JOEL GONZALES VEDASTO, AB, MPA, JD

Accreditor, Philippine Colleges & Universities-Commission on Accreditation

Director, Quality Assurance - DLSAU
— ART. 1175. Usurious transaction shall be governed by special
laws.

— Note: C.B. Circular No. 905 suspends the ceilings in the usury law.
Hence, parties can agree as to the rate of interest.

— Kinds of interest
1. Conventional *The rate which is agreed upon by
the parties.
2. Legal Interest *The rate which is prescribed by law.
3. Lawful Interest *The rate which is agreed upon by
the parties but which rate is within
the rate authorized by law.
4. Usurious Interest *The rate which is in excess of the
maximum rate of interest allowed
by law.
 ART. 1176. The receipt of the principal by the
creditor without reservation with respect to the
interest, shall give rise to the presumption that said
interest has been paid.

The receipt of a later installment of a debt

without reservation as to prior installments, shall
likewise raise the presumption that such
installments have been paid. (1110a)

Presumption - means “the inference as to the

existence of a certain fact which if not contradicted is
considered as true.”
 The presumption in the above article is a disputable
presumption, whereby one which can be contradicted by
presenting proof to the contrary while a conclusive
presumption does not admit any evidence or proof,
hence, it is considered as a fact.

— Presumption under this article:

1. Receipt of the principal, without reservation as to the
interest, shall give rise to the presumption that the said
interest has been paid.
2. When the creditor issues a receipt of a later installment
of a debt without reservation as to prior installment is
presumed to have been paid.
— ART. 1177. The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may 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. (1111)

— Rights of Creditors –
In order to satisfy their claims against the debtor, creditors have the
following successive rights:

1. to levy by attachment and execution upon all the property of the debtor,
except such as are exempt by law from execution;

2. to exercise all the rights and actions of the debtor, except, such as are
inherently personal to him; and

3. to ask for the rescission of the contracts made by the debtor in fraud of
their rights.
— ART. 1178. Subject to the laws, all rights acquired in
virtue of an obligation are transmissible, if there
has been no stipulation to the contrary. (1112)

— As a rule, all rights acquired in virtue of an obligation are

transmissible, except in the following cases:
1. When the law so provides.
2. When the parties stipulate otherwise – by agreement of
parties that the rights acquired by them will not be
transmitted to any other person.
3. When the obligation is purely personal in nature.
 LESSON 3: Kinds of Obligations
Classification of Obligations:
— The Civil Code classifies obligations primarily into: (PU CO
PE ALFA JOS DIP)
1. Pure;
2. Conditional;
3. With a period;
4. Alternative;
5. Facultative;
6. Joint;
7. Solidary or several or in solidum;
8. Divisible;
9. Indivisible;
10. With a penal clause.
— Other provisions of the Civil Code, however, impliedly
admit other classes of obligations, to wit:

a.) Unilateral and bilateral;

b.) determinate and generic;
c.) legal, conventional and penal;
d.) real and personal
— Section I. – 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)
1. Pure Obligation – when the obligation contain no term
or condition whatever upon which depends the
fulfillment of the obligation contracted by the debtor.
— It is immediately demandable and there is nothing to
exempt the debtor from compliance therewith.
— Example – Gaya obliged herself to pay her loan of P1,000 to Tito
on demand.
— Instances when obligations immediately demandable:
1. It is a pure obligation;
2. It is subject to a resolutory condition;
3. It is subject to resolutory period.
2. Conditional Obligations – one which is subject to a condition of
one whose performance depends upon a future or uncertain
events or upon past event unknown to the parties.

