Obligations

Joint and Solidary Obligations

Art. 1207, NCC
The concurrence of two or more creditors or of two or more debtors in one and the
same obligation does not imply that each one of the former has a right to demand,
or that each one of the latter is bound to render, entire compliance with the
prestation. There is a solidary liability only when the obligation expressly so states,
or when the law or the nature of the obligation requires solidarity.
 Obligations
Joint Obligation
Defined as an obligation where there is a concurrence of several creditors, or of
several debtors, or of several creditors and debtors, by virtue of which each of the
creditors has a right to demand, and each of the debtors is bound to render,
compliance with his proportionate part of the prestation which constitutes the
object of the obligation.
Other terms
joint or jointly
conjoint means mancum or mancomunada
mancomunada simple
pro rata obligation / proportionate
 Obligations
Effects of Joint Obligation
1. The defect of each obligation arising from the personal defect of a particular
joint debtor or joint creditor does not affect the obligation or right of the other
parties.
2. Insolvency of one joint debtor does not make the other joint debtor or debtors
responsible for his proportionate share
3. The demand by the creditor or creditors on one joint debtor puts him in delay
in case of non-payment while the other joint debtor or debtors are not liable.
4. The defenses of one joint debtor are not necessarily available to the other joint
debtor or debtors.
 Obligations
Example of Joint Obligation
B and C owes X and Y the amount of P100,000.00.

It means that B's share in the obligation is P50,000 so that he will only pay X
P25,000 and another P25,000 to Y. This is the same with C.
As to X, his credit is P50,000 so that he can only demand from B the amount of
P25,000 and from C the other P25,000. This is the same with Y.
 Obligations
Solidary Obligation
An obligation where each one of the debtors is bound to render and/or each of the
creditors has a right to demand entire compliance with the prestation.
Other terms
Joint and several or several
in solidum
mancomunada solidaria
juntos o separadamente
individually and collectively
 Obligations
Example of Solidary Obligation
B and C owes X and Y the amount of P100,000.00. Their agreement is solidary.

B or C can pay the entire amount of P100,000 subject to reimbursement so that

if it is B who paid the P100,000 to X, B can ask reimbursement of P50,000 from
C.
If X received the amount of P100,000, it is his obligation to give the P50,000 to
Y.
 Obligations
Example of Joint and Solidary Obligation
B, C, and D are solidarily liable to X, Y, and Z, joint creditors in the amount of
P90,000. How much can Z collect from D?

What if the debtors are B, C, D, and E, joint debtors of X and Y, solidary creditors
to the amount of P500,000. How much can X collect from C?
 Obligations
Solidarity not presumed
Art. 1208, NCC.
If from the law, or the nature or the wording of the obligations to which the
preceding article refers the contrary does not appear, the credit or debt shall be
presumed to be divided into as many shares as there are creditors or debtors, the
credits or debts being considered distinct from one another, subject to the Rules of
Court governing the multiplicity of suits.

