt
rights of the solidary creditor responsible for the novation, and pursue the principal for reimbursement
obligation of debtor or creditors is not in reality extinguished - Surety is bound equally and absolutely with the principal
- If effected by subrogating a third person in rights of all and is deemed an original promissor and debtor from the
solidary creditors, the creditor responsible for such novation beginning
is liable to other creditors for the share which corresponds to - Surety is not even entitled as a matter of right to be given
them in the obligation notice of the principal’s default; demand in the surety is not
necessary before bringing suit against them since the • INDIVISIBLE OBLIGATIONS - those which have as their
commencement of the suit is a sufficient demand object a prestation which is not susceptible of partial
- Surety is bound to tale notice of principal’s default and to performance, because, otherwise, the essence of the obligation
perform the obligation will be changed
- Suretyship is a direct contract to pay the debt of another
- Surety’s obligation is not an original and direct one for the • A thing is INDIVISIBLE - if separated into parts, its essence is
performance of his own act, but merely accessory or changed or its value is decreased disproportionately
collateral to the obligation contracted by the principal • A thing is DIVISIBLE - if separated into parts, its essence is not
- Liability of surety to the creditor or promisee of the principal changed or its value is not decreased proportionately, because
is direct, primary and absolute each of the parts into which it is divided are homogenous and
- Death or either the creditor or debtor does not extinguish the analogous to each other as well as to the thing itself
obligation - It must be possible to reconstruct the thing itself into its
- Only obligations that are personal or are identified with the condition prior to the division
persons themselves are extinguished by death - Kinds of division:
1. Quantitative - thing can be materially divided into
parts and such parts are homogenous to each other
ART. 1217 2. Qualitative - thing can be materially divided, but the
• As a rule, interest shall be computed from the time payment was parts are not exactly homogenous; ex. partition of
made inheritance
• If payment was made before debt became due, no interest during 3. Ideal or intellectual - thing can only be separated
intervening period may be demanded into ideal or undivided parts, not material parts, as in
- Interest shall be computed from the time the debt became the case of co-ownership
due, not from the time payment was made
• Before payment is actually made, the right of the solidary debtor
to demand reimbursement from his co-debtors is merely ART. 1223 - ART. 1224
contingent and conditional • GR: Creditor cannot be compelled partially to receive prestation
- Once payment has already been made, the right becomes in which the obligation consists; neither may the debtor be
real and existing required to make partial payments
• EXCPNS:
1. When obligation expressly stipulates the contrary
ART. 1219 - ART. 1221 2. When different prestations constituting the objects of the
• Effect of loss or impossibility of performance obligation are subject to different terms and conditions
1. If loss of the thing or impossibility of complying with the 3. When obligation is in part liquidated and in part
prestation is not due to the fault of the solidary debtors - unliquidated
obligation is EXTINGUISHED
2. If loss or impossibility is due to fault of one of the • Where there is plurality of debtors and creditors, the effect of
solidary debtors - obligation is converted to an obligation divisible or indivisible character of the obligation shall depend
of indemnity for damages, but solidary character of upon whether the obligation is joint or solidary
obligation remains
- Creditor can still proceed against one, or some, or all • Breach of joint indivisible obligations - the debtor who failed to
of the debtors for the payment of the price, plus comply with his obligation shall bear the burden of paying all of
damages the damages suffered by the creditor/s as a result of the
- It is without prejudice to subsequent right of action of nonfulfillment of the obligation
debtor/s who paid to proceed against the guilty or
negligent debtor for reimbursement
3. If loss or impossibility is due fortuitous event after one of ART. 1225
the debtors had already incurred in delay - obligation is • True test of divisibility: Whether the obligation is susceptible of
converted into an obligation of indemnity for damages, partial compliance or not
but solidary character of obligation remains • The purpose of the obligation is the controlling circumstance
• If the obligation to give something which is definite or which by
its very nature is indivisible, it is evident that it is not susceptible
ART. 1222 of partial compliance - deemed to be INDIVISIBLE
• Defenses available to solidary debtor • If obligation to give something which by its nature is divisible,
1. Defenses derived from very nature of the obligation GR is that the obligation is also DIVISIBLE since it is
- Ex. payment or performance, res judicata, prescription susceptible of partial compliance
2. Defenses personal to him or pertaining to his own share - Rule is not absolute because even though the object may be
- Ex. minority, insanity physically indivisible, the obligation is considered divisible
3. Defenses personal to the others, but only as regards that if it is so provided by law or si intended by the parties
part of the debt for which the latter are responsible • Intention may be:
- Ex. merely a partial defense 1. Express
2. Implied - (1) from the fact that although the
object of the obligation can be separated into
Section 5. — Divisible and Indivisible Obligations parts, yet each part constitutes a necessary
complement of the other parts; or (2) from the
• DIVISIBLE OBLIGATIONS - those which have as their object very purpose of the obligation itself which
a prestation which is susceptible of partial performance without requires the delivery of all the parts
the essence of obligation being changed

• In obligations to do, if it is not susceptible of partial • GR: Penalty is fixed by the contracting parties as a
performance, it shall be deemed INDIVISIBLE compensation or substitute for damages in case of breach
• If the obligation to do is susceptible of partial performance, GR • EXCPN: Penalty in its strictly penal aspect
is that it is DIVISIBLE
- In determining whether an obligation to do is divisible or • EXCPNS to the rule that penalty shall substitute the indemnity
indivisible, OBJECT or PURPOSE of the obligation must for damages and payment of interest in case of noncompliance
always be considered of principal obligation
- Obligation shall be considered DIVISIBLE when it has for 1. When there is a stipulation to the contrary
its object: 2. When obligor is sued for refusal to pay agreed penalty
1. Execution of a certain number of days of work; or 3. When obligor is guilty of fraud
2. Accomplishment of work by metric units; or - In these cases, purpose of the penalty is to punish the obligor
3. Accomplishment of analogous things which by their - Obligee can recover not only the penalty but also damages
nature are susceptible of partial performance or interests resulting from breach
- It may still be considered indivisible if so provided by the
law or so intended by the parties • Upon the breach or nonfulfillment of obligation, the penalty
stipulated becomes demandable, provided it is not contrary to
• The determination of the character of the obligation NOT TO law, morals, good customs, public order or public policy
DO will depend upon the sound discretion of the court • Where both parties are unable to comply with their respective
obligations, although breach is not willful or culpable, such as a
fortuitous event, the penal clause CANNOT be invoked by
Section 6. — Obligations with a Penal Clause anyone of them to the prejudice of the other
• OBLIGATION WITH A PENAL CLAUSE - one to which an