ART. 1180. When the debtor binds himself to pay when his means
permits him to do so, the obligation shall be deemed to be
one with the period, subject to the provisions of article
1197.(n)

Example –
A promissory note states that “This is to acknowledge receipt
of sum of One thousand Six Hundred pesos (P1, 600.00) and I am
to pay my debt to Arvin as soon as possible or as soon as I have the
money.” It was held that the conditional obligation is void,
because the collection would be impossible, the remedy of the
creditor is to ask the Court to fix the period of payment, thus, it
becomes an obligation with a period.
— ART. 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)

— ART. 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)

— 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)
— 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)

— 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 not 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)

— ART. 1186. The condition shall be deemed fulfilled

when the obligor voluntarily prevents its fulfillment. (1119)
 Kinds or classifications of
condition:
1. Suspensive and Resolutory
— Suspensive – the happening of the condition gives rise to an obligation.

Example:
Maya binds herself to deliver a determinate car to Tito if he marries Gaya. The
obligation is only demandable upon the happening of the condition that is, if
Tito marries Gaya. The obligation is suspended and not yet demandable.

— Resolutory – the happening of the condition extinguishes the obligation

already existing.

Example:
Arvin binds himself to lend his only car to Ian until the latter passes the CPA
Board. The obligation to lend is immediately demandable. Ian’s right over the
car is extinguished upon his passing the CPA board. Ian is now obliged to
return the car.
 Kinds or classifications of
condition:
2. Potestative, Casual and Mixed

— Potestative – is one the fulfillment of which depends upon the sole will of the debtor.
This kind of condition is void.
Example:
Arvin Promise to give his only parcel of land to Maya if he decides to leave for the United
States.

— Casual – is one the fulfillment of which depends upon chance.

Example:
Mario agrees to give Maria a determinate car if Maria’s only racing horse will win the
sweepstake race.

— Mixed – is one which depends partly upon the will of third person and partly upon chance
Example:
Vincent promise to give Victor a new Toyota Car if Victor will be able to play with and
beat Karpov in a game of chess. This is mixed condition, that is Karpov willingness to
play chess with Victor and the latter’s winning over Karpov.
 Kinds or classifications of
condition:
3. Possible and Impossible
Impossible condition is divided into 2:
a) Physical Impossibility – the condition imposed is not capable of being
performed physically.
Example:
Grace will give Christine a gold necklace if she swims across the
Pacific Ocean.

b) Illegal Impossibility – when the condition imposed is contrary to law, good

custom or public policy.
Example:
1. Contrary to law – Pedro agrees to give Ernesto P100,000 if Ernesto will
kill Mario.
2. Contrary to good custom – Santos binds himself to give Maria a gold
wrist watch if she will cohabit with Mr. Reyes without benefit of marriage.
3. Contrary to public policy – Maria agrees to employ Grace in her
company if Grace will not join a labor union.
 Kinds or classifications of
condition:
4. Positive and Negative:

A Negative condition is one where some event will not happen at a

determinate time, either
a.) the time indicated has elapsed; or
b.) it has become evident that the event cannot occur (Art.
1185, NCC)

Example:
Victor will give Jason a car if he will not marry Helen until Dec.
19, 2001, if Jason has not married Helen until Dec. 19, 2001 or if Helen
has died within the prescribed time without having married to Jason,
the obligation becomes demandable. If Jason married Helen within the
prescribed time, the obligation of Victor is extinguished.
 Kinds or classifications of
condition:
5. Divisible and Indivisible

— Divisible – that part of obligation which is not affected by

impossible or unlawful condition shall be valid (Art. 1183, NCC)
Example-
X promise to pay Y the sum of P1, 000.00 if Y furnishes X with
information as to the whereabouts of Z and another sum of P2,
000.00 if Y kills Z. in the obligation, the first part (to pay P1,
000.00) is valid while the second part (P2, 000.00) is void
because only the latter is affected by the condition.

6. Express and Implied

— ART. 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)
Effects of conditional obligation to
give:
— Once the condition is fulfilled, the effects of the
conditional obligations shall retroact to the day of the
constitution of the obligation and not on the date
when the condition was fulfilled.