General rule: Obligation is joint

 Obligations
Exception to the general rule:
The obligation is solidary when:
1. The obligation expressly so states that there is solidarity
2. The law requires solidarity
3. Nature of the obligation requires solidarity
 Obligations
Joint indivisible obligation
Art. 1209, NCC.
If the division is impossible, the right of the creditors may be prejudiced only by
their collective acts, and the debt can be enforced only by proceeding against all
the debtors. If one of the latter should be insolvent, the others shall not be liable for
his share.
The above article refers to a joint indivisible obligation wherein the nature of the
rights and obligations of the parties are joint and the nature of the obligation is
indivisible.
Indivisible obligation - those the obligation is to give definite things and those
which are not susceptible of partial performance
 Obligations
Joint indivisible obligation
Example:
A, B, and C are jointly liable to give D a car valued at P240,000. On the date of
delivery, A and B are willing to deliver but C is not.
D has no cause of action against C for the deliver of the car because, as a
joint debtor, C is liable only for a proportionate part of the obligation which is
P80,000.
Since the car is indivisible, the debt can only be enforced by proceeding
against all the debtors for compliance is not possible unless they act
together.
 Obligations
Joint indivisible obligation
Example:
A, B, and C are jointly liable to give D a car valued at P240,000. On the date of
delivery, A and B are willing to deliver but C is not.
Pursuant to Art. 1224, NCC, the liability is converted into one for damages. So
A, B, and C will be liable for P80,000 each or a total of P240,000 which is the
value of the car without increase of responsibility for A and B.
C, the unwilling debtor, shall be liable for damages to D for having violated
the obligation.
 Obligations
Joint indivisible obligation
Example:
A, B, and C are jointly liable to give D a car valued at P240,000. On the date of
delivery, A and B are willing to deliver but C is not.
If A and B suffered damages by reason of the non-fulfillment by C, they may
recover them from C.
Should anyone of the debtors be insolvent, the others shall not be liable for
their share. (Art. 1209) D must wait until the insolvent debtor can pay.
 Obligations
Characteristics of Joint indivisible obligation
1. No joint creditor can act in representation of the other joint creditor or
creditors.
All of the creditors must make a demand for the fulfillment of the obligation
otherwise, the debtor or debtors may legally refuse to deliver or he can insist
that all of the creditors must receive the thing otherwise, he may deposit the
thing by way of consignation.
2. No joint debtor can be compelled to fulfill the obligation of the other joint
debtor or debtors.
If there are two or more joint debtors, the fulfillment of the obligation
requires the concurrence of all the debtors.
 Obligations
Effect of Breach of Joint indivisible obligation
The obligation is converted into an indemnity for damages. (Art. 1224, NCC)
The joint debtors who failed or refused to comply with his obligation shall bear
the burden of paying all of the damages to the creditor or joint creditors.
Those joint debtors who may have been ready to comply with their obligation
shall not contribute to the indemnity beyond the corresponding portion of the
price of the thing or the value of the service in which the obligation consists.
 Obligations
Solidarity not presumed
Art. 1210, NCC.
The indivisibility of an obligation does not necessarily give rise to solidarity. Nor
does solidarity of itself imply indivisibility.
The reason is that solidary obligations are very burdensome for they create
unusual rights and liabilities.
 Obligations
Indivisibility and Solidarity, Distinguished
Indivisibility Solidarity

Refers to the prestation that is not capable of partial

Refers to the juridical tie or legal tie or vinculum juris
performance

Exists even if there is only one debtor and one Exists only if there are two or more debtors or two
creditor or more creditors

Each debtor is bound to the fulfillment or

Each debtor is not bound to fulfill the obligation more
compliance of the entire obligation and each
than his share and each creditor cannot demand
creditor may demand the fulfillment or compliance
fulfillment of the obligation more than his share
of the entire obligation
 Obligations
Indivisibility and Solidarity, Distinguished
Indivisibility Solidarity

In case of breach, the obligation is converted into In case of breach, the solidary character of the
indemnity for damages obligation remains

Only the debtors guilty of breach of the obligation All the debtors are liable for damages even if only
are liable for damages one of them is guilty of breach of the obligation

If one debtor is insolvent, all the other debtors who

If one debtor is insolvent, the other debtors are not
are solvent are proportionately liable for the share of
liable for his share
the former
 Obligations
Kinds of Solidarity
1. As to source
a. Legal solidarity - imposed by law
b. Conventional solidarity - agreed upon by the parties
c. Real solidarity - imposed by the nature of the obligations
2. As to the parties bound
a. Active solidarity - solidarity of creditors
b. Passive solidarity - solidarity of debtors
c. Mixed solidarity - solidarity among the debtors and creditors
 Obligations
Effects of beneficial acts and prejudicial acts of a solidary creditor
Art. 1212, NCC.
Each one of the solidary creditors may do whatever may be useful to the others,
but not anything which may be prejudicial to the latter.
The rule is based on the theory of mutual agency (i.e., right of one to act for and
in the name of the others) among the solidary creditors.
Example:
A owes B and C, solidary creditors, the sum of P10,000.00. B may make a demand for the
payment of the obligation for this will benefit C.
In case of remission or condonation effected by B, the obligation will be extinguished but
since C cannot be prejudiced by the remission, B has to reimburse for the latter's share.
 Obligations
Assignment by solidary creditor of his rights (Art. 1213, NCC)
General rule:
A solidary creditor cannot assign his rights.