accessory undertaking is attached for the purpose of insuring its ART. 1227
performance by virtue of which the obligor is bound to pay a • If there was fault on the part of debtor, creditor may demand not
stipulated indemnity or perform a stipulated prestation in case of only satisfaction of penalty, but also payment of damages
breach • If creditor chooses to demand satisfaction of penalty, he cannot
afterwards demand fulfillment of the obligation
• Penal clause or penalty has a three-fold purpose: • In order that debtor can exempt himself from performance of
1. Función coercitiva o de garantia - to insure performance obligation by paying penalty, the right must be EXPRESSLY
of obligation; RESERVED for him
2. Función liquidatoria - to liquidate the amount of • In order that creditor can demand fulfillment of obligation and
damages to be awarded to injured party in case of breach satisfaction of penalty at the same time, the right must be
of the principal obligation; and CLEARLY GRANTED to him
3. Función estricamente penal - in certain exceptional
cases, to punish the obligor in case of breach of the
principal obligation ART. 1228
• Applicable only if the penalty is compensatory in character
• Kinds of penalty: • In this sense, penalty is identical with “liquidated damages”
1. As to origin • If the aspect of penalty is punitive, creditor must prove amount
a. Legal - constituted by law of damages actually suffered
b. Conventional - constituted by agreement of parties
2. As to purpose
a. Compensatory - established for the purpose of ART. 1229
indemnifying the damages suffered by the obligee or • When penalty may be reduced:
creditor in case of breach of obligation 1. If principal obligation has been partly complied with
b. Punitive - established for purpose of punishing the - Contemplates a case where not all of the prestations
obligor or debtor in case of breach of obligation are complied with
3. As to effect 2. If principal obligation has been irregularly complied with
a. Subsidiary - only the penalty may be demanded in - Contemplates a case where all of the prestations are
case of breach of obligation complied with but not in accordance with the tenor of
b. Joint - injured party may demand the enforcement of the agreement
both penalty and principal obligation 3. If penalty is iniquitous or unconscionable even if there
has been no performance
- Contemplates a case where the only question raised is
ART. 1226 whether the amount of the stipulated penalty is
• Penal clause considered as reparation or compensation - question reasonable or unconscionable
of damages is resolved once and for all, since the stipulated • It has been held that the amount stipulated by the parties may be
indemnity or prestation represents a legitimate estimate made by reduced by the courts even if it is not contrary to law, morals,
the contracting parties good customs, public order or public policy, provided it is
- Proof of actual damages is not necessary in order that unreasonable or unconscionable
stipulated penalty may be demanded
• Penal clause considered as punishment - question of damages is • Stipulated penalty can be deleted by the court:
not yet resolved; right to damages, besides the penalty subsists 1. Where there ha been substantial performance in GF by
- Party must prove such damages if he desires to recover the the obligor
same 2. When penalty clause suffers from fatal infirmity
3. When exceptional circumstances warrant it

ART. 1230
• Penalty is merely an accessory obligation
• Efficacy of the principal obligation does not depend upon
efficacy of penal clause

CHAPTER 4 • GR: Creditor is not bound to accept payment or performance by
EXTINGUISHMENT OF OBLIGATIONS a third person
• EXCPNS:
General Provisions 1. When made by a third person who has an interest in the
fulfillment of the obligation, such as joint debtor,
ART. 1231 guarantor or surety
• Enumeration is not exclusive 2. Where there is a stipulation to the contrary - creditor is
• Other modes of extinguishing obligations: deemed to have waived his right to refuse to deal with
1. Renunciation or waiver by obligee/creditor strangers to the obligation
2. Compromise
3. Expiration of resolutory term or period • Rights of a third person who pays the obligation with knowledge
4. Death of one of contracting parties in purely personal and consent of the debtor
obligations 1. He can recover from debtor the entire amount which he
5. Will of one of the contracting parties in certain contracts has paid
6. Agreement of both contracting parties or mutual assent or 2. He is subrogated to all of the rights of the creditor
dissent • Right of a third person who pays without knowledge or against
the will of the debtor
1. He can only recover insofar as the payment has been
Section 1. — Payment or Performance beneficial to the said debtor
ART. 1232 • Whether payment was made with knowledge and consent of
• Concept of payment or performance debtor or without his knowledge or even against his will - third
1. Broadest sense - consists in the fulfillment of the person who made payment is entitled to REIMBURSEMENT
obligation either voluntarily or involuntarily, including its - If made with knowledge or consent of debtor
extinguishment by any means or mode whatsoever • Third person can recover from latter the entire amount
2. Limited sense - consists in the normal and voluntary which he has been paid
fulfillment of the obligation by realization of the - If made without knowledge or against the will of debtor
purposes for which it was constituted • Third person can recover only insofar as payment has
- Adopted concept by the NCC been beneficial to the debtor
3. More limited sense - consists in the fulfillment of • If debt or obligation has been previously extinguished
obligation by delivery of a sum of money totally, third person who pays without knowledge or
consent of debtor would not be able to recover
anything from the latter
ART. 1233 - ART. 1235 • If debt or obligation has been previously extinguished
• Obligation to give understood to have been paid - when debtor/ partially, third person can would be able to recover
obligor has completely delivered the thing which he had only that part of amount which he has paid which
obligated himself to deliver would correspond to the part of the obligation which
• Obligation to do understood to have been performed - when has not been extinguished
obligor completely rendered service which he has obligated - In both cases, remedy of third person would be
himself to render to proceed, not against debtor who has not been
• Obligation not to do understood to have been complied with - benefited by the payment, but against the
when obligor has completely refrained from doing that which he CREDITOR who was unduly paid applying
had obligated himself not to do principle that no person can unjustly enrich
himself at the expense of another
• EXCPNS: - In order that rights of payor may be subject to said
1. When obligation has been substantially performed in GF limitation, debtor must oppose payment before or at the time
- obligee is benefited; obligor should be allowed to the same was made, and not subsequent thereto
recover as if there has been a strict and complete
fulfillment, less damages suffered by obligee • If payment was effected with knowledge and consent of the
2. When obligee accepts performance, knowing its debtor, the third person who made the payment shall be
incompleteness or irregularity, and without expressing SUBROGATED to all of the rights which the creditor could
any protest or objection - based on principle of estoppel have exercised, not only against the debtor, but even against
3. When obligation to give, to do or not to do is converted third persons
into an obligation to indemnify the obligee/creditor • Right of subrogation is not the same as right of reimbursement
because of breach or nonfulfillment and indemnity is
finally paid in full
SUBROGATION REIMBURSEMENT
Right available to third person Merely a simple personal
ART. 1236 - ART. 1238 or payor, whereby he is action available to third person
• Persons who may pay obligation: entitled, not only to demand or payor against debtor to
1. Debtor himself or his legal representative reimbursement from debtor, recover from the latter what he
2. Any third person but also to exercise all of the has paid insofar as the
- Arts. 1236 to 1237
- Rules cannot be applied to a third person who pays the rights which the creditor could payment has been beneficial to
have exercised against the said debtor
redemption price in sales with right of repurchase debtor and against third
(pacto de retro) because the vendor a retro is not a persons
debtor within the meaning of the law

