ARTICLE 1187

 Depends on the happening of the condition

 EFFECT- reason: from the moment that such obligation is constituted, all the elements of a valid obligation
are already present EXCEPT THAT since there is a condition that it is ____ and It is suspensive, article 1187
applies. These are the suspension, or rather, the pendency of the happening of the suspensive condition. It is
just the effectivity or the efficacy of the obligation that is suspended and not the birth of the obligation- the
birth is already there subject to its effectivity in a suspensive condition. Rule is retroactivity of the EFFECTS.
EX. (obligation subject to a condition)
 Obligation to give- the obligor in this obligation cannot do anything in relation to that
specific object. He can’t consume it if it’s consumable, he cannot transfer it to another
person because from that time of the constitution, he has already that obligation to
PRESERVE the object. ---- What if he defies that obligation and let’s say that he transfers
it to another person, what is the right of the obligee? The right of the obligee, once that
condition has been fulfilled is to receive the transfer- on the assumption that the third
person to whom that thing was transferred, received the thing from the obligor in bad faith.
Meaning that he or she is aware that there is an existing obligation at the time the transfer
has been made to him. EXAMPLE OF ONCE A CONDITION IS FULFILLED IN A
CONDITIONAL OBLIGATION TO GIVE, IT’S EFFECT WOULD RETROACT –
meaning that the right of that obligee to possess and to take ownership of the thing
BEGINS from the moment of the constitution of the obligation and not from the moment
of the happening of the condition. Except that, he CANNOT demand that right until such
time that the condition has been complied with.
 That’s why if you will not from ARTICLE 1188, there are things that the obligee can do
for them to preserve his right meanwhile that the condition has to be made. One of which
is to rescind those actions fraudulent in nature- which right to rescind will be validated
once the suspensive condition has been complied with BUT if such suspensive condition
never happened, then that’s the time that you can nullify that action for rescission that is
filed by the obligee at the time they are still waiting for the happening of the condition.
 GOING BACK TO 1187, the rule is that there should be retroactivity in the consequences
of the happening of the suspensive condition.
 Exceptions to the rule on retroactivity
1.) Fruits of the object (provided for in 1187 itself) – fruits of the thing, fruits accruing, fruits interest
accruing prior to the happening of the suspensive condition will be given to the obligor and NOT to the oblige
even if that suspensive condition later on comes, and it doesn’t matter whether that obligation is unilateral or
reciprocal. The rule is if it is a reciprocal obligation, the fruits and interests arising from both the obligation
are deemed mutually compensated by each other. When it is unilateral, the rule is clear that such interest,
such rules will be appropriated by the obligor unless there is a contrary intention.

2.) With regard to acts of administration in relation to that obligation to give a specific object- the
obligor, in the mean time that the suspensive condition has yet to come, can exercise acts of administration.
When it comes to acts of disposition, that obligor cannot do it because that’s part of the rule regarding
retroactivity. But with regard to simple acts of administration, it can. And even if that suspensive condition
later on happens, the obligee cannot repudiate whatever acts of administration that obligor has done before
the happening of that suspensive condition. EX. Assuming what is due to be given by the obligor to the
obligee upon the happening of the suspensive condition is wonder apartment. In the meantime that the
suspensive condition is yet to happen, the obligor is not obligated to deliver possession and ownership of that
wonder apartment but of course he has to manage that wonder apartment- he can do acts of administration in
relation to that property. He has possession and ownership of the property before the happening of the
condition. If he does any act of administration, like painting the apartment- if he does it and later on the
suspensive condition happens and assuming that the oblige did not agree to the acts of administration made
by the obligor – can that obligee, who is now the owner and possessor of the apartment repudiate his acts of
 administration or to set aside whatever acts of administration that obligor has done? NO. He cannot because
that is an exception to the rule on retroactivity. On the assumption that the property to be given is specific or
determinate- assuming that prior to the happening of that suspensive condition, that specific object is lost.
Who bears the loss? The OBLIGOR. Because at the time of the happening of the loss of the thing, a
suspensive condition has yet to happen. Therefore, the obligor owns the thing at that time- EXCEPTION TO
THE RULE OF RETROACTIVITY.

