ARTICLE 1156 2.

Contracts
AN OBLIGATION IS A JURIDICAL NECESSITY TO GIVE, TO OR 3. Quasi-contracts
NOT TO DO 4. Acts or omissions punished by law
- legal bond wherby constraint is laid upon a person or
group of persons to act or forbear on behalf of another Notes:
person or group of persons - There are no other sources of obligation other than the
ones under this article
RIGHTS VS OBLIGATION - Obligations: civil or natural
- RIGHT: a claim or interest in anything whatsoever that o Civil – give a right of action to compel their
is enforceable by law performance
- OBLIGATION: A juridical necessity to give, to do or not o Natural
to do  based on equity and natural law; not
- * For every right enjoyed by any person, there is a based on positive law
corresponding obligation on the part of another to  do not grant right of action to compel
respect such right their performance, but after voluntary
fulfillment by the obligor, they authorize
OBLIGATION REQUISITES: the retention of what has been
1. Vinculum juris or juridical tie – efficient cause delivered
established by the various sources of obligation (law,
contracts, quasi-contracts, delicts, quasi-delicts CASE: METROPLITAN BANK AND TRUST COMPANY VS. ANA
2. Object – the prestation or conduct required to be GRACE ROSALES
observed (to give, to do or not to do) - Hold out clause applies only if there is a valid and
3. Subject-persons existing obligation arising from any of the sources of
a. Active – obligee obligation under Art. 1157.
b. Passive – obligor
ART. 1158
Note: Persons are both natural and juridical OBLIGATIONS DERIVED FROM LAW ARE NOT PRESUMED.
ONLY THOSE EXPRESSLY DETERMINED IN THIS CODE OR IN
ART 1157: SPECIAL LAWS ARE DEMANDABLE, AND SHALL BE
OBLIGATIONS ARISE FROM REGULATED BY THE PRECEPTS OF THE LAW WHICH
1. Law
ESTABLISHES THEM; AND AS TO WHAT HAS NOT BEEN
FORESEEN, BY THE PROVISIONS OF THIS BOOK.
- Law: most important source of obligation
- Obligation is:
o not determined by the will of the parties
o imposed by the state and is imbued with
public policy considerations
- EXISTING LAW ENTERS INTO AND FORMS PART OF A
VALID CONTRACTS WITHOUT NEED FOR THE PARTIES
EXPRESSLY MAKING REFERENCE THERETO.
ART. 1159
OBLIGATIONS ARISING FROM CONTRACTS HAVE THE FORCE
OF LAW BETWEEN THE CONTRACTING PARTIES AND SHOULD
BE COMPLIED WITH IN GOOD FAITH
- Obligatory nature of a binding and valid agreement
- Parties impose upon themselves the performance of
certain duties. In the event of a breach or willful non
performance, the other party can be prejudiced.
- The contract is the law between the parties as long as
its stipulations are not contrary to law, morals, good
customs, public policy, or public order
- When the contract is perfected – the parties are bound
to fulfill what was expressly stipulated and its
consequences
ART. 1160
OBLIGATIONS DERVED FROM QUASI-CONTRACTS SHALL BE
SUBJECT TO THE PROVISIONS OF CHAPTER 1, TITLE 17, OF
THIS BOOK (N)
- Certain lawful, voluntary, and unilateral acts give rise
to the juridical relation of quasi-contract
o No one shall be unjustly enriched or benefitted
at the expense of the other
 Example: the obligation to return what
has been obtained by mistake
ART. 1161
CIVIL OBLIGATIONS ARISING FROM CRIMINAL OFFENSE
SHALL BE GOVERNED BY THE PENAL LAWS, SUBJECT TO
PROVISIONS OF ARTICLE 2177, AND OF THE PERTINENT
PROVISIONS OF CHAPTER 2, PRELIMINARY TITLE, ON HUMAN
RELATIONS, AND OF TITLE 18 OF THIS BOOK, REGULATING
DAMAGES
- Civil liability – attaches to individuals who are found to
be criminally liable
- Civil damages awarded to:
o Whoever by act or omissiob causes damages to
another, there being fault or negligence, is
obliged to pay for the damage done (Art. 2176)
o Human Relations (Art. 19-26)
 ART. 19: accused in a criminal case
acquitted on the ground that guilt was
not proved beyond reasonable doubt –
can institute civil action for damages for
the same act of omission
 ART. 30: Separate civil action bought to
demand separate civil liability arising
from a criminal offense and no pending
crim proceedings are instituted during
 the case, preponderance of evidence is
sufficient to prove the act complained of
 ART. 33: Cases of defamation, fraud and
physical injuries – civil action for
damages entirely distinct and separate
from the crim action – can be brought
by the injured party, can proceed
independently of the crim prosecution
 ART. 34: Refusal of city or municipal
police force to render aid/protection to
any person in case of danger to life or
property – peace officer is held primarily
liable for damages, and city/municipality
is subsidiarily liable
 ART 32: Whoever violates the
constitutional rights of another person
shall be liable for damages
ART. 1162
OBLIGATIONS DERIVED FROM QUASI-DELICTS SHALL BE
GOVERNED BY THE PROVISIONS OF CHAPTER 2, TITLE XVII OF
THIS BOOK, AND BY SPECIAL LAWS
- Whoever by fault or omission causes damage to
another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if
there is no-pre-existing contract between the parties,
is called a quasi-delict and is governed by the
provisions of this chapter
ART. 1163
EVERY PERSON OBLIGED TO GIVE SOMETHING IS ALSO
OBLIGED TO TAKE CARE OF IT WITH THE PROPER DILIGENCE
OF A GOOD FATHER OF THE FAMILY, UNLESS THE LAW OR
THE STIPULATION OF THE PARTIES REQUIRES ANOTHER
STANDARD OF CARE.