• In gratuitous payments, if debtor’s consent is not secured, rules - Remedy of the creditor would be to proceed against the
in Arts. 1236 and 1237 will still apply possessor of credit to whom payment was improperly made
• As far as creditor who has accepted payment is concerned, • Applicable only to obligations to give
debtor’s consent is immaterial; payment is valid in any case
ART. 1243
ART. 1239 • After debtor has received notice of attachment or garnishment,
• Person who pays should have the necessary legal capacity to payment can no longer be made to the creditor whose credit has
effect such payment been attached
1. Free disposal of thing due
2. Capacity to alienate it
- Absence of one or the other will affect the validity of ART. 1244 - ART. 1246
payment • Creditor/ obligee cannot be compelled to accept delivery of a
different thing or substitution of the act or forbearance
• If payment was made by a minor or an insane person, payment is - If he accepts, such acceptance shall give the delivery or
not valid substitution the same effect as a fulfillment or performance
• If an incapacitated person offers to pay the obligation and of the obligation
creditor refuses to accept payment because he is aware of
payor’s incapacity, the obligation still subsists • DATION IN PAYMENT (dación en pago) - if creditor and
- Consignation of thing due is not possible debtor enter into an agreement by virtue of which a certain
property is alienated by the debtor to the creditor as equivalent
of performance of the obligation
ART. 1240 - Transmission of ownership of a thing by the debtor to the
• GR: Payment must be made to: creditor as an accepted equivalent of the performance of the
1. Person in whose favor the obligation was constituted, or obligation
2. His successor in interest, or - There is in reality an objective novation
3. Any person authorized to receive it - Law on sales shall govern
- Refers to person authorized by creditor and also a
person authorized by law • If object is generic, the obligation can only be fulfilled by the
• Includes not only the person who was creditor at the time of delivery of a thing which is neither of superior not inferior
constitution of obligation, but also the person who is creditor at quality
the time of payment
• EXCPNS
1. Payment made to a third person, provided that it has ART. 1247
redounded to the benefit of the creditor • Add the supplementary rule stated in par. 4, Art. 1251 that if
2. Payment made to possessor of credit, provided that it was debtor changes domicile in BF or after he has incurred in delay,
made in good faith additional expenses shall be borne by him
• If payment is made to a person other than those enumerated in