Exception:
The assignment is allowed if it is with the consent of all the other solidary creditors.

Assignment: the transfer of a right from one party to another

 Obligations
Payment to any of the solidary creditors (Art. 1214, NCC)
General rule:
The debtor may pay any one of the solidary creditors.

Exception:
If a demand, judicial or extrajudicial, has been made by one of the solidary creditors,
payment should be made to him.
 Obligations
Liability of solidary creditor in case of novation, compensation, confusion, or
remission (Art. 1215, NCC)
Art. 1231, NCC.
Obligations are extinguished:
1. By payment or performance
2. By the loss of the thing due
3. By the condonation or remission of the debt
4. By the confusion or merger of the rights of creditor and debtor
5. By compensation
6. By novation
 Obligations
Liability of solidary creditor in case of novation, compensation, confusion, or
remission (Art. 1215, NCC)
Novation - changing the object or principal conditions, or by substituting the
person of the debtor, or by subrogating a third person in the rights of the
creditor
Compensation - takes place when two persons, in their own right, are creditors
and debtors of each other
Confusion/Merger of rights - the characters of creditor and debtor are merged
in the same person
Remission/condonation - the obligee renounces the enforcement of the
obligation
 Obligations
Liability of solidary creditor in case of novation, compensation, confusion, or
remission (Art. 1215, NCC)

The solidary creditor, who may have executed any of the acts of novation,
compensation, confusion, or remission, shall be liable to the other solidary
creditor or creditors for the share in the obligation corresponding to the latter.
If the solidary creditor collected the debt, he is also liable to the other solidary
creditor or creditors for the share in the obligation corresponding to the latter
because the obligation was extinguished by payment.
 Obligations
Effect of novation, etc., where obligation is joint

In a joint obligation, the causes of modification or extinction of obligation does