- The person who has the duty to gibe must take care of
the object in order that in can be delivered in good
condition
o The proper diligence of a good father of the
family
- if the contract does not state the diligence to be
observed in performing an obligation – the proper
diligence of a good father of the family shall apply
- ordinary diligence -- in case of a contrary stipulation
- extraordinary diligence exercised by common carriers –
engaged in transporting people and goods; observes
extraordinary diligence for the safety of the goods and
people being transported
- banks – “required to observe the highest degree of
diligence”
ART. 1164
THE CREDITOR HAS A RIGHT TO THE FRUITS OF THE THING
FROM THE TIME THE OBLIGATION TO DELIVER IT ARISES.
HOWEVER, HE SHALL HAVE NO REAL RIGHT OVER IT UNTIL
THE SAME HAS BEEN DELIVERED TO HIM
- After the right to deliver the object has arisen in favor
of the creditor but prior to the delivery of the same,
there is no real right enforeceable and binding against
the whole world over the object and its fruits until the
same shall be given.
 - Real right – can be enforceable against the whole
world and can prejudice anyone else claiming the
object. Real right accrues only when the thing or object
is delivered to the creditor.
o The power belonging to a person over a specific
thing without a passive subject determined,
agiast whom such right may be personally
exercised
- Personal right – if the right is enforceable ONLY TO THE
DEBTOR WHO IS UNDER OBLIGATION TO GIVE
o Can be defeated by a third person in good faith
who has innocently acquired the object prior to
delivery, regardless of w/n the third person
acquired the property after the right to delivery
has accrued to the creditor
o The right to demand from another as a definite
passive subject, a fulfillment of a prestation to
give,do, or not to do
o THE SAME SHALL BE EXECUTED AT HIS COST.
ART. 1165
WHEN WHAT IS DELIVERED IS A DETERMINATE THING, THE
CREIDTOR, IN ADDITION TO THE RIGHT GRANTED HIM BY
ARTICLE 1170, THE CREDITOR, IN ADDITION TO THE RIGHT
GRANTED TO HIM BY ARICLE 1170, MAY COMPEL THE
DEBTOR TO MAKE THE DELIVERY
IF THE THING IS INDETERMINATE OR GENERIC, HE MAY ASK
THAT THE OBLIGATION BE COMPLIED WITH AT THE EXPENSE
OF THE DEBTOR
IF THE OBLIGOR DELAYS, OR HAS PROMISED TO DELIVER THE
SAME THING TO TWO OR MORE PERSONS WHO DO NOT
HAVE THE SAME INTEREST, HE SHALL BE RESPONSIBLE FOR
ANY FORTUITOUS EVENT UNTIL HE HAS EFFECTED THE
DELIVERY
- Fortuitous event – an event that could not be foreseen.
If foreseen, it was inevitable.
o Obligor is not excused from his obligation:
 If he delays
 If he promised to deliver the same
things to 2 or more persons who do not
have the same interest
ART. 1166
THE OBLIGATON TO GIVE A ETERMINATE THING INCLUDES
THAT OF DELIVERING ALL ITS ACECSSION AND ACCESSORIES
EVEN THOUGH THEY HAVE NOT BEEN MENTIONED
ART. 1167
IF THE PERSON OBLIGED TO DO SOMETHING FAILS TO DO IT,
THE SAME RULE SHALL BE OBSERVED IF HE DOES IT IN
CONTRAVENTION OF THE TENOR OF HIS OBLIGATIONS.
FURTHERMORE, IT MAY BE ECREED THAT WHAT HAS BEEN
POORLY DONE MAY BE UNDONE.
ART. 1168
WHEN THE OBLIGATION CONSISTS IN NOT DOING AND THE
OBLIGOR DOES WHAT HAS BEEN FORBIDE, IT SHALL ALSO BE
UNDONE AT HIS EXPENSE.
 - If debtor fails to perform his obligation – the creditor
can ask a third person to do whatever the debtor failed
to accomplish. The debtor is liable for all the expenses
the third person will incur for performing the
obligation of the debtor.
- If the debtor poorly performed the obligation – the
obligation can be undone at the debtor’s expense. This
prevents the debtor from taking his obligation lightly
and to motivate him to exercise due diligence and
prudence in performing the obligation.
- If the prestation is for the debtor not to do something
but he still does it nonetheless, the performance CAN
be undone at his expense.
Art. 1169. Those obliged to deliver or to do something incur
in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary
in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time when
the thing is to be delivered or the service is to be rendered
was a controlling motive for the establishment of the
contract; or
(3) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other
begins. (1100a)
- Delay – non-performance of an obligation with respect
to time
- Delay/default committed by the debtor – mora
solvendi
- Delay/default committed by the creditor – mora
accipiendi
- Mora accipiendi case – the debtor can consign to the
court what is due to the creditor if the circumstances
warrant. HOWEVER, DELAY IN THE OBLIGATION MUST
BE NEGLIGENT OR MALICIOUS.
o If the delay is only inadvertent and not
malicious – the obligor will not be liable under
Art. 1170
- Demand cannot be made before the maturity of the
obligation
- Demand can also NOT be made if the person who is
demanding has not fulfilled his obligation in the proper
manner
- Demand – must be a categorical assertion for the
fulfillment of an obligation which is due and
demandable.
o Letters of reminders are not demands
o Mere statement of failure to accomplish
obligation will result in penalties – not a
demand
- Delay – begins from the moment obligee demands the
performance of obligation and the obligor does not
heed the demand. WITHOUT THE DEMAND, JUDICIAL
OR EXTRAJUDICIAL EFFECTS WILL NOT ARISE.