this article, it shall NOT BE VALID ART. 1248
• GR: In order that prestation which is the object of obligation
may be considered paid or performed, the following conditions
ART. 1241 must concur:
• Payment is beneficial to the incapacitated person when that 1. Identity - only the prestation agreed upon and no other
which has been paid or delivered is applied or spent for some must be complied with
rational, necessary or useful purpose for this benefit 2. Completeness - thing or service in which the obligation
- Otherwise, payment is not valid and debtor may be made to consists must be completely delivered or rendered
pay again either at the instance of the incapacitated person 3. Indivisibility - payment or performance must be
upon recovering or acquiring capacity or at the instance of indivisible
the legal representative of such person during such
incapacity • Art. is applicable only to an obligation where there is only ONE
• Rule is applicable only to obligations to give debtor and ONE creditor; neither is it applicable to one where
different prestations are subject to different terms and conditions
• If payment is made to a third person, the rule is that it shall be
valid insofar as it has redounded to the benefit of the creditor • EXCPNS:
- The rule cannot be invoked without conclusive proof of the 1. Obligation expressly stipulates the contrary
benefit to the creditor; it cannot be presumed except in three 2. Different prestations which constitute the objects of the
cases specified in par. 2, Art. 1241 obligation are subject to different terms and conditions
3. Obligation is in part liquidated and in part unliquidated
ART. 1242
• Applied to the payment made to the original creditor by a debtor ART. 1249
who is not aware of the fact that the credit has already been • If there is no stipulation regarding currency in which payment
assigned to another person shall be made, payment shall still be made in legal tender of the
• May also be applied to payment made to an assignee, although Ph
the assignment is afterwards rescinded or annulled. • Since negotiable papers or mercantile documents are not legal
• Indispensable that payment should have been made in GF; if tender, delivery of such papers or documents shall not produce
present, it shall release the debtor the effect of payment
• If debtor tenders a check to the creditor as payment of - EXCPNS:
obligation, the latter has a perfectly valid right to refuse it, even a. When there is a stipulation to the
it the check may be good; the tender shall not produce the effect contrary
of payment b. Application of payment is made by the
- EXCPNS: party for whose benefit the term or
1. When the document has been cashed - applicable to period has been constituted; in relation
a negotiable paper or document executed by either a to Art. 1196
third person or the debtor himself and delivered by 4. Amount paid by debtor must not be sufficient to
said debtor to the creditor cover the total amount of all debts
2. When it had been impaired through the fault of the - Indispensable because, otherwise, there would
creditor - applicable only to a paper or document be no necessity of designating the debt/s to
executed by a third person and delivered by debtor to which the payment shall be applied
the creditor
• The right to make the designation of payment primarily belongs
to the debtor; such right is available to him ONLY at the time
ART. 1250 when the PAYMENT IS MADE
• EXTRAORDINARY INFLATION or DEFLATION - that which - If he does not exercise such right, the same is extinguished
is unusual or beyond the common fluctuation in value of the and the application will be governed by Art. 1254, UNLESS
currency, which the parties could not have reasonably foreseen the creditor, in the meantime, makes the application by
or which was manifestly beyond their contemplation at the time giving to the debtor, who accepts it, a receipt in which
when the obligation was established application of payment is made
• Rule is applicable only to CONTRACTUAL OBLIGATIONS; • In which case, the debtor cannot complain of the same,
cannot be applied to obligations arising from torts unless there is a cause for invalidating the contract
• Courts are given latitude in fixing the amount to be paid with the • Debtor may either accept or reject the application made
value of the currency at the time when obligation was by the creditor; but once the receipt is accepted, the
established as basis, unless there is an agreement to the contrary application of payment made can no longer be
impugned, unless there is a cause
• What the creditor merely does is to propose the
ART. 1251 application subject to the express or tacit approval of
• If there is no express designation in the obligation with respect said debtor
to place where payment shall be made, following rules are • While the debtor decides for himself, the creditor only
applicable: proposes to the debtor who may or may not agree
1. If obligation is to deliver a determinate thing, payment
shall be made at the PLACE WHERE THING MIGHT
BE at the time the obligation was constituted ART. 1253
2. In any other case, payment shall be made at the • SC held that the provision applies only in absence of verbal or
DOMICILE OF DEBTOR written agreement to the contrary; it is merely directory
- Rule is intended to govern unilateral obligations
- Reciprocal obligations are governed by special rules
ART. 1254
• When debts are not of the same burden, the following rules may
Subsection 1. — Application of Payment be stated:
1. Where there are various debts which are due and were
ART. 1252 incurred at different dates - OLDEST are more onerous
• APPLICATION OF PAYMENT - designation of debt to which 2. Where one debt bears interest and the other does not,
payment must be applied when the debtor has several even if the latter was incurred at an earlier date - FIRST
obligations of the same kind in favor of the same creditor is more onerous
- Requisites - As between two debts which bear interest - debt with
1. There must be only one debtor and one creditor HIGHER RATE of interest is more onerous
- Does not militate against possibility of 3. Where one debt is secured and the other is not - FIRST is
extending rules on application of payment to more onerous
solidary obligations 4. Where debtor is bound as principal in one obligation and
- Neither does the requirement militate against as guarantor or surety in another - FORMER is more
extending the rules on application of payment to onerous
a case in which a person is indebted at the same 5. When debtor is bound as a solidary debtor in one
time in separate and demandable sums to a obligation and as the sole debtor in another - FORMER is
partnership and to the managing partner of the more onerous
partnership 6. WIthin a solidary obligation - share which corresponds to
2. There must be two or more debts of the same kind a solidary debtor would be more onerous
- Cannot apply to guarantor or surety whose 7. Where one obligation is for indemnity and the other is by
liability is extended or confined only to a way of penalty - FORMER is more onerous
particular obligation 8. Where one debt is liquidated and the other is not -
- Payments made by a guarantor or surety cannot FORMER is more onerous
be applied to those obligations for which he is
not responsible either subsidiarily or solidarily • When debts are of the same nature and burden - payment shall
- Each of the debt must be of identical or be applied to ALL of them pro rata or proportionately
homogenous species
3. All of the debts must be due
Subsection 2. — Payment by Cession
• Tender of payment, even if valid, does not by itself produce
ART. 1255 legal payment, unless it is completed by consignation; tender of
• CESSION or ASSIGNMENt - special form of payment whereby payment alone is not a mode of extinguishing obligation
the debtor abandons all of his property for the benefit of his • Valid tender of payment has the effect of exempting debtor from
creditors in order that from the proceeds thereof the latter may payment of interest and/or damages
obtain payment of their credits
- Requisites: • General requisites of valid consignation - Arts. 1232 - 1251
1. Plurality of debts • Since it is a special form of payment, it must conform not only
2. Partial or relative insolvency of debtor with all of special requirements prescribed by law, but also with
3. Acceptance of cession by creditors all of the requisites of valid payment
- Payment by cession may either be contractual or judicial
• In order that consignation shall produce the effects of payment,
it is essential that certain special requirements must be complied
PAYMENT BY CESSION DATION IN PAYMENT with; the debtor must show:
As to number of parties 1. There is a debt due
2. Consignation has been made either because creditor to
Plurality of creditors is There may be only one whom tender of payment was made refused to accept the
essential creditor payment without just cause, or because any of the causes
stated by law for effective consignation without previous
As to financial condition of parties tender of payment exists
- GR: There must have been a tender of payment made
Debtor is in state of partial or Debtor is not necessarily in by debtor to creditor
relative insolvency state of financial difficulty a. Tender of payment must have been made prior
to consignation
As to object b. It must have been unconditional
c. Creditor refused to accept payment without just
What is ceded by debtor is What is delivered by debtor is cause
universality of all his property m e r e l y a t h i n g t o b e - EXCPNS:
considered as the equivalent of a. Creditor is absent or unknown, or does not
performance of obligation appear at the place of payment
b. He is incapacitated to receive payment at the
As to effect time it is due
Merely to release debtor for P a y m e n t e x t i n g u i s h e s c. When, without just cause, he refuses to give a
net proceeds of the things obligation to the extent of the receipt
ceded or assigned value of the thing delivered d. When two or more persons claim the right to
wither as agreed upon or as collect
may be proved, unless parties e. When title of the obligation has been lost
consider it as the equivalent of 3. Previous notice of consignation had been given to the
the performance of the persons interested in the fulfillment of the obligation
- PREVIOUS NOTICE is a formal act manifested not
obligation
only to the creditor, but also to other persons
interested in the fulfillment of obligation directly
• Extinguishment of his obligation will only be partial announcing the consignation which will be made as a
• Assignment does not transfer the ownership of things or objects result of unjust refusal of creditor to accept payment
to creditors 4. Thing or amount due had been placed at the disposal of
- What is transmitted is only the possession of such things or judicial authority
objects including their administration - Deposit with the clerk of court
5. After consignation had been made, persons interested in
fulfillment of obligation had been notified thereof
Subsection 3. — Tender of Payment and Consignation - Notification which is separate and distinct from
notification made prior to consignation
ART. 1256 - ART. 1258
• TENDER OF PAYMENT - manifestation made by the debtor to • Not only movables, but even immovables may be subject matter
the creditor os his decision to comply immediately with his of consignation
obligation
• CONSIGNATION - deposit of object of obligation in a
competent court in accordance with the rules prescribed by law ART. 1259
after refusal or inability of creditor to accept tender of payment • Before creditor can be charged with expenses of consignation,
essential that consignation must have been properly made
1. When creditor accepts the thing or amount deposited
TENDER OF PAYMENT CONSIGNATION without contesting efficacy or validity of consignation
2. When creditor contests the efficacy or validity of
Antecedent of consignation; Principal act with will produce
consignation and court finally decides that it has been
preparatory act the effects of payment
properly made or cancels the obligation at the instance of
By its very nature extrajudicial Judicial in character the debtor in accordance with the provisions of par. 1,
in character Art. 1260