 What about if the conditional obligation is to do- with regard to the consequences or effects of the happening
of the suspensive condition and obligation to do, what’s the rule?
 According to 1187, it’s going to be the the COURTS that will determine the consequences of the
happening of the suspensive condition from such kind of obligation. There’s no specific rule that is
stated in the law. It all depends on the appreciation of the court- assuming of course that there is a
dispute between the obligor and the obligee with regard to- let’s say, what would be the effects of
the happening of the suspensive condition in an obligation to do. For instance, fruits and interest.
Who gets the interest, who gets the fruits assuming that there are fruits or interest accruing in relation
to that obligation to do. BUT is it possible that there’s going to be interest accruing in an obligation
to do? IT DEPENDS on the kind of obligation that is imposed. Let’s assume that A is obligated to
pay 10 million pesos to B. Subsequently, B agreed to condone the 10 million pesos upon the
happening of the suspensive condition. So, in relation to B, what is his obligation? His obligation is
an obligation to do and that is to condone the debt. Let’s assume that the suspensive condition
happens. Then, this will weapon the demandability of the obligation of B to condone the debt. What
part of the debt does B has to condone? Would it be just the principal or including the accrued
interest prior to the happening of the suspensive condition? Will A be forgiven to pay everything-
not only the principal but also the accrued interest. Now that is a question that will have to be
resolved, assuming that A and B cannot agree, it’s going to be the court who will decide. But if you
will take a look at it, the logical conclusion there is that the interest will likewise be forgiven. That’s
probably the intent of the parties when the obligee in the original obligation has committed to forgive
the debtor. Because if you commit to forgive the debtor, then obviously, you will be forgiving
everything- not only the principal of the debt but also whatever interest that principal has earned so
far before the happening of the suspensive condition. (This is an example of the 2 nd paragraph of
1187)

ARTICLE 1188 (in relation to 1187)

 The first paragraph pertains to the rights of an obligee that he can exercise, in order to preserve his right over
the objects that are due prior to the happening of the condition.
 What are these rights that this person can exercise prior to the happening of the suspensive condition?
o SO MANY. Ex. Gear towards the preservation of the object because if that suspensive
condition happens, then as we said, this will result to the effectivity of the obligation and
if it is a conditional obligation to give the thing, then that thing should be delivered by the
obligor to the obligee. BUT how can that obligee ensure that once condition is met, the
obligor will be able to comply with the obligation to give. In violation of the obligor’s
obligation under article 1187, it transfers the project prior to the happening of the
suspensive condition. He can very well do that because he is still in possession of that
property prior to the happening of the suspensive condition. In relation to that, what can
that oblige do? If there is that obvious intent on the part of the obligor to convey the
property to another person by way of selling for instance, the obligee CAN FILE AN
ACTION to prevent that obligor from transferring property. If he has good reason to
believe that that obligor has intention to, then he can file an action for injunction to restrain
that obligor from transferring that object to another person. Again, that is in connection
with Article 1187 because if eventually that suspensive condition doesn’t happen, then
 there will be no obstacle on the part of that obligor to transfer the property to any other
person. Therefore, that act of the obligee, initiating an action for injunction, will have to be
set. So that preemptive action taken by the obligee is always subject to the eventual
happening of that suspensive condition.
o Another action that that person can do, assuming that it is a conditional obligation in a
specific object is for this obligee to make known to third persons the fact of the existence
of that conditional obligation so that persons who are minded, who are interested to
purchase or acquire that property subject of the conditional obligation will be forewarned
that that property is subject to a conditional obligation. How is it done? It depends on the
kind of property. If it’s a real property, the go the register of deeds and then ask your right
over that particular property- the annotated deed of title of that real property. You annotate
that conditional obligation. If somebody would like to acquire that property and goes to the
register of deeds to verify the title, then he will right away see that this property is subject
to such condition. If he is in his right mind, you will not gamble upon this property specially
if it is for a valuable consideration. If it’s a vehicle, go to the LTO and ask the LTO to
annotate the same, so then again that is the notice to the public of the existence of that
conditional obligation involving that particular property.
o If you have not prevented the transfer of that property to another person, by that obligor as
the obligee, and you came to know about it after the transfer has been done, then you can
file an action for rescission of that transfer on the ground of fraudulent alienation because
you have the right over that property meanwhile the suspensive condition is yet to happen.
That right pertains to that right mentioned under article 1187. But again, your right of
rescission is conditioned from the happening of that suspensive condition.