— Example –
On Jan. 1, 1999 A agreed to give B a parcel of land if he
passes the May, 1999 CPA exams. If B passes the CPA
exams in May, 1999, he is entitled to the land effective
Jan. 1, 1999 because B’s right over the land retroacts to
the date when the obligation was constituted.
— As to the fruits and interest – The effect of conditional
obligation to give, as a rule, do not retroact to the date of the
constitution of the obligation. The following rules shall
govern:

1. In reciprocal obligation (like a contract of sale) - the fruits and

interest during the pendency of the condition shall be deemed
to have been mutually compensated.

Example:
A agrees to sell and B agrees to buy A’s parcel of
land if B passes the May, 1999 CPA exams. If B passes the
May, 1999 CPA Board, the obligation becomes
demandable. B is entitled to all the interests that his
money (with which to pay A) may earn while A is
entitled to the fruits which the parcel of land may have
produced during the pendency of the condition.
2. In unilateral obligation – the debtor shall appropriate
the fruits and interests received during the pendency
of the condition unless a contrary intention appears.
Example –
X agreed to give Y a parcel of land if Y
passes the CPA Board in May, 1999 exams.
Pending the happening of the condition, A is
entitled to the fruits which the land may produce,
A will deliver only the parcel of land if the
condition is fulfilled, unless a contrary intention
appears.
 — ART. 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)

— Preservation of Creditor’s Right –

The action for the preservation of the creditor’s right
may have for their objectives:

1. To prevent the loss or deterioration of the things which are the

objects of the obligation by enjoining or restraining acts of
alienation or destruction by the debtor himself or by third
person;
Preservation of Creditor’s Right –

2. To prevent concealment of the debtor’s properties

which constitute the guaranty in case of non-
performance of the obligation;

3. To demand security if the debtor becomes insolvent;

4. To compel the acknowledgement of the debtor’s

signature on a private document or the execution of
proper public document for registration so as to affect
third person.
Preservation of Creditor’s Right –

5. To register the deeds of sale or mortgages;

6. To set aside fraudulent alienation made by the debtor;

7. To interrupt the period of prescription by actions

against adverse possessors of the things which are
objects of the obligation. (Lawyer’s journal, 1951, p.
47)
— Paragraph I of the above article authorizes the creditor
to take any appropriate actions for the preservation of
creditor’s right during the pendency of the condition:

— Example:
On Jan. 1, 1999, Raul obliged himself to sell a parcel of land
to Dennis if he passes the CPA exams in October, 1999.
From the time the obligation was constituted and pending
the happening of the condition (passing the CPA Exams)
Dennis may cause the annotation of the condition in the
certificate of title in the Register of Deeds where the land is
located, to preserve his right over the parcel of land.
— Paragraph II in order that debtor may recover what he has paid by
mistake, during the pendency of the condition, the following
requisites may be present:

1. The debtor paid the creditor before the fulfillment of the condition;
2. Payment made by debtor was through mistake and error;

1. The action to recover what was paid by mistake should be made

before the fulfillment of the condition.

— Example –
Pedro obliged himself to pay Santos P20, 000 if a PAL plane crashes at
Cebu before Dec. 30, 1998. After the obligation was constituted and
before Dec. 30, 1998, a plane crushed in Cebu. Pedro honestly and
believing that the condition was fulfilled paid the P20, 000 to Santos. It
turned out however that it was a Cebu airline that crushed. Thus, Pedro
may recover the amount paid to Santos by mistake for the reason that
the condition has not yet been fulfilled.
— 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.
— These rules apply only to obligation to give a determinate or
specific thing subject to a suspensive condition in case of loss,
deterioration or improvement of the thing.
1. In case of loss of the thing

a) If the thing is lost without the fault of the debtor, the obligation shall
be extinguished.
Example –
Reyes obliged himself to give Santos a determinate car if he
passes the CPA Exams in Oct. the current year. If during the
pendency of the condition the car was lost through fortuitous event
without the fault of Reyes, the obligation to deliver the car is
extinguished even if the condition is fulfilled later.