• Theory of “rebus sic stantibus” - parties stipulate in light of the
ART. 1260 - ART. 1261 prevailing conditions, and once these conditions cease to exist,
• Effects of consignation: the contract also ceases to exist
1. If creditor accepts thing or amount deposited without
contesting validity of consignation - obligation is
cancelled or extinguished ART. 1268
2. If creditor contests validity of consignation - result is • Applicable to persons who are principally and subsidiarily liable
litigation • Only case where the debtor is relieved from liability is when he
- If during trial, plaintiff-debtor is able to establish that had offered the thing to the obligee and the latter had refused to
all of the requisites of valid consignation had been accept it without justification
complied with - obligation is extinguished - Offer should not be confused with consignation
• Withdrawal of the object deposited before creditor has accepted • When offer is made by debtor and creditor refuses to accept it
consignation or before judicial declaration that consignation has without justification, he may choose either of two courses:
been properly made - obligation remains in force 1. He may make consignation of the thing and thereby
• Withdrawal made with consent of creditor - creditor losses every completely relieve himself of further liability
preference which he may have over the thing; solidary debtors, 2. He may keep the thing in his possession, in which case,
guarantors and sureties shall be released the obligation shall still subsist but that if the thing is lost
through a fortuitous event, Arts. 1262 and 1265 shall
govern
Section 2. — Loss of the Thing Due
• Has no application in cases there an offer is not possible
• LOSS OF THE THING DUE - the thing which constitutes the
object of obligation perishes, or goes out of commerce of man,
or disappears in such a way that its existence is unknown or ART. 1269
cannot be recovered • All rights of action which debtor may have against third persons
by reason of loss are transmitted by operation of law to the
creditor
ART. 1262 - Transmission is made from moment of the extinguishment of
• Before loss of thing due will result in extinguishment of the obligation
obligation, it is necessary that the following requisites must
concur:
1. Thing which is lost must be determinate Section 3. — Condonation or Remission of the Debt
2. Thing is lost without any fault of debtor
- If lost through fault of debtor, obligation is not • REMISSION - act of liberality by virtue of which the obligee,
extinguished; it is converted into an obligation to without receiving any price or equivalent, renounces the
indemnify creditor for damages enforcement of the obligation, as a result of which it is
3. Thing is lost before debtor has incurred in delay extinguished in its entirety or in that part or aspect of the same to
- If lost after debtor incurred in delay, such debtor can which the remission refers
still be held liable for indemnity for damages - Gratuitous abandonment by creditor of his right
- Requisites:
• CW: Art. 1174 1. It must be gratuitous
2. It must be accepted by the obligor
3. Obligation must be demandable
ART. 1263
• Based upon the principle that the genus of the thing can never • Kinds of remission
perish 1. As to form
• Debtor can still be compelled to deliver a thing which must be a. Express - when made in accordance with formalities
neither of superior not inferior quality prescribed by law for donations
b. Implied - although not made in accordance with
formalities prescribed by law, it can be deduced from
ART. 1264 the acts of the obligee/creditor
• Effect of partial loss 2. As to extent
a. Total - entire obligation is extinguished
b. Partial - refers only to the principal or accessory
ART. 1265 obligation or to an aspect thereof which affects the
• Obligation is not extinguished and the debtor is still liable for debtor
damages 3. As to constitution
a. Inter vivos - constituted by agreement of the obligee
and obligor which partakes the nature of donation
ART. 1266 inter vivos
• Impossibility must have occurred after the constitution of the b. Mortis causa - constituted by last will and testament
obligation; otherwise, if present during constitution, the in which partakes the nature of donation mortis
obligation would be ineffective from its inception causa
ART. 1267 ART. 1270

