Erneylou V Ranay February 15, 2023

Civil Law Review 2

1. Robes-Francisco Realty & Dev. Corp. v CFI and Millan, 86 SCRA 59

Doctrine: The contract of sale in this case, which stipulates payment of interest at 4% per annum
in case vendor fails to issue a certificate of title to vendee, is not a penal clause. The said clause
does not convey any penalty for even without it, the Millan would be entitled to recover the
amount paid by her with legal rate of interest which is even more than the 4 % provided for in
the clause, pursuant to Article 2209 of the Civil Code.

2. Pryce Corporation v Philippine Amusement and gaming Corp. 458 SCRA 164
Doctrine: A penal clause is "an accessory obligation which the parties attach to a principal
obligation for the purpose of insuring the performance thereof by imposing on the debtor a
special prestation (generally consisting in the payment of a sum of money) in case the obligation
is not fulfilled or is irregularly or inadequately fulfilled."

In the case at bar, the first exception applies because Article XX (c) provides that, aside from the
payment of the rentals corresponding to the remaining term of the lease, the lessee shall also
be liable "for any and all damages, actual or consequential, resulting from such default and
termination of this contract."

3. SSS v Moon Walk Development & Housing Corp., G.R. No. 73345, April 7, 1993
Doctrine: A penal clause is an accessory undertaking to assume greater liability in case of
breach. 6 It has a double function: (1) to provide for liquidated damages, and (2) to strengthen
the coercive force of the obligation by the threat of greater responsibility in the event of breach.
From the foregoing, it is clear that a penal clause is intended to prevent the obligor from
defaulting in the performance of his obligation. Thus, if there should be default, the penalty may
be enforced.

4. Ligutan v Court of Appeals, 376 SCRA 560

Doctrine: A penalty clause, expressly recognized by law, is an accessory undertaking to assume
greater liability on the part of an obligor in case of breach of an obligation. It functions to
strengthen the coercive force of the obligation and to provide, in effect, for what could be the
liquidated damages resulting from such a breach. The obligor would then be bound to pay the
stipulated indemnity without the necessity of proof on the existence and on the measure of
damages caused by the breach. Although a court may not at liberty ignore the freedom of the
 parties to agree on such terms and conditions as they see fit that contravene neither law nor
morals, good customs, public order or public policy, a stipulated penalty, nevertheless, may be
equitably reduced by the courts if it is iniquitous or unconscionable or if the principal obligation
has been partly or irregularly complied with.

5. Suatengco v Reyes, 574 SCRA 187

Doctrine: Liquidated damages are those agreed upon by the parties to a contract to be paid in
case of breach thereof. The stipulation on attorney’s fees contained in the said Promissory Note
constitutes what is known as a penal clause. A penalty clause, expressly recognized by law, is an
accessory undertaking to assume greater liability on the part of the obligor in case of breach of
an obligation. It functions to strengthen the coercive force of obligation and to provide, in effect,
for what could be the liquidated damages resulting from such a breach. The obligor would then
be bound to pay the stipulated indemnity without the necessity of proof on the existence and
on the measure of damages caused by the breach. It is well-settled that so long as such
stipulation does not contravene law, morals, or public order, it is strictly binding upon the
obligor.

6. Boysaw v Interphil Promotions, Inc., 148 SCRA 636

Doctrine: Where one party did not perform the undertaking which he was bound by the terms
of the agreement to perform, he is not entitled to insist upon the performance of the contract
by the other party, or recover damages by reason of his own breach. Under the law, when a
contract is unlawfully novated by an applicable and unilateral substitution of the obligor by
another, the aggrieved creditor is not bound to deal with the substitute.

7. City of Manila v Intermediate Appellate Court, 179 SCRA 428

Doctrine: The superior or employer must answer civilly for the negligence or want of skill of its
agent or servant in the course or line of his employment, by which another who is free from
contributory fault, is injured. Municipal corporations under the conditions herein stated, fall
within tile operation of this rule of law, and are liable accordingly, to civil actions for damages
when the requisite elements of liability co-exist.

Obligations arising from contracts have the force of law between the contracting parties. Thus a
lease contract executed by the lessor and lessee remains as the law between them. Therefore, a
breach of contractual provision entitles the other party to damages even if no penalty for such
breach is prescribed in the contract.
8. Gov’t of the Philippine Islands v Herrero, 38 Phil 410
Doctrine: In the case at bar, the demand that Robles produce the firearm for inspection is not a
demand for its delivery. Obligations imposing penalties and forfeitures must be strictly
construed, for it is well-settled that sureties are only chargeable according to the strict terms of
the bond. The terms of their contract are those which measure the extent of their liability.
While it is quite probable, upon the facts disclosed by the evidence, that had Robles' license
been revoked and demand made upon him for the surrender of the revolver, it would not have
been produced, that does not alter the fact so far it has only been made to appear that he has
failed to comply with the demand that his license and the revolver be produced for verification
and inspection.

9. Titan Construction Corp v Uni-Field Enterprises, 517 SCRA 180

Doctrine: Contracts are perfected by mere consent; the stipulations of the contract being the
law between the parties, courts have no alternative but to enforce them as they are agreed
upon and written, there being no law or public policy against the stipulated provisions.

The attorney’s fees here are in the nature of liquidated damages and the stipulation therefor is
aptly called a penal clause. It has been said that so long as such stipulation does not contravene
law, morals, or public order, it is strictly binding upon defendant. The attorney’s fees so
provided are awarded in favor of the litigant, not his counsel.