b) If the thing is lost through the fault of the debtor, he shall be obliged
to pay damages. If in the example above, the specific car was lost
through the fault of Reyes, he shall be liable for damages upon the
fulfillment of the condition.
— It is understood that the thing is lost:
a) When it perishes (as when a house is burnt to ashes)

a) When it goes out of commerce (as when the object before

is unprohibited becomes prohibited)

b) When disappears in such a way that its existence is

unknown (as when a particular car has been missing for
some time)

c) When it disappears in such a way that it cannot be

recovered (as when a particular diamond ring is dropped
in the middle of the Atlantic Ocean).
2. When the thing deteriorates -
a) When the thing deteriorates during the pendency of the condition,
without the fault of the debtor, the impairment is to be borne by
the creditor.
Example –
Arvin obliged himself to give Ian a determinate Toyota car if Ian
passes the October CPA Exams. During the pendency of the
condition, the car was partially damaged by flood, without the fault
on the part of Arvin. If the condition is fulfilled, Ian will bear the
impairment.

b) If the thing deteriorates, during the pendency of the condition,

through the fault of the debtor, the creditor may choose, after the
fulfillment of the condition, between the rescission of the
obligation or its fulfillment, with indemnity for damages in either
case.
3. When the thing improved –

a) If the thing improved during the pendency of the condition, by

its nature, or by time, the improvement shall inure to the
benefit of the creditor. The reason for this is to compensate the
creditor who would suffer in case, instead of improvement,
there would be deterioration without the fault of the debtor.
b) If the thing is improved at the expense of the debtor, he have no
other right than that granted to the usufructuary. By us usufruct
is meant the right to enjoy the property of another which
includes the right to enjoy and use the fruits of the property.
— ART. 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 to the preceding article shall be
applied to the party who is bound to return.

— As for obligations to do or 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)
 Effects When Resolutory
Condition is fulfilled
1. The obligation is extinguished. (Art. 1181, NCC)
2. Because the obligation is extinguished and considered to have had no effect,
the parties should restore to each other what they have received.
3. The fruits and interests thereon should also be returned after deducting of
course the expenses made for the production, gathering and preservation, if
any.
4. The rules given in Art. 1189, N CC will apply to whoever has the duty to return
in case of loss, deterioration or improvement of the thing.
5. The courts are given power to determine the retroactivity of the fulfillment of a
resolutory conditions.

— Example :
A gave B a parcel of land on condition that B will pass the
CPA Exams on May, this year. B did not pass the CPA Exams. The
obligation is extinguished and therefore, it is as if there was never
an obligation at all. B will therefore have to return both the land and the
fruits he had received there from the moment A has given him the land.
— ART. 1191. The power to rescind obligatios 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
later 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.
Right to Rescind
The right to rescind means the right to cancel or to resolve
in case of reciprocal obligation in case of non-fulfillment
on the part of one.
— Example:
In a contract of sale, the buyer can rescind if the seller does
not deliver or te seller can rescind if the buyer does not pay.
— The power to rescind is given to the injured party and the
injured party has the following alternative remedies:
1. Demand fulfillment of the obligation plus damages; or
2. Demand rescission of the obligation plus damages.
— ART. 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.

— Rules if Both Parties Have Committed a Breach

The above rules are deemed just. The first one is fair to
both parties because the second infract or, though they
would derive some advantage by his own act or neglect.
The second rule is likewise just, because it is presumed
that both parties at about the same time tried to reap
some benefits. (Report of the Code Commission)
— Section 2 - Obligations with a period
`
— ART. 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.
Period Defined –

— A period is a future and certain length of time which

determines the effectivity or the extinguished of
obligation.

— Obligation with a period is one whose consequences

are subject in one way or another to the expiration of
said period or term. (8Manresal58)

— A day certain is understood to be that which must

necessarily come, although it may not be known when.
 Period and Condition
Distinguished:
a) As to fulfillment - A period is a certain event which must
happen sooner or later while a condition is an uncertain
event.

b) As to time – a period refers only to the future while a

condition may refer to a past unknown event.

c) As to influence or effect on the obligation – the period fixes

the time of the effectivity of the obligation while a condition
may cause the demandability of the obligation to arise or to
terminate.
— 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)
— Effect of loss, deterioration, or improvement before the
arrival of period.