 With regard to the second paragraph, it’s the CONVERSE of the first paragraph. In the second paragraph, it
talks about mistaken payment/ mistaken performance. In other words, there’s premature performance on the
part of the obligee because it performed the prestation prior to the happening of the suspensive condition.
Not knowing what is at stake. If that happens what can he do? He can recover whatever he has given assuming
that it is a specific object, or even if it is a general object, he can recover it. That he can do for as long as at
the time he files an action to recover- assuming that the obligee does not voluntarily return whatever was
prematurely delivered, the obligor can ask for the return of that object through a court action for as long as
at the time that he files a court action, the suspensive condition has yet to happen because in the mean time
that the action let’s say for the return of the object prematurely delivered is pending by the court and the
suspensive condition happens, this will already taint the rights of that obligor to recover what has been
prematurely delivered.

ARTICLE 1189

 It talks about certain rules in case of loss, improvement or detoriation of the object which is the object of a
traditional obligation (specific object).
 This article will apply only when- first, the obligation is a real obligation which is an obligation to give, and
the object involved is a specific object. And that there is a suspensive condition that is attached to that
obligation and if that suspensive condition later on happens, BUT before happening of that suspensive
condition—there is in the mean time, loss, detoriation, or improvement of the object. Those are the requisites
before Article 1189 can apply.
 Consequences (book)
 Define loss
 When you talk about an object that perishes
EX. You can say an object is perished when it is totally burned or when in an accident, a car gets
totally wrecked. If the object is spoiled.
 “gone out of commerce” – “when out of market”, not capable of being the subject of commercial transactions.
It something that is within commerce previously but later on becomes out of commerce. DRUGS is not one
of it because ever since, out of commerce nanaman siya.
 SSS v. Osmena III – example of objects that can no longer be recovered
o The transacrion involving APC shares owned by SSS. There were APC shares before
owned by SSS but eventually these shares were converted to new common shares when a
merger has taken place between APC and NBO. These shares were totally replaced by new
common shares. According to the SC, because of such circumstances, the merger of APC
and NBO and subsequently the conversion of these shares into new common shares, these
objects are now considered to be irreplaceable. It can no longer be recovered.
o EX. lumubog na barko
 Fortuitous event- obligation will be extinguished. BUT if the cause of the loss was because of the fault of the
debtor, debtor is liable for damages AS SOON as that suspensive condition happens. That is always subject
to that. Because even if the thing is lost by the obligor himself, if eventually, the suspensive condition hasn’t
happened, then he is not obligated to pay anything in favour of the obligee.
 DETORIATION- still exists but no longer in tact, something broken. A depreciation or impairment in the
value of that object but which impairment doesn’t amount to loss.
o EX. If the tires of the car were stolen, then the car is considered to have been detoriated.
o Rule: If that detoriation is caused not by the fault of the debtor, then he is NOT responsible
for anything in favour of the obligee or the creditor. BUT if he is the cause for such
detoriation, then the obligee has 2 options. Either to ask for the rescission of the obligation
or ask for its fulfilment. With damages in either case because the property that is to be
delivered to him, on the assumption that he has chosen to fulfill, will already be a property
whose value is lower than the value of the property at the time of the making of the
obligation.
o If the fault of the detoriation is merely the ordinary depreciation of the object due to the
passage of time, then that is not the fault of the obligor.
 IMPROVEMENTS- what if the property or the object improves in the mean time before the happening of
the suspensive condition – it DEPENDS.
o It depends. If the cause of the improvement is by nature or by time, then any improvement
accruing on the property will be to the benefit of the obligor. EX. appreciation of value of
a property (land)
o If the improvement was introduced by the obligor, what will happen assuming that the
suspensive condition takes place. According to the rule, that obligor will have the rights of
a usufruct.
o There are 3 basic rights of a usufruct: to remove whatever he has attached to the principal
object which resorts to the improvement of the principal object. For as long as the removal
will not cause any damage to the principal object. EX. If it’s a car that is the object of the
obligation, and then the obligor, prior to the happening of the suspensive condition,
improved the car. He painted the car with a new paint and then he installed an air
conditioning unit. Later on, the suspensive condition happens. Naturally, the obligor has to
deliver the car. Can he do anything with regard to the things he did before he delivered it
to the obligee (improvements)? Possible. The airconditioning unit, he can remove that
WITHOUT damaging the car. For as long as he can restore the car prior to the installation
of the air conditioning unit, then that will be fine.
o Another right of the usufruct is TO MAKE USE OF IT in the mean time prior to its
delivery. He can make use of the principal object including the improvement that he has
introduced before he makes the delivery or at least before the happening of the suspensive
condition.
o Third right: RIGHT OF SET OFF/ COMPENSATE. Assuming that before the happening
of the suspensive condition, by the fault of the obligor, that property was damaged. But at
the same time, he has introduced certain improvements on the object. What can he do? If
 the cause of the damage is his own fault, then according to the rule, he has to compensate-
he has to pay, the obligee the cost of the damage done. BUT since he introduced
improvements in that object, then he can off set this to the cost of the value of the damage
done.