- COMMENCEMENT OF SUIT IS A SUFFICIENT FORM OF
DEMAND
o Obligor is liable for damage FOR THE DELAY
NOT FROM THE TIME OF THE OBJECT OF
PRESTATION BUT FROM THE TIME OF THE
EXTRAJUDICIAL OR JUDICIAL DEMAND
- Partial payment does not ipso facto mean an
abandonment of the creditor of his prior demand
o A debt is not paid unless the thing in which the
obligation consists has been fully paid
- If the payment consists in the sum of money, the
debtor incudes in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the
interest stipulated upon
o Six percent per annum (legal interest) – if
there is no stipulation
- Interest replaces damages in case of obligation for the
payment of sum of money. But still, the default only
occurs after the time of extrajudicial or judicial
demand. It does not occur from the filing of the
complaint
- Unless stipulated otherwise, an extrajudicial demand is
not rewuired before a judicial demand
- CASES WHERE EXTRA JUDICIAL DEMAND SHOULD
FIRST BE MADE BEFORE FILING A CIVIL SUIT:
o Ejectment cases where the ground is failure to
pay rent or comply with conditions of the lease
 If the leases is already expired and the
expiration is the cause for ejectment –
the lessor can immediately filed the
case without prior extra-judicial demand
o Consignment cases
 The debtor must first make an EJD for
the creditor to accept payment of
obligation. If there is unjust refusal of
the payment, the debtor can consign
the amount in court for purposes of
extinguishing the obligation.
 If there is no EJD – the
consignment will be dismissed
unless tender of payment prior
to consignment need not be
made pursuant to law
MEANING OF “IN DEFAULT”
- For the debtor to be in default, the following requisites
must be met:
o That the obligation is demandable and already
liquidated
o The debtor delays performance
o The creditor requires the performance judicially
and extrajudicially
WHEN IS DEMAND NOT NECESSARY
1. When the obligation or the law expressly so declares
2. When time is of the essence in a particular contract
3. When it would be useless, as when the obligor has
rendered it beyond his power to perform
RECIPROCAL OBLIGATIONS
 - Created and established at the same time out of the
same cause, resulting in a mutual relationship of
creditor and debtor between the parties
- The performance of one is conditioned upon the
simultaneous performance of the other
- The obligation of one is a resolutory condition of the
other. The non-fulfillment entitles the other party to
rescind the contract
- Party who does not fulfill the undertaking – not
entitled to insist upon the performance of the other
party. The other party does not incur in delay.
- AGCAOILI VS. GSIS – “in reciprocal obligations, neither
party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is
incumbent upon him”
- Rights of rentention exist in cases of reciprocal
obligation when one party is in delay
- If there was mutual delay in part of both of the parties
– the delay cancels out the effect of default as if no
one is default
ART. 1170
THOSE WHO IN THE PERFORMANCE OF THEIR OBLIGATION
ARE GUILTY OF FRAUD, NEGLIGENCE, IR DELAY, AND THOSE
WHO IN ANY MANNER CONTRAVENE THE TENOR THEREOF,
ARE LIABLE FOR DAMAGES.
- Obligations must be complied with so as not to
prejudice persons who are directly interested therein
- The obligor is not excused from liability even if the
fraud, negligence, etc. co-exists with a fortuitous
event/is aggravated by a fortituous event
COMPENSATORY OR ACTUAL DAMAGES
- If the breach were in good faith, only the reasonable
and probable consequence of the breach will be
awarded in favor of the aggravated party
MORAL DAMAGES
- PNB VS. SPOUSES AGUSTIN – moral damages are
recoverable only if the defendant acted fraudulently or
in bad faith or in wanton disregard of his contractual
obligations
ART. 1171
RESPONSIBILITY ARISING FROM FRAUD IS DEMANDABLE IN
ALL OBLIGATIONS. ANY WAIVER OF AN ACTION FOR FUTURE
FRAUD IS VOID
ART. 1172
RESPONSIBILITY ARISING FROM NEGLIGENCE IN THE
PERFORMANCE OF EVERY KIND OF OBLIGATION IS ALSO
DEMANDABLE, BUT SUCH LIABILITY MAY BE REGULATED BY
THE COURTS, ACCORDING TO THE CIRCUMSTANCES.
NEGLIGENCE
- The want of care required by the circumstances
- Application depends on the situation of the parties and
the degree of care and vigilance required by the
situation
BAD FAITH
- DISHONEST PURPOSE/CONSCIOUS DOING OF WRONG
- Synonymous with fraud
Note:
- ART. 1171 APPLIES IF NEGLIGENCE CONCURS WITH
BAD FAITH
ART. 1174
EXCEPT IN CASES EXPRESSLY SPECIFIED BY THE LAW, OR
WHEN IT IS OTHERWISE DECLARED BU STIPULATION, OR
WHEN THE NATURE OF THE OBLIGATION REQUIRES THE
ASSUMPTION OF RISK, NO PERSON SHALL BE RESPONSIBLE
FOR TRHOSE EVENTS WHICH COULD NOT BE FORESEEN, OR
WHICH, THOUGH FORESEEN, WERE INEVITABLE.