not extinguish or modify the obligation except with respect to the creditor or
debtor affected, without extending its operation to any other part of the debt or
of the credit.
Example:
A, debtor, and B, C, D, joint creditors in the amount of P30,000.00. If B validly
condones the debt, it will affect only the share of B in the amount of P10,000.00. So
A is still indebted to C and D in the amount of P20,000.00.
 Obligations
Right of creditor to proceed against any solidary debtor
Art. 1216, NCC.
The creditor may proceed against any one of the solidary debtors or some or all of
them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long
as the debt has not been fully collected.
Example:
A, B, and C solidarily owe D the amount of P30,000.00. D can collect from A or B or C alone,
or from any two of them, or all of them simultaneously.
If A pays D P10,000.00, the latter can still go against all of them for the balance as long as
the debt has not been entirely satisfied.
 Obligations
Effects of payment by a solidary debtor (Art. 1217, NCC.)
1. Between the solidary debtors and creditor(s)
Payment made by one of the solidary debtor extinguishes the obligation
If two or more solidary debtors offer to pay, the creditor for his protection is
given the right to choose which offer to accept.
2. Among the solidary debtors
The paying solidary debtor can demand reimbursement from his co-debtors
for their proportionate shares with interest only from the time of payment
3. Among the solidary creditors
The receiving creditor is jointly liable to the others for their corresponding
shares.
 Obligations
Effects of payment by a solidary debtor (Art. 1217, NCC.)
Payment - means not only the delivery of money but also the performance, in
any other manner, of the obligation
Payment by one of the solidary debtors extinguishes the obligation
A debt shall not be understood to have been paid unless the thing or service
in which the obligation consists has been completely delivered or rendered,
as the case may be.
 Obligations
Effects of payment by a solidary debtor (Art. 1217, NCC.)
Example:
X, Y, and Z solidarily obliged themselves to pay P450,000 to B on December 31,
2020. If Z offered to pay and thereafter ask for reimbursement from X and Y their
share in the obligation which is P150,000 each.
What if on due date both X and Y are offering to pay the entire amount of the
obligation?
What if X paid the total obligation on October 31, 2020?
What if after X paid the obligation, Z also become insolvent on due date?
 Obligations
Effects of payment after obligation has prescribed or become illegal
Art. 1218, NCC.
Payment by a solidary debtor shall not entitle him to reimbursement from his co-
debtors if such payment is made after the obligation has prescribed or become
illegal.
Prescription - one acquires ownership and other real rights through the lapse of
time in the manner and under the conditions laid down by law.
rights and conditions are lost by prescription
actions prescribe by the mere lapse of time fixed by law
 Obligations
Effects of payment after obligation has prescribed or become illegal
Prescriptive periods of actions
The following actions must be brought within 10 years from the time the right of
action accrues:
a. Upon a written contract
b. Upon an obligation created by law
c. Upon a judgment (Art. 1144, NCC)
The following actions must be commenced within six (6) years:
Upon an oral contract
Upon a quasi-contract (Art. 1145, NCC)
 Obligations
Effects of payment after obligation has prescribed or become illegal
Prescriptive periods of actions
The following actions must be brought within 4 years from the time the right of
action accrues:
a. Upon an injury to the rights of the plaintiff
b. Upon a quasi-delict (Art. 1146, NCC)
 Obligations
Effects of remission of share after payment
Art. 1219, NCC.
The remission made by the creditor of the share which affects one of the solidary
debtors does not release the latter from his responsibility towards the co-debtors,
in case the debt had been totally paid by anyone of them before the remission was
effected.
If remission is made previous to the payment and payment is made, solutio
indebiti arises.
The purpose of the article is to forestall fraud whereby the debt having been