ARTICLE 1190

 Just the converse of 1189.

 Whereas in 1189, the object is a conditional obligation to give- where the condition is suspensive. In 1190,
it is a conditional obligation to give where the condition is resolutory. This time, the person subject of this
loss, detoriation, or improvement is the OBLIGEE in the original obligation. He has the obligation not to lose
the thing, not to cause anything that will resort to the detoriation. And if ever there will be improvements on
the thing that is going to be introduced, he will acquire the rights of a USUFRUCT.

ARTICLE 1991

 These are obligations arising from the same transactions, the same events, and the same cause. Therefore the
parties there are actually debtor and creditor of each other for that same obligation. Because of that, the
performance of 1 of them is conditioned upon the performance of the other. So the performance of 1 is a
condition precedent for the performance by the other of his own obligation. That is the nature of the reciprocal
obligation.
o EX. contract to sell a land – the obligation to transfer the title of the land and the obligation
of the other party to provide the purchase price
 These respective prestations of the parties in a reciprocal obligation are just like resolutory conditions. It’s
just like a negative resolutory condition because if one party doesn’t comply with his obligation, then the
obligation of the other party is deemed extinguished. Except that if you say one party breaching the
obligation, this pertains to the non- performance of the prestation of one party and not actually the non-
happening of the condition. But the effect is just the same.
 Article 1191 talks about reciprocal obligations and the power of a party to receive such obligation. When will
that power arise?
o It will arise if there is non- performance of the obligation of another party. Which means
that even without any stipulation of the parties in that particular obligation, that either of
them can rescind the obligation once one of the parties refuses to perform his prestation-
the injured party of the party willing to perform or has already performed his own prestation
has that right to rescind.
 When we talk about rescinding that obligation, what does the law mean by that?
o To rescind is to CANCEL. To terminate the contract.
o It contemplates that when an obligation is rescinded, the parties are reverted back to their
original status before entering the obligation. (WRONG)
o It is a valid obligation prior to the non- performance. You cannot simply say that it is void
unless there is an INVALIDITY.
 The power to rescind under the first paragraph of Article 1191 is IMPLIED. Therefore, it is not necessary to
have a prior stipulation regarding it. It is the law itself that empowers. Villamor VS. Mangaoil.
 This power of rescission as provided for in Article 1191 is different from the rescission provided for in the
previous provisions. EX. accion pauliana is a kind of rescission- you cannot exercise accion pauliana as an
obligee if you haven’t exercise other remedies. Accion pauliana shall be the last resort. It is different from
rescission under 1191 because this provision is predicated on breach or non- performance of obligation.
 The premise of Article 1991 to rescind is the NON- PERFORMANCE OF ONE PARTY OF HIS
PRESTATION IN HIS OBLIGATION. Whereas, what is the basis of accion pauliana? The basis of accion
pauliana is different because it is running after third persons in order to satisfy the claim or cancelling
contracts between the obligor and a third person. It is premised on something else and not simply the breach
 of the obligation by the obligor but it is actually the failure of the obligee to be compensated or to be able to
recover his claim to his own obligor. Secondly, when we talk about rescission, it is also different from
rescission under 1381- rescission on the basis of economic prejudice suffered by a person. It is not
conditioned on non- performance. As a matter of fact, that rescission under 1381 does not even contemplate
reciprocal obligations unlike the rescission under 1191.
 Under the second paragraph of 1191, the law has provided 2 remedies if a party refuses or fails to comply
with his prestation in a reciporal obligation. Aside from rescission under the first paragraph, there is also the
remedy of FULFILLMENT- ex. specific performance for the delivery of an object.
 Fulfillment of an obligation is an alternative remedy provided for in Article 1191. Take note however that if
the injured parties has already chosen one of those remedies, and then the Court has confirmed the validity
of that remedy, then the injured party can no longer change course. For instance, an obligor in a reciprocal
obligation has failed to comply with his prestation, what’s the right of the obligee in that reciprocal
obligation?
o To either rescind or cancel the contract (with damages) and if he goes to Court and file an
action for rescission, and then during the proceedings, he was able to obtain a decision
from the Court saying that there is a basis for rescission because the other party has failed
in the performance of his prestation. That party can no longer change his mind and say that
he wants to proceed with the obligation. He can do it if he chose rescission and the COURT