- No one should be held to account for fortuitous cases
REQUISITES OF BREACH OF OBLIGATION DUE TO AN ACT OF
GOD
1. Cause of breach of obligation must be independent of
the will of the debtor
2. The event must either be unforeseeable or
unavoidable
3. The event must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner
4. The debtor must be free from any participation or
aggravation of the injury
NAKPIL VS. COURT OF APPEALS:
- “when the negligence of a person concurs with an act
of God in producing a loss, such person is not exempt
from the liability by showing that the immediate cause
of the damage was an Act of God. To be exempt from
liability, he must be free from any previous
negligence or misconduct by which that loss or
damage have been occasioned.
Notes:
- even if there is a fortuitous event, a person can still be
held responsible for the performance of his obligation
if the law, or the stipulation of the parties, or when the
nature of the obligation so requires. (See Art. 1165)
- if the parties declare that they shall be liable even for
loss due to a fortuitous event, they shall be liable.
- If nature of the obligation requires the assumption of
risk – the person will not be excused should a
fortuitous event occur
ART. 1175
USURIOUS TRANSACTIONS SHALL BE GOVERENED BY SPECIAL
LAWS
- This provision does not prohibit usurious contracts but
only provides that they are goverened by special laws
o The law can prohibit, allow, or merely put a
ceiling as to what the highest interest can be
legally imposed
ART. 1176
THE RECEIPT OF THE PRINCIPAL BY THE CREDITOR, WITHOUT
RESERVATION WITH RESPECT TO THE INTEREST, SHALL GIVE
RISE TO THE PRESUMPTION THA THE SAID INTEREST HAS
BEEN PAID.
THE RECEIPT OF A LATTER INSTALLMENT OF A DEBT
WITHOUT RESERVATION AS TO PRIOR INSTALLMENTS, SHALL
LIKEWISE RAISE THE PRESUMPTION THAT SUCH ART. 1178
INSTALLMENTS HAVE BEEN PAID. Subject to the laws, all rights acquired in virtue of an
obligation are transmissible, if there has been no stipulation
- In ordinary business transactions, the interest is to the contrary. (1112)
normally paid first. - generally, rights growing out of an obligation are
- Creditor – has the burden of proof to show that the transmissible
interest has been paid. - however, the person who transmits sad right cannot
- The payment of the latter installment – gives rise to transfer greater rights than he himself has by virtue of
the presumption that the previous installments have the obligation
been paid. - the person whom the rights are transmitted can have
no greater interest than that possessed by the
ART. 1177 transmitter at the time of the transmission of the rights
THE CREDITORS, AFTER HAVING PURSUED THE PROPERTY IN - transmissibility of rights can be limited or prohibited by
POSSESSION OF THE DEBTOR TO SATISFY THEIR CLAIMS, MAY stipulation of the parties
EXERCISE ALL THE RIGHTS AND BRING ALL THE ACTIONS OF
THE LATTER FOR THE SAME PURPOSE, SAVE THOSE WHICH
ARE INHERENT IN HIS PERSON; THEY MAY ALSO IMPUGN THE
ACTS WHICH THE DEBTOR MAY HAVE DONE TO DEFRAUD
THEM
- the law protects the creditors; he is given by law all
possible remedies to enforce such obligations.
- The creditor after exhausting all means to satisfy his
claim, is given the opportunity to bring all actions
which the obligor can institute against his debtors to
protect and satisfy claims against the obligor.
- HOWEVER, the rule is not absolute – the creditor
cannot bring those which are inherent in the person of
the obligor

CHAPTER 3
DIFFERENT KINDS OF OBLIGATIONS
SECTION 1: PURE AND CONDITIONAL OBLIGATIONS
ART. 1179
EVERY OBLIGATION WHOSE PERFORMANCE DOES NOT
DEPEND UPON A FUTURE OR UNCERTAIN EVENT, OR UPON A
PAST EVENT UNKNOWN TO THE PARTIES, IS DEMANDABLE
AT ONCE.
EVERY OBLIGATION WHICH CONTAINS A RESOLUTORY
CONDITION SHALL ALSO BE DEMANDABLE, WITHOUT
PREJUDICE TO THE EFFECTS OF THE HAPPENING OF THE
EVENT. (1113)
NOTES:
PURE OBLIGATION
- unqualified obligation demandable immediately
- performance not dependent on a future or uncertain
event or past event unknown to the parties
CONDITIONAL OBLIGATION
- reverse of pure obligation
- condition is an act or event other than the lapse of
time, which, unless the condition is execused, must
occur before a duty to perform a promise in the
agreement arises or which discharges a duty of
performance that has already risen
- performance depends upon a future or uncertain
event or upon a past event unknown to the parties
RESOLUTORY CONDITION
- also demandable at once
- once the condition is established and acknowledged,
the right immediately exists. Thus, the obligation
concomitant with the right can be demanded at once
- obligation is discharged when the uncertain event that
constitutes the condition happens
SUSPENSIVE CONDITION
- not demandable at once
- can only be demanded upon the happening of a future
or unknown event or past event unknown to the
parties
- If the condition does not take place, the parties stand
as if the conditional obligation never existed
- Note:
o Contract to sell and conditional contract of sale
are different from each other.