Note the cross reference to Art. 1189, NCC.

— Example:
If A is suppose to deliver to B a particular car on Dec.
19, 1999 by the car was destroyed by fortuitous event
in July 1, 1999, the obligation is extinguished.
— 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 de and
demandable, may be recovered, with the fruits and interests.
(1126a)

— Effect Of Payment Before Arrival of Period

This article which is similar to Article 1188, NCC, in an obligation to

give, allows the recovery of what has been paid by mistake before the
fulfillment of a suspensive condition.

— Example -
E owes G P20, 000.00, which was supposed to be paid on December 25 this
year. By mistake, E paid his obligation on December 25 last year. Assuming
that today is only June 30, E can recover the amount plus interest therein.
But E cannot recover, except he interest, if the debt had already matured or
if E had knowledge of the period.
— ART. 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)

— Presumption As to Benefit Of A Period

The general rule is that when a period is fixed by the parties , the
period is presumed to be for the benefit of both creditor and
debtor.

— Which means that before the expiration of the period, the

debtor may not fulfill the obligation and neither the creditor
demand its fulfillment.
— By way of exceptions, however, if the tenor of the obligation or
other circumstances may indicate that a period is have been
established for the benefit of either the creditor or debtor:
1. For the benefit of both creditor and debtor
— Example –
Gaya obtained a loan of P10, 000 at 12% interest per annum from Tito for one
year. Gaya has a period of one year within which to use the money, while Tito
will benefit from the interest which the money will earn.

2. For the benefit of the creditor

— Example -
Gaya executes a promissory note in favor of Tito which reads: “I promise to
pay Tito or order the amount of P10, 000 on demand. Thus, Tito can demand
payment from Gaya anytime.

3. For the benefit of debtor

— Example –
Gaya executes a promissory note which reads: “I promise to pay Tito r order
the amount of P 10,000 or before December 31, 2001. Gaya can pay her
obligation on or before Dec. 31, 2001.
— ART. 1197. If the obligation does not fix a period, but
from its nature and 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 circumstance have been probably
contemplated by the parties. Once by the courts, the
period cannot be changed by them. (1128 a)

— Court Generally is Without Power to Fix a Period

If an obligation does not state a judicial period and no period is
intended, the court is not authorized to fix a period. The courts
have no right to make contracts for the parties.
Exceptions to the general rule
1. If the obligation does not fix a period but it can be inferred from its
nature and circumstances that a period is intended.
Example:
S sold a parcel of land to B with a right of repurchase. No term is
specified in the contract for the exercise of the right. Then, the
court is authorized to fix the period to repurchase.
2. If the duration of the period depends upon the sole will of the
debtor
Example:
I will pay you as soon as possible. Here , the period is not fixed,
so the court may fix the same because if this is not so the
obligation may never be complied with by the debtor.
— ART. 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)
When Debtor Loses The Right to
Make Use Of A Period
— The general rule is that the obligation is not
demandable before the lapse of the period. The
exceptions are based on the fact that the debtor might
not be able to comply with his obligation:

1. When debtor becomes insolvent:

The insolvency need not be judicially declared. It is sufficient
that the debtor has less assets than his liabilities or if debtor is
unable to pay his debts as they mature. It is noted that the
insolvency of the debtor must occur after the obligation has
been contracted.
When Debtor Loses The Right to
Make Use Of A Period
2. When debtor does not furnish guaranties or securities promised:
Example:
Gaya borrowed loan from Tito which loan was secured by a chattel
mortgage of Gaya’s car as a guaranty. After obtaining the loan, Gaya
fails or does not execute a chattel mortgage, the loan becomes
demandable or the debtor loses her right to make use of the period.