HAS YET TO CONFIRM the validity of the claim but ONCE the decision has already
been made by the Court, he may no longer change it. XPN: When there is impossibility
with the fulfillment.
o Nothwithstanding the first choice of the injured party, he can still later on change his action
to rescission if it is proven that the fulfilment is no longer possible. AYSON v. ADAMOS.
o After you have determined that rescission cannot be enforced, that is the time to start
counting the 4- year prescriptive period and NOT during the finality of the decision.
Reckoning point of the 4- year prescriptive period is during the DATE OF
IMPOSSIBILITY and NOT during the finality of judgment.
 What kind of violation will entitle the injured party to rescind or ask for fulfilment as the case may be?
o Substantial or fundamental breach- something that will defeat the purpose of the contract.
(Reyes case and Northwestern case)
o Under Article 1191, the Court is empowered to fix a period if there’s a basis for making a
period. Reyes case.
o XPN: Both in the cases of Reyes and Northwestern, the rule is that you can only, as an
injured party, opt to receive that contract or that obligation when the breach is substantial
BUT if there is a contrary stipulation expressly made that any breach of that obligation will
entitle the injured party to file for rescission or exercise the right to rescind, then even if
the breach committed is merely slight or casual, then that right of rescission will be
available.
 KINDS OF RESCISSION UNDER ARTICLE 1191
o Judicial rescission
o Extra- judicial rescission – exercise on the part of the injured party to cancel the contract
outside of court. Is the option to extra- judicially rescind always available? NO.
o Who has the option to choose if the rescission will be judicial or extra- judicial?
-The injured party.
o When it is logical for the injured party to resort to judicial rescission?
-When he has already fulfilled his part of the obligation.
o Why would it benefit the injured party to resort to judicial rescission after he has already
complied with his part of the obligation?
-
o Can the injured party recover damages in extra- judicial rescission?
 -YES. If they both agree. Because all the offending- party has to do is to pay
voluntarily the damages or if one party has already complied with his own prestation and
the other party refuses, can he resort to extra- judicial rescission? YES.
o What is the effect of rescission?
-Extinguishment. What will be the effect of that extinguishment? Reversion to
status quo prior to the obligation itself. What’s the status quo? To give what I have received
from you and to give back what I had paid. When you already have already complied with
your obligation, then it is your right to recover from the other party everything that you
have given. What if he does not agree to return? Can you force it extra- judicially? NO.
That’s why you have to go to court and file for judicial rescission because part of that
rescission is to direct the other party to return everything he has received from him and for
him to pay damages. That is the benefit that you will get out of judicial rescission. THAT
IS WHEN YOU HAVE ALREADY COMPLIED WITH YOUR PART OF THE
OBLIGATION.
o BUT if you haven’t done your part, you don’t need judicial rescission. You can extra-
judicially rescind. Just tell the other party that you are not ready. If he does not agree, then
that’s the time that he will go to court.
o You haven’t complied with your obligation and the other party has manifested that he will
not comply with his part of the obligation. Question: can you rescind (either judicially or
extra- judicially?) Do you have that right to rescind when you’re yet to comply with your
prestation? YES. IF YOU’RE ALREADY READY TO PERFORM THE
OBLIGATION, THEN YOU HAVE THE RIGHT TO RESCIND.
o If you already manifested your willingness to comply with the obligation, and the other
party is not, then that party is considered to be in DEFAULT.
o When you extra- judicially rescind, the other party may question its validity and its now up
to the Court to determine w/n you have a valid basis for the extra- judicial rescission. BUT
that extra- judicial rescission is in effect AS LONG AS it is not reversed by the Court.
 What is a valid form of extra- judicial rescission?
o There must be a NOTICE OF CANCELLATION. Any form of such notice is allowed. Any
form of extra- judicial rescission is ALLOWED. It can be in writing or done orally
UNLESS there is a specific law which provides for a particular form of rescission to make
that rescission effective and valid. Cases of Manzano and Fabregas involving RA 6552.
That’s when the law requires a specific form of extra- judicial rescission to be considered
as valid.
 What are those requirements under RA 6552? Example of a law that requires a specific formality in rescission
to be considered as valid
o RA 6522 is a law that protects buyers of real properties on instalment. If the buyer cannot
pay in instalment, can the seller extra- judicially rescind?
- YES. The rescission must be in accordance with the law + requirements
under Maceda Law. (check case)
- 60 days to pay
 What is the consequence if there is extra- judicial rescission?
o It will revert back to its original state prior to the creation of the contract. Whatever each
party has given to each other must be returned back.