paid, the creditor, who does not stand to suffer any loss or damage, remits the
share of a particular debtor.
 Obligations
Effects of remission of share after payment
Example:
X and Y solidarily obliged themselves to pay B and C the amount of P150,000. Later,
B remitted or condoned only the share of X, P75,000. Unknown to X, the whole
obligation was already paid by Y to C before the remission took place. In this case,
X is still liable to Y because the obligation was extinguished first by payment before
the condonation set in.
 Obligations
No right to reimbursement in case of remission
Art. 1220, NCC.
The remission of the whole obligation, obtained by one of the solidary debtors, does
not entitle him to reimbursement from his co-debtors.
The debtor who obtains remission pays nothing to the creditor.
Example:
X and Y solidarily obliged themselves to pay B the amount of P300,000 on
December 31, 2020. Because of their present financial condition, X pleaded with B
for the latter to extinguish the obligation. Consequently, B condoned the obligation.
Now, X is demanding from Y the amount of P150,000 because he alleged that it was
through his efforts that B condoned the obligation. Is X correct?
 Obligations
Rules in case thing has been lost or prestation has become impossible (Art. 1221)
1. Loss is without fault and before delay
The obligation is extinguished if the thing is lost or destroyed through a
fortuitous event and before the solidary debtors have incurred in delay.
2. Loss is due to fault on the part of a solidary debtor
All of the solidary debtors shall be liable to the creditor for the price of the
payment of damages and interest. However, this is without prejudice to their
action against the guilty or negligent debtor.
3. Loss is without fault but after delay.
The delay by any of the solidary debtors makes all of the solidary debtors
responsible even for a fortuitous event.
 Obligations
Defenses available to a solidary debtor
Art. 1222, NCC.
A solidary debtor may, in actions filed by the creditor, avail himself of all defenses
which are derived from the nature of the obligation and of those which are personal
to him, or pertain to his own share. With respect to those which personally belong
to the others, he may avail himself thereof only as regards that part of the debt for
which the latter are responsible.
1. Defenses derived from the nature of the obligation.
This is a total defense. Thus, all of the solidary co-debtors are benefitted.
Ex: payment or performance, lack of cause or consideration, condonation,
prescription and in cases of absolutely simulated contract
 Obligations
Defenses available to a solidary debtor
2. Defenses which are personal to him or pertain to his own share
This constitutes total defense and partial defense.
Total defense: minority, insanity, fraud, mistake, violence, and intimidation
Partial defense: non-fulfillment of a suspensive condition and non-arrival of
a suspensive period
Example:
A and B are solidarily liable to C in the amount of P40,000. If the action by C is
against B, and B was insane at the time the obligation was contracted, B can put
up the defense of insanity with respect to the entire obligation. This defense is
personal to B alone. It is a complete defense.
 Obligations
Defenses available to a solidary debtor
3. Defenses personal to other solidary debtors
A solidary debtor may avail himself only as regards that part of the debt for
which the other solidary co-debtors are responsible.
Example:
In a contract, X and Y are the solidary debtors of B in the amount of P10,000.
When B made a demand from Y, the latter raised his defense of insanity of X at
the time of the perfection of the contract. If this is true, then Y is liable only for
P5,000, his share in the obligation. As to Y, this is a partial defense. Hence, he is
not liable for the share of X amounting to P5,000.
 Obligations
Divisible and Indivisible Obligations
Divisible obligations - one the objec tof which, in its delivery or performance, is
capable of partial fulfillment
Ex: obligation to deliver 10 sacks of rice
Indivisible obligations - one the object of which, in its delivery or performance,
is not capable of partial fulfillment
Ex: to deliver a specific car
 Obligations
Divisible and Indivisible Obligations