• Intention of the parties should govern
• Extent of remission or condonation shall be governed by rules • In these cases, original obligation is recreated in the same form
regarding inofficious donations and under the same condition in which it was found before the
• An express remission which is formally defective cannot affect merger took place
the obligee or creditor, unless new or other acts from which • The period of merger until revocation cannot be computed in
remission may be deduced should confirm the purpose expressed determination of period of prescription
in the former
Section 5. — Compensation
ART. 1271 - ART. 1272
• Requisites: ART. 1278
1. Document evidencing credit must have been delivered by • COMPENSATION - mode of extinguishing in their concurrent
creditor to the debtor amount hose obligations of persons who in their own right are
2. Must be a private document creditors and debtors of each other
3. Delivery must be voluntary - Figurative operation of weighing two obligations
simultaneously in order to extinguish them to the extent in
which the amount of one is covered by the amount of the
ART. 1273 - ART. 1274 other
• Effect upon accessory obligations - Simplified payment (pago abreviado)
• Rule in pledge
• It has double advantage over payment
1. Facility of payment because it takes effect by operation
Section 4. — Confusion or Merger of Rights of law
2. Guaranty for the effectivity of credit
ART. 1275
• CONFUSION - merger of characters of creditor and debtor in
one and the same person by virtue of which the obligation is COMPENSATION PAYMENT
extinguished Requisites prescribed by law Requisites prescribed by law
- Meeting in one and the same person of the qualities of
are different from payment are different from consignation
creditor and debtor with respect to one and the same
obligation Takes effect by operation of Takes effect by act of parties
- Requisites: law
1. Merger of characters of creditor and debtor must be in the
same person Capacity to give and to acquire Capacity to give and to acquire
2. It must take place in the person of either the principal is not necessary is essential
creditor or principal debtor
3. It must be complete and definite As a rule, partial As a rule, complete and
- Merger must be of character that there will be indivisible
complete and definite meeting of all of the qualities of
creditor and debtor in the obligation or in part of
aspect thereof which is affected by the merger COMPENSATION CONFUSION
• Kinds of merger: As to number of person
1. As to cause or constitution
a. Inter vivos - by agreement of parties There must be two persons, There is only one person in
b. Mortis causa - by succession who, in their own right, are whom is merged the qualities
2. As to extent or effect creditor and debtors of each of creditor and debtor
a. Total - extinguishment of entire obligation other
b. Partial - extinguishment of only a part of obligation
• Confusion or merger refers only to part of obligation As to number of obligations
• When obligation is joint
At least two There is only one
ART. 1276
• Effect upon accessory obligation COMPENSATION COUNTERCLAIM
Two debts must consist in Not necessary
ART. 1277 money, or if the things due are
• There is only partial extinguishment of debt in joint obligations fungibles, they must be of the
• With regard to solidary obligations, Art. 1215 shall apply same kind and quality
GR, requires that debts must Not required

• If merger is constituted by agreement, it may be revoked by: be liquidated
1. Presence of any of the causes for rescission
2. Annulment Need not be pleaded Must be pleaded to be
3. Nullity or in existence of contracts effectual
4. Some special cause such as redemption
• If merger is constituted by inheritance, it may be revoked by:
1. Nullity of the will • As to cause, compensation may be:
2. Any other cause which will nullify the merger
1. Legal - takes effect by operation of law from the moment and the amount thereof, it is converted into a liquidated claim by
all the requisites are present court decree, in which case compensation shall take effect from
- Arts. 1278 and 1279 moment the judgment liquidating the claim has become final
2. Voluntary - when parties who are mutually creditors and
debtors agree to compensate their respective obligations,
even though all of the requisites for compensation may ART. 1284
not then be present • EXCPN to the GR of demandability in order that compensation
- FACULTATIVE COMPENSATION - effected by a shall take place
party who is entitled to oppose the compensation - Rescissible or voidable obligations are considered
because he would be prejudiced thereby demandable while the vices with which they are tainted are
3. Judicial - when it takes effect by judicial decree not yet judicially declared
- If action for rescission or annulment is not exercised, or is
• As to effect, compensation may be renounced, or if the debt/s are ratified, the obligation/s are
1. Total - debts to be compensated are in equal amount susceptible of compensation
2. Partial - debts to be compensated are not equal in amount
ART. 1285
ART. 1279 • Distinction must always be made between effects of assignment
• Essential requisites of compensation: when compensation has already taken place and when
1. There must be two parties, who, in their own right, are compensation has not yet taken place
principal creditors and principal debtors of each other 1. When compensation HAS TAKEN PLACE
2. Both debts must consist in money, or if the things due are - Subsequent assignment of rights by creditor to a third
fungible, they must be of the same kind and quality - person cannot in any way affect the debtor with
contemplates obligations to give respect to compensation which has already taken place
3. Both debts must be due - Assignee can only demand indemnity for damages
4. Both debts must be liquidated and demandable from the assignor on the ground of fraud
5. There must be no retention or controversy commenced by - EXCPN: when debtor had consented to the
third persons over either of the debts and communicated assignment, in which case assignee can still demand
in due time to debtor - retention consists in the for the payment of credit
application of credit of one of the parties to the 2. When compensation HAS NOT TAKEN PLACE
satisfaction of the claim of a third person; if there is - Effects of such assignment once all of the requisites
balance of excess after application of credit, for compensation are present shall depend upon
compensation will take place, but only to the extent that whether it was made with consent, or without the
credit is not affected by retention knowledge of debtor
- Controversy refers to a case in which a third person a. With consent of debtor - debtor cannot set up
claims to be the creditor against the assignee the compensation which
6. Compensation must not be prohibited by law would have pertained to him against the
assignor: however, if debtor notified assignor
• As to parties, it is necessary that: that he is reserving his right to compensation, he
1. That the parties be mutually creditors and debtors in their can still set up the defense of compensation
own right against the assignee in case the latter demands
2. That they must be bound as principals payment of assigned credit
- Notwithstanding this rule, guarantor may set up b. With knowledge, but without consent, of debtor
compensation as regards what the creditor may - par. 2, Art. 1285
owe the principal debtor - Purpose is to prevent fraud
- If notification PRECEDED assignment,
effects of assignment are produced from the
ART. 1280 time it is made and not from the time the
• Art. constitutes an exception to rule stated in Art. 1279, no.1 in notification is given; debtor can set up
relation to Art. 1278 defense of compensation contracted prior to
• Guarantor, in case payment of debt is demanded from him, may assignment
set up compensation, not only for what such creditor owes him, - If notification and assignment are made
but also for what such creditor owes the principal debtor SIMULTANEOUSLY, no question about the
- The bond of the guarantor cannot be resorted to so long as time when effects of assignment are
the debtor can pay although it may be in the abbreviated produced; debtor can set up defense of
form of compensation compensation contracted prior to assignment
- If the principal obligation is extinguished, the accessory - If notification is given AFTER assignment
obligation of guarantor is also extinguished had been made, assignment must have been
effected without consent and knowledge of
debtor; last par. of Art. 1285 is applicable
ART. 1281 - ART. 1282 c. Without knowledge of debtor - debtor may set
• Art. 1282 is an example of VOLUNTARY COMPENSATION up defense of compensation of all credits which
he may have against assignor and which may
have become demandable, before he was
ART. 1283 notified of the assignment
• In reality, what is set off against the other party is a counterclaim - Remedy of assignee is a personal action for
• When the defendant who has unliquidated claim for damages indemnification against assignor
against plaintiff sets it off by proving his right to said damages
ART. 1286 - ART. 1288