 Contract to sell – only a promise to sell
upon the happening of the suspensive
condition; there are no meeting of
minds relative to the transfer of
ownership; seller reserves the transfer
of title until the suspensive condition
takes place; the property is not
automatically transferred to the buyer,
the seller still has to convey to title to
the buyer by entering into a contract of
sale
 Conditional contract of sale – there is
already consent although it is
conditioned upon the happening of a
 contingent event. If the SC is not
fulfilled, the perfection of the contract is
abated; Ownership will automatically
transfer to the buyer
ART. 1180
WHEN THE DEBTOR BINDS HIMSELF TO PAY WHEN HIS
MEANS PERMIT HIM TO DO SO, THE OBLIGATION SHALL BE
DEEMED TO BE ONE WITH A PERIOD, SUBJECT TO THE
PROVISIONS OF ARTICLE 1197. (N)
- When the debtor binds himself to pay when his means
permit him oto do so, the law presumes that the
debtor really intends to satisfy the obligation.
However, there is uncertainty on the part of the
creditor as he does not know when exactly the
payment will occur
- ART. 1197 applies – the parties may ask the court to fix
the duration of the period within which the payment
should be made especially when the period depends
upon the debtor’s will.
ARTICLE 1181
IN CONDITIONAL OBLIGATIONS, THE ACQUISITION OF
RIGHTS, AS WELL AS THE EXTINGUISHMENT OR LOSS OF
THOSE ALREADY ACQUIRED, SHALL DEPEND UPON THE
HAPPENING OF THE EVENT WHICH CONSTITUTES THE
CONDITION. (1114)
- What a condition, whether suspensive or resolutory,
can do to the existence or extinguishment of a right
- Resolutory condition – condition subsequent
o An event, the existence of which, by the
agreement of parties, operates to discharge a
duty of performance that has risen
- Suspensive condition – condition precedent
o Act or event, other than the lapse of time,
which must occur or exist before a duty to
perform a promised performance arises. If the
condition does not occur and is not excused,
the promised performance need not be
rendered.
Article 1182. When the fulfillment of the condition depends
upon the sole will of the debtor, the conditional obligation
shall be void. If it depends upon chance or upon the will of a
third person, the obligation shall take effect in conformity
with the provisions of this Code. (1115)
- If the condition fulfillment depends upon the sole will
of the debtor, it is essentially a condition because
whether the debtor will pay or not is a future and
uncertain event
o known as potestative suspensive condition
- if the PSC gies birth to the obligation, both the
condition and obligation are void
- if the PSC is imposed on the fulfillment of the
obligation, only the condition is avoided
- if the condition is declared void but the obligation is
still valid, should the obligation be declared pure and
unconditional? NO because an arrangement might be
enforced which is not within the contemplation of the
parties
 MIXED CONDITIONS – depend not only upon the will of the
debtor but also upon chance and other factors
- resolutory condition that depends upon the will of a
third person is not void
ART. 1183
IMPOSSIBLE CONDITIONS, THOSE CONTRARY TO GOOD
CUSTOMS OR PUBLIC POLICY AND THOSE PROHIBITED BY
LAW SHALL ANNUL THE OBLIGATION WHICH DEPENDS UPON
THEM. IF THE OBLIGATION IS DIVISIBLE, THAT PART THEREOF
WHICH IS NOT AFFECTED BY THE IMPOSSIBLE OR UNLAWFUL
CONDITION SHALL BE VALID.
THE CONDITION NOT TO DO AN IMPOSSIBLE THING SHALL BE
CONSIDERED AS NOT HAVING BEEN AGREED UPON. (1116A)
NOTES:
- Conditions which are impossible render the obligation
upon them legally ineffective
- The condition and the entire obligation is annulled
ART. 1184
THE CONDITION THAT SOME EVENT HAPPEN AT A
DETERMINATE TIME SHALL EXTINGUISH THE OBLIGATION AS
SOON AS THE TIME EXPIRES OR IF IT HAS BECOME
INDUBITABLE THAT THE EVENT WILL NOT TAKE PLACE.
(1117)
- An obligation exists as soon as the condition happens
at a particular time and it is extinguished should the
condition not happen within the said time period.
ART.1185
THE CONDITION THAT SOME EVENT WILL NOT HAPPEN AT A
DETERMINATE TIME SHALL RENDER THE OBLIGATION
EFFECTIVE FROM THE MOMENT THE TIME INDICATED HAS
ELAPSED, OR IF IT HAS BECOME EVIDENT THAT THE EVENT
CANNOT OCCUR.
IF NO TIME HAS BEEN FIXED, THE CONDITION SHALL BE
DEEMED FULFILLED AT SUCH TIME AS MAY HAVE PROBABLY
BEEN CONTEMPLATED, BEARING IN MIND THE NATURE OF
THE OBLIGATION. (1118)
- Deals with the effectivity of an obligation in case the
condition does not happen at a particular time.
- Fulfillment of the obligation is dependent on the non-
occurrence of the condition
ART. 1186
THE CONDITION SHALL BE DEEMED FULFILLED WHEN THE
OBLIGOR VOLUNTARILY PREVENTS ITS FULFILLMENT. (1119)
- Good faith obligation involves implied term on the part
of the parties not to impede, hinder, obstruct or
prevent the fulfillment of an obligation.
- If the preventive acts are undertaken – breach of
contract (unwarranted and unlawful)
- Obligor voluntarily prevents the fulfilment of a
condition of obligation – the obligation is deemed
fulfilled
o Called constructive fulfillment

REQUISITES OF CONSTRUCTIVE FULFILLMENT
1. The condition is suspensive
2. The obligor actually prevents the fulfillment of the
condition
3. He acts voluntarily
ARTICLE 1187.
