SECTION VI

STUDY GUIDE
Caliwan, Milette S

BFN-B1P

Prof. Masangkay
I. Definitions
Define or give the meaning of the following:
1. Obligation with a penal clause - one which contains an accessory undertaking to
pay a previously stipulated indemnity in case of breach.
2. Penal clause - an accessory undertaking attached to an obligation to assume
greater liability in case of breach.
3. Joint penal clause - both the principal obligation and the penal clause can be
enforced
II. Discussions
1. What are the purposes of incorporating a penal clause to an obligation?
 According to Art.1226, penal clauses are incorporated to obligations to
ensure their performance (to make the consequence of breach as
onerous as possible) and to substitute penalty for indemnity for damages
and payment of interests in noncompliance. The main purposes are
reparation and punishment.
2. In an obligation with a penal clause, may the creditor still recover damages and
interests in addition to the stipulated penalty?
 According to Art.1226, the creditor may still do so if it is stipulated by the
parties, the obligor refuses to pay the penalty (in which case the creditor
may recover legal interest thereon), or the obligor is guilty of fraud in the
fulfillment of the obligation (in which case the creditor may recover
damages caused by such fraud).
3. In what cases may the debtor validly object to the enforcement of the stipulated
penalty?
 According to Art.1227, debtor may object the enforcement of penalty if
there is performance on his part or if the creditor already required
fulfillment of obligation.
III. Problems
Explain or state briefly the rule or reason for your answer.
1. X promises to deliver to Y a specific horse. Their contract contains a penal clause
that in case of non-fulfillment, X shall pay a penalty of P10,000. X wants to just
pay that penalty instead of delivering the horse. Has Y the right to refuse to
accept the penalty in lieu of the horse?
 Yes. According to Art.1227, X cannot exempt himself from delivering the
horse by paying the penalty, unless this right was reserved for him.
2. In the same problem, X was able to show that Y did not suffer any damage by X’s
violation of his obligation. Can Y still enforce the penalty?
 Yes. According to Art 1228, Y does not have to prove that he suffered
damages in order to demand the penalty. Since X violated the obligation,
Y can enforce the penalty.
3. In the same problem, suppose X was guilty of negligence in the fulfillment of his
obligation. Is X liable for damages in addition to the penalty?
 No. According to Art.1226, X will only be liable for damages if the
stipulations so states, if X refuses to pay the penalty, or when there is
fraud on X’s part. Since there is only negligence and not fraud, Y cannot
demand for damages in addition to the penalty and X is only liable for the
penalty.