• Debts which cannot be compensated: ART. 1292
1. Debts arising from contracts of depositum • Form of extinguishment
2. Debts arising from contracts of commodatum 1. Express
3. Claims for support due by gratuitous title 2. Implied - intent to substitute a new obligation for the old
4. Obligations arising from criminal offenses one must be clearly established
5. Certain obligations in favor of the government, such as • Novation is NEVER presumed and the animus novandi, whether
taxes, fees, duties and others of similar nature totally or partially, must appear by express agreement of the
• Rule cannot be applied to support in arrears parties, or by their acts that are too clear and unequivocal to be
mistaken
ART. 1289 - ART. 1290 • EXPRESS NOVATION - can only take place when the
• Most fundamental effect of compensation - extinguishes BOTH contracting parties disclose that the object in making the new
debts to the extent that the amount of one is covered by the contract is to extinguish the old one; otherwise, the old contract
amount of the other remains in force and the new one is added to it
• Legal compensation operates even against the will of the
interested parties even without their consent; takes place ipso • IMPLIED NOVATION - test of incompatibility: whether or not
jure both of the old and new obligations can stand together, each
- But the rule is applicable only to LEGAL having its own independent existence
COMPENSATION - If can stand together, no novation
- If cannot stand together, there is incompatibility; there is
novation
Section 6. — Novation
• If there is a reduction or decrease of the duration of term or
ART. 1291 period, there is novation
• NOVATION - substitution or change of an obligation by another,
resulting in its extinguishment or modification
- Distinctive feature is that although it extinguishes the ART. 1293
obligation, it also gives birth to another obligation; • Subjective novation
extinguishment is relative in character • EXPROMISIÓN - if substitution of debtors is effected with the
- Requisites: consent of the creditor at the instance of the new debtor even
1. Previous valid obligation without the knowledge or against the will of the old debtor
2. Agreement of the parties to the new obligation - Requisites:
3. Extinguishment of the old obligation 1. Initiative for the substitution must emanate from the
4. Validity of the new obligation NEW debtor
- Novation is EXTINCTIVE when old obligation is terminated 2. Consent of the creditor to the substitution
by creation of new obligation that takes place of the former - Two kinds:
- Novation is MODIFICATORY when the old obligation subsists 1. Substitution WITH knowledge and consent of old
to the extent it remains compatible with the amendatory debtor
agreement 2. Substitution WITHOUT knowledge or against the
will of old debtor
• Kinds of novation - If substitution was effected WITH knowledge and consent of
1. As to its essence original debtor, and subsequently payment is made by new
a. Objective or real - change wither in the cause, object debtor with or without knowledge and consent of such
or principal conditions of the obligations original debtor — new debtor can (1) demand
b. Subjective or personal - substitution of the person of reimbursement from original debtor of the entire amount
the debtor or to the subrogation of a third person in which he has paid and (2) be subrogated in all of the rights
the rights of the creditor of the creditor
- Passive - substitution of the person of the debtor - If substitution was effected WITHOUT knowledge and
- Active - substitution of the person of the consent of original debtor, and subsequently, payment is
creditor made by new debtor again without knowledge and consent
c. Mixed - combination of objective and subjective of original debtor — new debtor can (1) demand
novation reimbursement from original debtor only insofar as the
2. As to form or constitution payment has been beneficial to such debtor, but he cannot be
a. Express - declared in unequivocal terms that the old subrogated in the rights of the creditor
obligation is extinguished by a new one • If payment was made with knowledge and consent of
b. Tacit or implied - when old and new obligations are original debtor, although substitution had been effected
incompatible with each other on every point without knowledge and consent — new debtor can (1)
3. As to its extent or effect still demand reimbursement from original debtor of the
a. Total entire amount which he has paid, and (2) be subrogated in
b. Partial all the rights of the creditor
• OBJECTIVE NOVATION may be effected by: • DELEGACIÓN - substitution of debtors effected when original
1. Changing the cause of the obligation debtor offers and the creditor accepts a third person who
2. Changing the object of the obligation consents to the substitution
3. Changing the principal or essential conditions of the - Requisites:
obligation
1. Initiative from the substitution must emanate from whether the condition which affects the first is complied with or
the OLD debtor not
2. Consent of the new debtor - Because the subsequent obligation was contracted on the
3. Acceptance by the creditor basis of the efficacy of the previous obligation as its
- Since substitution was effected with the consent of all the equivalent
parties — new debtor (delegado) can (1) demand - If suspensive condition is not fulfilled, the novation is valid;
reimbursement from original debtor (delegante) of the entire otherwise, it is not
amount which he as paid as well as (2) compel the creditor
(delegatorio) to subrogate him in all of his rights • If conditions affecting both obligations can stand together, and
• See pp. 339-341 they are fulfilled, the effect is that the new obligation becomes
demandable
• WHETHER SUBSTITUTION IS EFFECTED THROUGH • If only the condition affecting the first obligation is fulfilled, the
EXPROMISIÓN OR DELEGACIÓN THE CONSENT OF THE previous obligation is revived, while the new obligation loses its
CREDITOR MUST ALWAYS BE SECURED force
- Reason is that substitution of one debtor for another may • If only the condition affecting the second obligation is fulfilled,
delay or prevent the fulfillment or performance of the the effect is that there is no novation since the requisite of a
obligation by the temporary inability or insolvency of the previous valid and effective obligation would be lacking
new debtor • If conditions affecting both obligations are incompatible with
- Law does not prescribe when such consent may be given; each other, it is evident that the effect of such incompatibility is
neither does it require any specific form the extinguishment of the first obligation so that only one
obligation remains — the new obligation whose demandability
of effectivity shall depend upon the fulfillment or non-
ART. 1294 - ART. 1295 fulfillment of the condition affecting it
• Art. 1294 applies to expromisión
- New debtor’s insolvency or nonfulfillment of the obligation
can never result in the revival of the original debtor’s ART. 1300
liability to the creditor if substitution was made without • CONVENTIONAL SUBROGATION - takes place by
knowledge of original debtor or even against his will agreement of the original creditor, third person substituting the
- If substitution was effected with knowledge and consent of original creditor and debtor
original debtor, new debtor’s insolvency or nonfulfillment of • LEGAL SUBROGATION - takes place by operation of law
obligation shal REVIVE the original debtor’s liability to the
creditor
• Art. 1295 applies to delegación ART. 1301
- Purpose of the two exceptions is to prevent commission of • Must clearly be established
fraud • Essential that there must be an agreement of all the parties with
respect to the subrogation
• When the creditor transmits his rights to a third person even
ART. 1296 without the consent of the debtor, there would be no novation
• Precept applies to objective novations as well as to those but and assignment of rights
novations effected by substituting the person of the debtor
• Cannot apply to novations effected by subrogating a third person
in the rights of the creditor because it is regulated by Arts. 1303 CONVENTIONAL
ASSIGNMENT OF RIGHTS
and 1304 SUBROGATION
As to rules which govern
• EXCPN: Refers to a case where there is a stipulation constituted
in favor of a third person, which may be demanded separately Arts. 1300 to 1304 Arts. 1624 to 1627
from the principal obligation, although subordinated to the latter
- Ex. stipulation pour autrui As to necessity of debtor’s consent
Debtor’s consent is required Not required