THE EFFECTS OF A CONDITIONAL OBLIGATION TO GIVE, ONCE
THE CONDITION HAS BEEN FULFILLED, SHALL RETROACT TO
THE DAY OF THE CONSTITUTION OF THE OBLIGATION.
NEVERTHELESS, WHEN THE OBLIGATION IMPOSES
RECIPROCAL PRESTATIONS UPON THE PARTIES, THE FRUITS
AND INTERESTS DURING THE PENDENCY OF THE CONDITION
SHALL BE DEEMED TO HAVE BEEN MUTUALLY
COMPENSATED. IF THE OBLIGATION IS UNILATERAL, THE
DEBTOR SHALL APPROPRIATE THE FRUITS AND INTERESTS
RECEIVED, UNLESS FROM THE NATURE AND CIRCUMSTANCES
OF THE OBLIGATION IT SHOULD BE INFERRED THAT THE
INTENTION OF THE PERSON CONSTITUTING THE SAME WAS
DIFFERENT.
IN OBLIGATIONS TO DO AND NOT TO DO, THE COURTS SHALL
DETERMINE, IN EACH CASE, THE RETROACTIVE EFFECT OF
THE CONDITION THAT HAS BEEN COMPLIED WITH. (1120)
- RESOLUTORY CONDITIONS – RETROACTIVITY IS NOT
RELEVANT BECAUSE THE FULFILLMENT OF THE
CONDITION EXTINGUISHES THE OBLIGATION
- SUSPENSIVE VONDITIONS – EFFICACY OF THE
OBLIGATION IS MERELY SUSPENDED/HELD IN
ABEYANCE UNTIL THE CONDITIOJN IS FULFILLED
Article 1188.
THE CREDITOR MAY, BEFORE THE FULFILLMENT OF THE
CONDITION, BRING THE APPROPRIATE ACTIONS FOR THE
PRESERVATION OF HIS RIGHT.
THE DEBTOR MAY RECOVER WHAT DURING THE SAME TIME
HE HAS PAID BY MISTAKE IN CASE OF A SUSPENSIVE
CONDITION. (1121A)
- The law allows the creditor to protect his interest even
if the condition in a conditional obligation has not yet
been fulfilled
- If prior to the happening of the event constituting the
suspensive condition, the debtor by mistake pays the
creditor, the debtor can recover BECAUSE THE
OBLIGATION IS NOT YET DUE AND DEMANDABLE
o Recovery can also take place even if there was
no mistake in payment in order to prevent
unjust enrichment on the part of the person
who received the payment
ART. 1189
WHEN THE CONDITIONS HAVE BEEN IMPOSED WITH THE
INTENTION OF SUSPENDING THE EFFICACY OF AN
OBLIGATION TO GIVE, THE FOLLOWING RULES SHALL BE
OBSERVED IN CASE OF THE IMPROVEMENT, LOSS OR
DETERIORATION OF THE THING DURING THE PENDENCY OF
THE CONDITION:

(1) IF THE THING IS LOST WITHOUT THE FAULT OF THE
DEBTOR, THE OBLIGATION SHALL BE EXTINGUISHED;
(2) IF THE THING IS LOST THROUGH THE FAULT OF THE
DEBTOR, HE SHALL BE OBLIGED TO PAY DAMAGES; IT IS
UNDERSTOOD THAT THE THING IS LOST WHEN IT PERISHES,
OR GOES OUT OF COMMERCE, OR DISAPPEARS IN SUCH A
WAY THAT ITS EXISTENCE IS UNKNOWN OR IT CANNOT BE
RECOVERED;
(3) WHEN THE THING DETERIORATES WITHOUT THE FAULT
OF THE DEBTOR, THE IMPAIRMENT IS TO BE BORNE BY THE
CREDITOR;
(4) IF IT DETERIORATES THROUGH THE FAULT OF THE
DEBTOR, THE CREDITOR MAY CHOOSE BETWEEN THE
RESCISSION OF THE OBLIGATION AND ITS FULFILLMENT,
WITH INDEMNITY FOR DAMAGES IN EITHER CASE;
(5) IF THE THING IS IMPROVED BY ITS NATURE, OR BY TIME,
THE IMPROVEMENT SHALL INURE TO THE BENEFIT OF THE
CREDITOR;
(6) IF IT IS IMPROVED AT THE EXPENSE OF THE DEBTOR, HE
SHALL HAVE NO OTHER RIGHT THAN THAT GRANTED TO THE
USUFRUCTUARY. (1122)
NOTES:
- Anything can happen to the object of prestation prior
to the fulfillment of the suspensive condition.
- if the thing is lost, the extinguishment of the obligation
depends on whether or not the loss was the fault of
the debtor
o if not the fault of the debtor – the obligation is
extinguished
o if the determinate thing is lost – debtor is liable
for damages
o if the object deteriorates without the fault of D
– C bears the impairment
o if D causes the deterioration, C can:
 rescind the fulfillment of the obligation
and;
 rescind its fulfillment
 C CAN SEEK DAMAGES IN BOTH CASES!
 Note: C has a choice because he
might still have use for the
deteriorated object and thus do
not have to rescind the contract.