 The last paragraph of 1191 is very important because there is that PRINCIPLE OF MUTUAL
RESTITUTION when it is specific object is to be returned and that specific object has already been
transferred to a third party who has received it in good faith, then obviously, the party who has that obligation
to return that specific object can no longer do that. If that’s the case, the rule is that the obligation of that
party will be converted into an obligation to PAY DAMAGES. XPN: Generic objects because generic objects
are not capable of being lost- you can always replace them.
ARTICLE 1192

 What’s the consequence if both of them violated their respective obligations?

o Then both are incompensated others. The consequence is not to make the valid the
obligation BUT to terminate the obligation- if the evidence will not show which party first
violated their obligation. BUT if the identity of the first violator is know, he shall be
responsible. He should be the one liable for damages but his liability may be mitigated by
reason of the subsequent breach of the other party.
o Central Bank V. CA – the borrower was still required to pay because there was a violation
on the part of the borrower- the non- payment of interest. The interest here is NOT
compensatory and but monetary so w/n there is breach, they are obligated to pay the the
monetary interest. But since there is breach, then he has to pay the interest by reason of the
breach. BUT since the bank has also breach, then these damages were considered as
mutually compensated. BUT with regard to damages

ARTICLE 1193

 What are obligations with a period?

o It is an obligation in which the demandability or extinguishment of which is dependent
upon the arrival of that day certain. A period is a day certain and a day certain is that day
which must necessarily come although there is no knowledge when it will arrive.
 Distinguish a period from condition
o Period is only concerned with the demandability. It has nothing to do with the efficacy of
the obligation.
o In period, there is that existing obligation- you can’t just demand it.
 Example of impossible periods
o To deliver a car on February 31
o To deliver a car on April 50, 2019
 KINDS OF PERIODS
o Definite- the arrival of which is known EX. tomorrow
o Indefinite- EX. the day that I will die

o Suspensive & Resolutory

o Judicial- when it is the Court who fixes the period

o Legal period- EX. payment of taxes

ARTICLE 1994 - 1995

 Article 1189
 Why is the payment considered premature?
o Because the payment was given before the obligation to pay is due and demandable
because the period is yet to arrive. If that happens, what is the right of the obligor? The
obligor has the right to recover what has been prematurely paid.
o Is it always the rule that when there’s premature payment, the obligor is entitled to the
return of that object delivered?
 -NO. He must have no knowledge as to the maturity of the obligation to invoke
this.
o In case that he is in good faith, what can he recover?
-The object that was delivered including the fruits and interest. What’s the extent
of the recovery of the fruits and interest? Until the day that the thing is actually returned to
him OR the date of the maturity of the obligation- whichever comes first. Because if the
object is returned prior to the arrival of the period, then the fruits and interest earned from
the date of the premature delivery up to the actual return will be the one that will be returned
by the obligor.
o How about if that obligor has failed to give back the object and it’s now the maturity of the
obligation so there’s no question anymore that the principal object can no longer be
returned because the period has already arrived. BUT how about the fruits and interest? It
may be delivered and it will be counted from anything that is earned by that object from
the time of the premature delivery up to the arrival of the period. Whatever that object will
earn after the arrival of the period will now pertain to the obligor.

 Are we saying that once there’s premature delivery, (assuming that obligee has no knowledge with regard to
the maturity of the obligation), the fruits and interest must automatically be returned by the obligee?
o NO. You have to determine the good faith and bad faith of the obligor.
 Do they have to return ALL the fruits and interest? NO. The Principle of Solutio Indebiti. The rule is that
when that obligee receives the premature delivery in good faith (without knowledge), his obligation to return
fruits and interests will be limited to those fruits and interests which ACTUALLY benefited him. BUT when
he is in bad faith, he is now obligated to return ALL fruits and interest that the object earned from the date of
premature delivery up to the arrival of the period.

