STUDY GUIDE: Arts.

1226-1230 (Obligations with a Penal Clause)

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CHAPTER 3, Section 6
Obligations with a Penal Clause
(Arts. 1226-1230)

1. Distinguish between a principal and an accessory

obligation. –

(a) Principal Obligation – one which can stand by

itself and does not depend for its validity and
existence upon another obligation.

(b) Accessory Obligation – one which is attached to

a principal obligation and, therefore, cannot
stand alone.

1. Obligation with a penal clause – an obligation

which contains an accessory undertaking to pay a
previously stipulated indemnity in case of breach.

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2. Penal Clause - an accessory undertaking to assume

greater liability in case of breach. It is attached to the
principal obligation in order to insure its performance.

3. Kinds of penal clauses:

(a) As to its origin :

¤ Legal – when it is provided by law; and

¤ Conventional – when it is agreed upon

by the parties.

(b) As to its purpose:

¤ Compensatory (Art. 1226) – when the

penalty takes the place of damages.

¤ Punitive – when the penalty is imposed

merely as punishment for breach.

(c) As to its demandability or effect:

¤ Subsidiary or alternative – when only the

penalty will be enforced in case of
breach.

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¤ Joint, cumulative or complementary –

when both the principal obligation and
the penal clause can be enforced.

4. ART. 1226. –

(a) GENERAL RULE: As a general rule, in an

obligation with a penal clause, the penalty takes the place
of the indemnity for damages and the payment of
interests in case of non-compliance. (Art. 1226, par. 1)

(b) EXCEPTIONS: Additional damages (aside

from the penalty), however, may be recovered under the
following instances: (Art. 1226, par. 2)

(b.1.) When the parties expressly agree that damages

or interest may still be recovered despite the presence of
the penal clause.

(b.2.) When the debtor refuses to pay the penalty

imposed in the obligation, in which case the creditor may
recover legal interest thereon pursuant to Art. 2209 of the
Civil Code.

(b.3.) When the debtor is guilty of fraud in the

fulfilment of the obligation. The creditor, however, must

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prove the facts constituting the fraud in order to be able to

recover damages on said ground.

2. What are the instances when the debtor is not

liable to the creditor for the payment of the penalty? –

(a) When the breach of contract is due to the

fault of the creditor.

(b) When a fortuitous event intervenes.

(c) When the debtor is not yet in default.

5. ART. 1227. – The rationale for this provision is that

the precise purpose of the penalty is to secure the
performance of the principal obligation.

(a) The GENERAL RULE is that the debtor is

NOT ALLOWED to just pay the penalty instead of fulfilling
the obligation. He may, however, be EXPRESSLY granted
by the creditor the right to refrain from the execution of
the contract by a forfeiture of the penalty. (Art. 1227, 1st
sentence)

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 Rationale: If the debtor can choose to just pay the

penalty instead of fulfilling his obligation, this would in
effect make the obligation an alternative one.

(b) The penal clause is presumed to be

SUBSIDIARY or ALTERNATIVE and NOT JOINT or
CUMULATIVE (Art. 1227, 2nd sentence). – The GENERAL
RULE is that the creditor does NOT have the right to
demand fulfilment of the obligation and the penalty at the
same time. The creditor, however, may jointly demand
performance and payment of the penalty:

(b.1.) If the right has been clearly granted to him.

(Art. 1227, 2nd sentence)

(b.2.) If, after having required fulfilment, the

performance of the obligation should have
become impossible with the debtor’s fault, the
creditor may enforce payment of the penalty.
(Art. 1227, 3rd sentence)

6. ART. 1228 – Proof of actual damages suffered by

the creditor is NOT necessary in order that the penalty
may be demanded.

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(a) To be able to recover the penalty, all that the creditor

has to prove is that the debtor committed a breach of
his obligation.

(b) As long as there has been a breach, the creditor may

enforce the penalty whether he suffered damages or
not.

(c) The creditor, however, cannot recover more than the

penalty agreed upon, even if he proves that the
amount of his damages exceeds the penalty.

(d) Then again, in any of the three exceptions when

damages may be recovered by the creditor in addition
to the penalty (Art. 1226, 2nd sentence), the creditor is
required to prove the amount of damages he actually
suffered resulting from the debtor’s breach of the
principal obligation.

7. ART. 1229 – When can the court reduce the

penalty provided for in the penal clause?

(a) When there is partial performance of the principal

obligation.

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(b) When there is irregular performance of the principal

obligation.

(c) When, although there has been no performance of the

principal obligation, the penalty is iniquitous or
unconscionable.

8. ART. 1230 –

(a) If the principal obligation is null and void, the penal

clause (which is an accessory obligation) will have no
more use for existence, and is therefore also
considered null and void. “The accessory follows the
principal.” (2nd paragraph)

(b) On the other hand, nullity of the penal clause does not
make the principal obligation void. Reason: The
principal obligation can stand alone, and the void penal
clause (which is subordinate to the principal obligation)
will simply be disregarded. (1st paragraph)

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APPLICATION/PROBLEMS:

1. On 15 January 2022, Darryl obliged himself to

deliver to Carlita on 15 March 2022 his BMW car worth P8
million. Darryl also bound himself to pay Carlita the
amount of P100,000.00 as penalty should he default in the
performance of his obligation. In another contract, Carlita
obliged herself to deliver the BMW car to Manuel, who
was interested to buy it for P8.5 million. On 20 February
2022, Darryl drove the BMW car after having a few drinks
with his friends in a birthday party. Darryl beat the red
light and collided with a ten-wheeler truck. Darryl
survived the accident, but the BMW car was crashed
beyond recognition and repair. On 15 March 2022, Darryl
could not deliver the car to Carlita as promised. Hence,
Carlita lost P500,000.00 because her deal with Manuel
could not push through. Carlita then sought to hold Darryl
liable for the actual damages suffered by her in the
amount of P500,000.00. Under the facts, how much will
Darryl be liable to Carlita under their contract?
(Art. 1226)

2. Virgie obliged herself to pay Jun P500,000.00 on

15 September 2021, with a penalty of P10,000.00 per
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month if she fails to pay on time. On 15 May 2022, since

Virgie had not paid her obligation yet, Jun demanded
payment from her in the amount of P500,000.00 plus
P80,000.00 penalty interest. Virgie, however, avers that
she should pay Jun only the amount of P500,000.00 plus
legal interest of 6% per annum as provided by law
corresponding to eight months from 15 September 2021
to 15 May 2022 – equivalent to P20,000.00. Under the
facts and the law applicable, how much is Jun entitled to
collect from Virgie on 15 May 2022? (Art. 1226)

3. On 1 May 2022, Damian obliged himself to repaint

the car of Corina, for a consideration of P150,000.00, and
to finish it within 30 days. It was also agreed by the parties
that if Damian is not able to finish the repainting job in 30
days, Damian will pay Corina a penalty of P15,000.00. On
the eighth day of repainting, Damian informed Corina that
his daughter was treating him to a 45-day European tour.
Hence, Damian offered to pay Corina the P15,000.00
penalty because he could no longer proceed with the
repainting job as he was expected to fly in four (4) days.
Corina, however, refused to accept the P15,000.00, and
insisted that Damian finish the job as agreed upon. Is
Corina legally justified in her demands? (Art. 1227)

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4. Edgar, a faculty member of a university, is sent on

a scholarship grant under the faculty development
program of the school to pursue a doctorate degree in
another school. The contract stipulates that for every two
years of study under the grant, Edgar is required to render
one year of return service, and that if Edgar violates the
contract, his employment in the university will be
terminated. After four years of study, Edgar finishes his
doctorate degree. He then writes the university and,
invoking the scholarship contract, he offers that his
employment in the university be terminated. Under the
facts, may Edgar be compelled to render return service to
the university? (Art. 1227)

5. Engr. Deogracias obliged himself to construct a

chapel for Fr. Carlito for P3.5 million. The building contract
carried with it a penal clause to the effect that in case of
breach with his obligation, Engr. Deogracias will be liable
to pay Fr. Carlito a penalty of P350,000.00. When the
chapel was two weeks away from completion, Fr. Carlito
detected some discrepancies in the construction. It was
discovered that major portions of the chapel were not
constructed according to the specifications in the parties’
building contract. Hence, Fr. Carlito refused to pay his

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unpaid balance of P800,000.00 to Engr. Deogracias, and

filed a case against Engr. Deogracias to recover the
P350,000.00 penalty for breach of contract. Are the
actions of Fr. Carlito legally justified under the factual
circumstances of this case? (Art. 1227)

6. Madig-on Furnitures undertook to deliver to

Juliana a narra twelve-seater dining set for the contract
price of P300,000.00. The parties’ agreement had a penal
clause stating that any violation of the contract would
entitle the aggrieved party to damages in the amount of
P30,000.00. Three days after Juliana received delivery of
the dining set, she was told by a friend who visited her
house that her dining set was not made of narra but of
another wood of inferior quality. Juliana then filed suit to
recover damages. In the hearing, she was able to prove
that because of the inferior quality of the dining set, she
suffered actual damages amounting to P150,000.00. She
then prayed that the court order Madig-on Furnitures to
pay her the P150,000.00 actual damages plus the
P30,000.00 penalty, or a total of P180,000.00. Will the
court be legally justified in granting the prayer of Juliana?
(Art. 1228)

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7. Dana promised to deliver to Rommel 600 bottles

of sparkling wine worth P800,000.00 for the 80th birthday
celebration of his mother. It was stipulated by the parties
that if Dana fails to deliver on the day agreed upon, she
will be liable to Rommel a penalty of P50,000.00. On the
day of the celebration, Dana was able to deliver only 580
of the 600 bottles promised. Hence, Rommel filed an
action against Dana to recover the penalty of P50,000.00
as stipulated in the parties’ contract. Is Rommel’s action
legally justified? (Art. 1229)

8. Daniel obliged himself to sell to Chloe for

P65,000.00 his Australian kangaroo which was then
pregnant. It was agreed upon by the parties that Daniel
would deliver the kangaroo to Chloe after it gave birth or,
in default thereof, to pay a penalty of P8,000.00.
However, the kangaroo died while giving birth to its joey.
Hence, Daniel was not able to make good his obligation to
Chloe. In view of the non-delivery of the kangaroo, Chloe
filed an action against Daniel for the recovery of the
penalty of P5,000.00 as stipulated by the parties in their
contract. Does Chloe’s action have legal basis?
(Art. 1230)

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 END OF LECTURE 

HAPPY READING & LEARNING! 

Prepared by:

Atty. Harriet B. Reyes-Linsangan

21 May 2022 (Saturday)

FOOD FOR THOUGHT

Our greatest glory is not in never failing, but in rising

every time we fall.

When it is obvious that the goals cannot be reached,

don’t adjust the goals, adjust the action steps.

Confucius

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