He can ask for fulfillment but he
should be paid for damages on
account of the deterioration
 If the deterioration is so bad that
C has no use for the object
anymore – C can rescind the
obligation plus damages
o IF object is improved at D’s expense – his only
right would be that of an usufructary
 Usufruct – gives right to enjoy the
property of another with the obligation
of preserving its form and susbstance
unless the title constituting it or the law
otherwise provides.
ARTICLE 1190
WHEN THE CONDITIONS HAVE FOR THEIR PURPOSE THE
EXTINGUISHMENT OF AN OBLIGATION TO GIVE, THE
PARTIES, UPON THE FULFILLMENT OF SAID CONDITIONS,
SHALL RETURN TO EACH OTHER WHAT THEY HAVE
RECEIVED.
IN CASE OF THE LOSS, DETERIORATION OR IMPROVEMENT
OF THE THING, THE PROVISIONS WHICH, WITH RESPECT TO
THE DEBTOR, ARE LAID DOWN IN THE PRECEDING ARTICLE
SHALL BE APPLIED TO THE PARTY WHO IS BOUND TO
RETURN.
AS FOR THE OBLIGATIONS TO DO AND NOT TO DO, THE
PROVISIONS OF THE SECOND PARAGRAPH OF ARTICLE 1187
SHALL BE OBSERVED AS REGARDS THE EFFECT OF THE
EXTINGUISHMENT OF THE OBLIGATION. (1123)
ARTICLE 1191.
THE POWER TO RESCIND OBLIGATIONS IS IMPLIED IN
RECIPROCAL ONES, IN CASE ONE OF THE OBLIGORS SHOULD
NOT COMPLY WITH WHAT IS INCUMBENT UPON HIM.
THE INJURED PARTY MAY CHOOSE BETWEEN THE
FULFILLMENT AND THE RESCISSION OF THE OBLIGATION,
WITH THE PAYMENT OF DAMAGES IN EITHER CASE. HE MAY
ALSO SEEK RESCISSION, EVEN AFTER HE HAS CHOSEN
FULFILLMENT, IF THE LATTER SHOULD BECOME IMPOSSIBLE.
THE COURT SHALL DECREE THE RESCISSION CLAIMED,
UNLESS THERE BE JUST CAUSE AUTHORIZING THE FIXING OF
A PERIOD.
THIS IS UNDERSTOOD TO BE WITHOUT PREJUDICE TO THE
RIGHTS OF THIRD PERSONS WHO HAVE ACQUIRED THE
THING, IN ACCORDANCE WITH ARTICLES 1385 AND 1388 AND
THE MORTGAGE LAW. (1124)
- In reciprocal obligations, the obligation of one party is
the resolutory condition of the obligation of the other
party, the non-fulfillment of the RC entitles the other
party to rescind the contract.
- Reciprocal obligations are those that arise from the
same cause and which each party is both a debtor and
a creditor of the other, such that the obligation of one
is dependent upon the obligation of the other.
- - in case of non-compliance, the aggrieved party has
the implied power to rescind/resolve the contract
o Rescind – to abrogate the contract from the
beginning and to restore the parties as to their
relative positions as if no contract has been
made” // to declare the contract void at its
inception as if it never was
- Prescriptive period for rescinding written contracts –
10 years from the time the cause of action accrues
(Art. 1144)
- PP for oral contracts – six years (Art.1145)
- Gotesco Properties Inc. V Spouses Eugenio and
Fajardo:
o Mutual restitution, which entails the return of
the benefits that each party may have received
as the result of the contract is thus required
RECISSION
 - Rescission under Art. 1191 – predicated on breach of - If the violation can be traced to both parties and both
faith by aby of the parties, violating the reciprocity committed the breach, the first violator only is
between them penalized and the subsequent violator is not held
- Power to rescind not absolute – it must be based on a liable.
SERIOUS OR SUSBTANTIAL BREACH OF AN OBLIGATION o But the liability of the first violator will be
AS TO DEFEAT THE OBJECT OF THE PARTIES tempered because the injury to the other party
- Rescission is not granted where the breach is slight or would not have been so great if it hadn’t been
casual for the violation of the first party
- The implied power to rescind can only be enforced - If the court cannot determine which party first violated
through court action in the absence of stipulation to the contract:
the contrary o Obligation is deemed extinguished and each
- Injured party can still seek recission even after person bears his own damages
choosing fulfillment if the latter becomes impossible
- Power to rescind can be expressly stipulated in the
contract (facultative resolutory condition)
o the act of a party in treating a contract to be
cancelled or resolved must be made known to
the other party
- implied power to rescind – the court shall decree the
rescission unless there be cause authorizing the fixing
of the period
- restitution does not apply if the remedy chosenis
specific performance

ARTICLE 1192. IN CASE BOTH PARTIES HAVE COMMITTED A

BREACH OF THE OBLIGATION, THE LIABILITY OF THE FIRST
INFRACTOR SHALL BE EQUITABLY TEMPERED BY THE
COURTS. IF IT CANNOT BE DETERMINED WHICH OF THE
PARTIES FIRST VIOLATED THE CONTRACT, THE SAME SHALL
BE DEEMED EXTINGUISHED, AND EACH SHALL BEAR HIS OWN
DAMAGES. (N)
SECTION 2
OBLIGATIONS WITH A PERIOD
ARTICLE 1193. OBLIGATIONS FOR WHOSE FULFILLMENT A
DAY CERTAIN HAS BEEN FIXED, SHALL BE DEMANDABLE
ONLY WHEN THAT DAY COMES.