Test for divisibility or indivisibility: the controlling circumstance is not the

possibility of partial prestation but the purpose of the obligation or the intention of
the parties. Hence, even though the object or service may be physically divisible, an
obligation is indivisible of so provided by law, or intended by the parties.
However, if the object is not physically divisible or the service is not susceptible of
partial performance, the obligation is always indivisible, the intention of the parties
to the contrary notwithstanding.
General rule: An obligation is presumed indivisible where there is only one creditor
and only one debtor. (Art. 1248, NCC)
 Obligations
Kinds of Division
1. Qualitative division - one based on quality, not on number or quantity of the
things which are the object of the obligation
when X inherits a particular car while Y inherits a specific parcel of land
2. Quantitative division - one based on quantity rather than on quality
obligation of X to deliver 10 ObliCon books to B and C
3. Ideal or intellectual division - when the thing can only be separated into ideal
or undivided parts, not material parts, as in the case of co-ownership
when X, Y, and Z inherits from their deceased father one parcel of land.
 Obligations
Effect of breach of joint indivisible obligation
Art. 1224, NCC.
A joint indivisible obligation gives rise to indemnity for damages from the time
anyone of the debtors does not comply with his undertaking. The debtors who may
have been ready to fulfill their promises shall not contribute to the indemnity
beyond the corresponding portion of the price of the thing or of the value of the
service in which the obligation consists.
The creditor cannot ask for specific performance or rescission because there is
no cause of action against the other debtors who are willing to fulfill their
promises.
 Obligations
Obligations deemed indivisible (Art. 1225, NCC)
1. Obligations to give definite things
to give a particular electric fan; to deliver a specific house.
2. Obligations which are not susceptible of partial performance
to sing a song; to dance the tinikling
3. Obligations provided by law to be indivisible even if thing or service is
physically divisible
obligation to pay taxes
4. Obligations intended by the parties to be indivisible even if thing or service
is physically divisible
 Obligations
Obligations deemed divisible (Art. 1225, NCC)
1. Obligations which have for their object the execution of a certain number of
days of work
the obligation of X to clean the house of Y in 2 days
2. Obligations which have for their object the accomplishment of work by
metrical units
the obligation of X to make a cabinet, 2 feet wide and 6 feet long
3. Obligations by which their nature are susceptible of partial performance
the obligation of the teacher to teach Obligations and Contracts for one year
in a university
 Obligations
Divisibility or indivisibility in obligations not to do (Art. 1225, NCC)
The character of the prestation in each particular case shall determine their
divisibility or indivisibility
Indivisible obligation: A obliged himself to B not to sell cigarettes in his store
for one year. Here, the obligation should be fulfilled continuously during a
certain period.
Divisible obligation: If the obligation of A is not to sell cigarettes in his store
only during Sundays and holidays, the obligation is divisible because the
forebearance is not continuous.
 Obligations
Obligations with a Penal Clause
Art. 1226, NCC.
In obligations with a penal clause, the penalty shall substitute the indemnity for
damages and the payment of interests in case of non-compliance, if there is no
stipulation to the contrary. Nevertheless, damages shall be paid if the obligor
refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.
The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code.
 Obligations
Obligations with a Penal Clause
An obligation with a penal clause is one with an accessory undertaking by virtue
of which the obligor assumes a greater liability in case of breach of the
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.
 Obligations
Obligations with a Penal Clause
1. Principal obligations
one which can stand by itself and does not depend for its validity and
existence upon another obligation
2. Accessory obligations
one which is attached to a principal obligation and, therefore, cannot stand
alone
 Obligations
Penal Clause
An accessory undertaking attached to an obligation to assume greater liability in
case of breach, i.e., the obligation is not fulfilled or is partly or irregularly
complied with.
If such stipulation is found contrary to law for being usurious, it can be nullified
by the courts without affecting the principal obligations
Example:
X promised to deliver a particular TV to Y on December 31, 2020. As an additional
stipulation, they agreed that X will be liable to pay P5,000 penalty in case of failure
to deliver said obligation on maturity date.
 Obligations
Purposes of Penal Clause
1. To insure their performance by creating an effective deterrent against breach,
making the consequences of such breach as onerous as it may be possible. This
is the general purpose of a penal clause. (Reparation)
2. To substitute a penalty for the indemnity for damages and the payment of
interests in case of non-compliance. (Art. 1226, NCC) (Punishment)
Obligations