ARTICLE 1196

 Everytime that there is a period designated in an obligation, it is presumed that it is established for the benefit
of both.
 Examples – de Leon.
 Favorable to the creditor because the debtor cannot compel him to accept the payment before the arrival of
the period.
 When can you say that a period contained in an obligation is for the sole benefit of the debtor or creditor?
o EXAMPLES – de Leon.
 If there’s interest stipulated, will it no longer be for the benefit of the debtor and it is only for the benefit for
the creditor?
o NO. Because the option to make use the benefit of the period is only on that debtor. The
better benefit that the obligee has gotten by reason of the delay or by reason of the fact that
he earned interest is merely incidental BUT the point is he cannot make use of the benefit
of the period. In other words, he cannot compel the obligor to pay if that obligor doesn’t
want to pay. You, the debtor is benefited because of the benefit of the period. The creditor
cannot make use of the benefit of the period. But for the debtor, he may choose to pay the
obligation before the arrival of the period.
o The creditor will always benefit from the obligation as long as there is interest.
REGARDLESS WHETHER THERE IS PERIOD OR NO PERIOD IN THE
OBLIGATION. Gonzi’s point is who can make use of that period. The person who can
make use of that period is the person who benefited from that period.
 Example of a period that is exclusively for the benefit of the creditor.
  Gonzi: The test for him is whoever is able to make use of that period is the one that is benefited. In a period
that is fixed, like I will pay you on Tuesday- it is for the benefit of both the creditor and debtor. BUT if there’s
a stipulation that the option to accelerate payment is on the creditor, then it is for the exclusive benefit because
the creditor can make use of the period. These examples are regardless of the incidentals- whether the loan
or obligation owns interest or not. Because there are several obligations- law on transactions is just one of
them so why would we base the benefit from the presence of interest. How about the obligations which are
not subject to interest? THIS IS DIFFERENT FROM DE LEON AND TOLENTINO!!!! THIS IS GONZI’S
OPINION.
 EXAMPLES which are solely for the benefit of the debtor.
 EX. A and B has an obligation 1 year from now. There’s a period there. But there’s also a stipulation from
the parties that the creditor can demand payment after 6 months – this is an example of a period that is for
the sole benefit of the creditor because he may demand the payment earlier and the debtor cannot compel the
creditor to accept payment earlier than the arrival of the period BUT if the stipulation from the parties that
the creditor can demand payment after 6 months and the debtor may choose to pay after 6 months, then it is
both for the benefit of the creditor and debtor.

ARTICLE 1197

 There are certain obligations which do not state specific period, and according to 1197, an obligation based
from its nature and circumstances, etc., has no period, it shall be presumed that the parties involved agreed
with a period for the compliance of their obligation. Assuming that they cannot agree on a period, the Court
will fix the period. It is important to establish the intention of the parties because there may be cases that the
absence of a period is because of the lack of intention on the part of the parties to establish one. If no period,
it is presumed that the obligation is demandable at once. To make it a pure obligation.
 Example of an obligation without a fixed period therein but it can be inferred from the intention of the parties
to have a period- building of a house, contractual employment.
 EX. “I will commit to give you 50K”- demandable at once; “I will commit to give you 50K for your tuition
fee next year.”- not demandable at once; there is a period- enrolment next year.
 LAST PARAGRAPH OF 1197- what is the duration of the period? The Courts will determine as may under
the circumstances, nature have been probably contemplated by the parties. Barretto V. City of Manila.

ARTICLE 1198

 1st- insolvency does not need to be declared by the Court for as long as the creditor can establish that the
debtor’s assets are way less than his liabilities, then he can already demand the full payment even if the arrival
of the period is yet to arrive. XPN: Can you still make use of the period if you are insolvent? YES. If he
furnish to the creditor guaranties or securities.
 2nd- mere failure to furnish is enough
 3rd- 2 situations. XPN: unless he immediately gives new ones equally satisfactory.
 4th- A situation where the obligation is a pure obligation (demandable at once) but by reason of a collateral
commitment undertaking made by the debtor, the obligation is converted into an obligation with a period.
The creditor agreed to enter into the obligation because of the promise of debtor to undertake a certain act
but failed to do so.
 5th- hide, escape to avoid his obligation.