OBLIGATIONS WITH A RESOLUTORY PERIOD TAKE EFFECT AT
ONCE, BUT TERMINATE UPON ARRIVAL OF THE DAY
CERTAIN.
A DAY CERTAIN IS UNDERSTOOD TO BE THAT WHICH MUST
NECESSARILY COME, ALTHOUGH IT MAY NOT BE KNOWN
WHEN.
IF THE UNCERTAINTY CONSISTS IN WHETHER THE DAY WILL
COME OR NOT, THE OBLIGATION IS CONDITIONAL, AND IT
SHALL BE REGULATED BY THE RULES OF THE PRECEDING
SECTION. (1125A)
NOTES:
- A period designates particular time which is certain to
happen as the moment when the obligation will be
effective or be extinguished
o If it gives rise to the effectivity of the period –
suspensive period
o If it extinguishes obligation – resolutory period
- DAY CERTAIN – that which must necessarily come
although it may not be known when
ART. 1194
IN CASE OF LOSS, DETERIORATION OR IMPROVEMENT OF
THE THING BEFORE THE ARRIVAL OF THE DAY CERTAIN, THE
RULES IN ARTICLE 1189 SHALL BE OBSERVED. (N)
ART.1195
ANYTHING PAID OR DELIVERED BEFORE THE ARRIVAL OF THE
PERIOD, THE OBLIGOR BEING UNAWARE OF THE PERIOD OR
BELIEVING THAT THE OBLIGATION HAS BECOME DUE AND
DEMANDABLE, MAY BE RECOVERED, WITH THE FRUITS AND
INTERESTS. (1126A)
- In a suspensive period, the obligation to give or pay
only takes effect upon the arrival of the period
- The creditor has no right to obtain the thing or to be
paid until the arrival of the period unless both parties,
with full knowledge of the period, decide to give and
accept the thing to be delivered
- OTHERWISE, THE DEBTOR HAS THE RIGHT TO REVOVER
WHAT HE HAS GIVEN WITH FRUITS AND INTEREST
ARTICLE 1196. WHENEVER IN AN OBLIGATION A PERIOD IS
DESIGNATED, IT IS PRESUMED TO HAVE BEEN ESTABLISHED
FOR THE BENEFIT OF BOTH THE CREDITOR AND THE DEBTOR,
UNLESS FROM THE TENOR OF THE SAME OR OTHER
CIRCUMSTANCES IT SHOULD APPEAR THAT THE PERIOD HAS
BEEN ESTABLISHED IN FAVOR OF ONE OR OF THE OTHER.
(1127)
- However, the benefit of the period may be waived by
the person in whose favor it was constituted
ART. 1197
IF THE OBLIGATION DOES NOT FIX A PERIOD, BUT FROM ITS
NATURE AND THE CIRCUMSTANCES IT CAN BE INFERRED
THAT A PERIOD WAS INTENDED, THE COURTS MAY FIX
THE DURATION THEREOF.
THE COURTS SHALL ALSO FIX THE DURATION OF THE PERIOD
WHEN IT DEPENDS UPON THE WILL OF THE DEBTOR.
IN EVERY CASE, THE COURTS SHALL DETERMINE SUCH
PERIOD AS MAY UNDER THE CIRCUMSTANCES HAVE BEEN
PROBABLY CONTEMPLATED BY THE PARTIES. ONCE FIXED BY
THE COURTS, THE PERIOD CANNOT BE CHANGED BY THEM.
(1128A)
- Once the period is fixed by the courts, it cannot be
changed. This puts a sense of definiteness in an
otherwise ambiguous situation and FINALLY PUT THE
PARTIES IN A POSITION WHERE THEIR OBLIGATIONS
ARE PREDICTABLE
- court must determine a period based on the intention
of the parties
ARTICLE 1198. THE DEBTOR SHALL LOSE EVERY RIGHT TO
MAKE USE OF THE PERIOD:
(1) WHEN AFTER THE OBLIGATION HAS BEEN
CONTRACTED, HE BECOMES INSOLVENT, UNLESS HE
GIVES A GUARANTY OR SECURITY FOR THE DEBT;
(2) WHEN HE DOES NOT FURNISH TO THE CREDITOR
THE GUARANTIES OR SECURITIES WHICH HE HAS
PROMISED;
(3) WHEN BY HIS OWN ACTS HE HAS IMPAIRED SAID
GUARANTIES OR SECURITIES AFTER THEIR
ESTABLISHMENT, AND WHEN THROUGH A
FORTUITOUS EVENT THEY DISAPPEAR, UNLESS HE
IMMEDIATELY GIVES NEW ONES EQUALLY
SATISFACTORY;
(4) WHEN THE DEBTOR VIOLATES ANY UNDERTAKING,
IN CONSIDERATION OF WHICH THE CREDITOR
AGREED TO THE PERIOD;
(5) WHEN THE DEBTOR ATTEMPTS TO ABSCOND.
(1129A)
NOTES:
FIRST INSTANCE:
- The creditor can demand payment even before the
period to pay arrives, unless the debtor provides
guarantee or securities
- insolvency need not to be judicially declared; by
putting up a guarantee or collareral, the interest of the
creditor is safeguarded since he will have other means
to satisfy his claim
SECOND INSTANCE
THIRD INSTANCE
- Debtor loses benefit of the period even if the sureties
and guaranties disappear unless he immediately
- provides new ones that are equally satisfactory
FOURTH INSTANCE
- if the debtor attempts to absond or flee to evade the
payment of his indebtness, the debt could be
immediately demanded from him