Penal clause Condition

Constitutes an obligation although

Does not constitute an obligation
accessory

May become demandable in default of

the unperformed obligation and Never demandable
sometimes jointly with it
 Obligations
Kinds of Penal Clause
1. As to its origin
a. Legal penal clause - when it is provided by law
b. Conventional penal clause - when it is provided for by stipulation of the parties
2. As to its purpose
a. Compensatory penal clause - when the penalty takes the place of damages
b. Punitive penal clause - when the penalty is imposed merely as punishment for
breach
3. As to its demandability or effect
a. Subsidiary or alternative penal clause - when only the penalty can be enforced
b. Joint or cumulative penal clause - when both the principal obligation and the
penal clause can be enforced
 Obligations
Penalty substitutes for damages and interests
General rule: The penalty takes the place of the indemnity for damages and the
payment of interests in case of non-compliance. (Art. 1226, NCC)
Proof of actual damages suffered by the creditor is not necessary in order that
the penalty may be enforced. (Art. 1228, NCC)
Exception: The parties may stipulate that interest may be demanded in addition to
the penalty
When penalty may be enforced
It may be enforced only when it is demandable in accordance with the
provisions of the Civil Code. Thus, it is demandable if there is a breach of the
obligation and it is not contrary to law, morals, good customs, public order, or
public policy.
 Obligations
When creditor may recover damages
The creditor, in addition to the penalty, may recover damages and interests:
1. When so stipulated by the parties;
2. When the obligor refuses to pay the penalty, in which case the creditor may
recover legal interest thereon; or
3. When the obligor is guilty of fraud in the fulfillment of the obligation (Art. 1226,
NCC), in which case the creditor may recover damages caused by such fraud.
 Obligations
Penalty not substitute for performance
Art. 1227, NCC.
The debtor cannot exempt himself from the performance of the obligation by paying
the penalty, save in the case where this right has been expressly reserved for him.
Neither can the creditor demand the fulfillment of the obligation and the satisfaction
of the penalty at the same time, unless this right has been clearly granted him.
However, if after the creditor has decided to require the fulfillment of the obligation,
the performance thereof should become impossible without his fault, the penalty may
be enforced.
 Obligations
Penalty not substitute for performance
Example:
X promised to deliver a particular TV to Y on December 31, 2020. As an additional
stipulation, they agreed that X will be liable to pay P5,000 penalty in case of failure to
deliver said obligation on maturity date. If X defaulted by failure to deliver the TV, he
will pay P5,000 as penalty. But this will not mean that he will no longer deliver the TV.
Take note that the penalty is not a substitute for the performance of the principal
obligation.
 Obligations
Penal clause presumed subsidiary
General rule: The creditor cannot demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time
The primary purpose of penalty is to urge the debtor to the performance of the
main obligation
A penal clause is generally subsidiary and not joint obligation.
When there is performance: the purpose is attained and therefore, there is no need
for demanding the penalty
Where there is no performance: the creditor may ask for the penalty or require
specific performance
 Obligations
When penal clause is joint (Art. 1227, NCC)
1. The debtor has the right to pay penalty in lieu of performance only when this right
has been expressly reserved for him.
2. The borrower cannot claim that he is no longer liable to pay his loan after paying
the penalty. Otherwise, he will benefit from his non-performance if the amount of
the penalty is less than that of the loan.
Penalty demandable without proof of actual damages
Art. 1228, NCC.
Proof of actual damages suffered by the creditor is not necessary in order that the
penalty may be demanded.
 Obligations
Penalty demandable without proof of actual damages
All that the creditor has to prove, to enforce the penalty, is the violation of the
obligation by the debtor.
One of the reasons of fixing the penalty is to avoid such necessity and other
difficulties involved in litigations.
The creditor may enforce the penalty whether he suffered damages or not.
But he cannot recover more than the stipulated penalty even if he proves that
the amount of his damages exceeds the penalty.
Damages recoverable in addition to penalty
The creditor must prove the amount of such damages which he actually suffered
resulting from the breach of the principal obligation.
 Obligations
When penalty may be reduced by the courts (Art. 1229, NCC)
1. When there is partial or irregular performance
As a general rule, an obligation is not deemed performed unless the thing or
service in which it consists has been delivered or rendered, as the case may be.
2. When the penalty agreed upon is iniquitous or unconsionable
The penalty may be reduced even if there is no performance at all.
Whether the penalty is iniquitous or reasonable depends on the circumstances.
 Obligations
Effect of nullity of the penal clause (Art. 1230, NCC)
The general principle that the accessory follows the principal and not vice versa is
illustrated in this case:
If only the penal clause is void, the principle remains valid and demandable.
The injured party may recover indemnity for damages in case of non-performance
of the obligation as if no penalty had been stipulated.
Example:
S agreed to sell merchandise to B. It is provided in their agreement that in case of
default, S will deliver a prohibited drug as penalty.
Here, the obligation to sell merchandise is valid but the penalty to deliver the
prohibited drug is void. For failure of S to comply with his obligation, B may recover
damages.
 Obligations
Effect of nullity of the principal obligation (Art. 1230, NCC)
The general principle that the accessory follows the principal and not vice versa is
illustrated in this case:
If the principal obligation is void, the penal clause is likewise void.
The reason is that the clause cannot stand alone without the principal obligation to
which it is subordinated.
Example:
S agreed to deliver to B two (2) grams of prohibited drugs. The contract carries a
penal clause to the effect that in case of non-compliance with the obligation, S would
pay a penalty of P10,000.
Here, the nullity of the principal obligation carries with it that of the penal clause
although it is itself valid.