ART. 1297 - ART. 1298
• Essential that both the old and new obligation must be valid As to effect upon obligation
• A voidable obligation is binding until it is annulled by a
competent court, and therefore, susceptible of ratification E f f e c t o f e x t i n g u i s h i n g Effect of transmitting the
- However, if debtor concurs in the novation, he impliedly obligation and giving rise to a rights of the creditor to another
renounces his right to ask for annulment, and therefore, new one person without modifying or
validates the obligation extinguishing the obligation
- But concurrence is not always indispensable because it may
be lacking as in the case of expromisión As to effect upon vices
- If he was aware of the vice or defect of the obligation at the
Defects or vices in original Not cured
time when he assumed its payment, cannot avail himself of obligation are cured
the right to invoke its voidable character against any claim
of the creditor As to time of effectivity
Effects arises from moment of As far as debtor is concerned,

ART. 1299 novation or subrogation arises from the moment of
• If the original obligation is conditional, the novation must also notification
be conditional, and its efficacy shall, therefor, depend upon
ART. 1302
• LEGAL SUBROGATION - takes place by operation of law
- GR: Not presumed
- EXCPNS: those enumerated in the article
ART. 1303 - ART. 1304

• Accessory obligations are not extinguished because in such
obligations the person subrogated also acquires all of the rights
which the original creditor had against third persons
- Application of the rule is absolute with respect to legal
subrogations
- With respect to conventional subrogations, such accessory
obligations may be increased or reduced depending upon
agreement of parties

JURADO Obligations Reviewer

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

JURADO Obligations Reviewer

Uploaded by

Copyright:

Available Formats

Civil Law: Obligations and Contracts

BOOK IV obligation, or Solidary, when each obligor may

• GR: Civil action to recover damages from the person criminally

Abesamis, Austinne Joyce D. !2

Abesamis, Austinne Joyce D. !4

The breach or nonfulfillment Defendant’s negligent act or ART. 1174

Abesamis, Austinne Joyce D. !5

Abesamis, Austinne Joyce D. !7

ART. 1187 - ART. 1188

Abesamis, Austinne Joyce D. !9

ART. 1194 - ART. 1195 Section 3. — Alternative and Facultative Obligations

Culpable loss of object which Culpable loss of any of the

Abesamis, Austinne Joyce D. !11

Extension of time granted to Extension granted to principal

Abesamis, Austinne Joyce D. !14

• OBLIGATION WITH A PENAL CLAUSE - one to which an

Abesamis, Austinne Joyce D. !15

Abesamis, Austinne Joyce D. !16

Abesamis, Austinne Joyce D. !17

• If payment is made to a person other than those enumerated in

Abesamis, Austinne Joyce D. !20

ART. 1267 ART. 1270

GR, requires that debts must Not required

ART. 1286 - ART. 1288

Debtor’s consent is required Not required

Effects arises from moment of As far as debtor is concerned,

ART. 1303 - ART. 1304

Abesamis, Austinne Joyce D. !26

You might also like