3. When by his own acts he has impaired said guaranties or

securities:
Example:
Gaya borrowed P50, 000 from Tito which loan was secured by a
chattel mortgage on Gaya ‘s car. Later, Gaya’s fault, the car was
damaged or she causes the impairment of the car, Gaya loses her
right to make use of the period, unless she gives another one
equally satisfactory.
When Debtor Loses The Right to
Make Use Of A Period
4. When by fortuitous event, the guaranty or security was lost.
Example:
Gaya borrowed P50, 000 from Tito which loan was secured by a chattel
mortgage on Gaya’s car. After obtaining the loan, the car was lost by fortuitous
event. Gaya loss her right to male use of the period unless she gives another
guaranty or security equally satisfactory.

5. When debtor violates an undertaking –

Example:
Art secured a loan from Arnold on condition that Art will paint the house of
Arnold. If after the proceeds of the loan was given to Art, he did not pant the
house of Arnold, Art loses his right to make use of the period.

6. When the debtor attempts to abscond.

Abscond means a depart or escape from creditor’s knowledge to avoid payment
of his debt. Mere attempt on the part of debtor will entitle the creditor to
demand payment of the obligation without waiting for the period to expire.
— Section 3. Alternative and Facultative obligations

— ART. 1199. A person alternatively bound by different

prestations shall completely perform one of them.

— The creditor cannot be compelled to receive part of one and

part of the other undertaking. (1131)

— Meaning of Alternative Obligation

It means an obligation where two or more prestations are due
but the delivery of one is sufficient to extinguish the obligation.

Example:
Gaya binds herself to give Tito either a determinate refrigerator or a TV
set. If Gaya chooses and delivers the TV set, the obligation is
extinguished. Thus, Gaya cannot compel Tito to accept part of one and
the part of the other prestations.
— ART. 1200. The right of choice belongs to the
debtor, unless it has been expressly granted to the
creditor.

— The debtor shall have no right to choose those

prestations which are impossible, unlawful or
which could not have been the object of the
obligation.
 Rule on Who Makes the Choice –
— As a general rule, the right of choice or to select the prestation belongs to the
debtor, unless the right to choose is expressly granted to the creditor. But the right
of the debtor is subject to the following:
The debtor cannot choose those prestations which are:
a) Impossible – E.g.- Gaya promised to deliver to Tito 100 sacks of rice or a stone
from Mars. Gaya cannot chose to deliver the stone coming from Mars as it is
physically impossible.

b) Unlawful – E.g. Gaya obliged herself to deliver to Tito a kilo of dangerous drug or a
parcel of land. Gaya can choose only the delivery of parcel of land.

c) Could not have been the object of the obligation - E.g. Gaya borrowed from Tito
P50, 000. It was agreed that Gaya would give Tito her horse or her German Piano.
Now, Gaya has two horses, a race horse worth P50, 000 and an ordinary horse
which is worth for only P5, 000. Gaya cannot choose

d) Only one prestation is practicable (Art. 1202) – E.g. Gaya will deliver to Tito her
carabao, or her horse or her refrigerator. Through no fault of Gaya, the horse and
the carabao were lost by fortuitous event. Gaya can only delivery the refrigerator
which is the only one practicable.
— ART. 1201. The choice shall produce no effect
except from the time it has been communicated.
(1133)

— Right of Choice Must be Communicated –

— Until the choice is made and communicated, the
communicated, the obligation remains alternative. Once
the notice to the effect that a choice is made, the obligation
ceases to be alternative and becomes a simple obligation.
— Where the choice has been expressly given to the creditor,
such choice shall likewise produce legal effects upon being
communicated to the debtor. (Art. 1205, par. 1)
— ART. 1202. The debtor shall lose the right of choice when
among the prestations whereby he is alternatively bound, only
one is practicable.
— ART. 1203. If Through The creditor’s acts the debtor cannot
make a choice according to the terms of the obligation, the
latter may rescind the contract with damages.

— When debtor may rescind contract

If through the creditor’s fault, the debtor cannot made a choice
according to the terms of the obligation the debtor is given the right to
rescind and recover damages.

— Example:
Gaya borrowed from Tito P5, 000.00. it was agreed that instead of P5, 000,
Gaya could deliver a TV set or a refrigerator or a piano. If through the fault of
Tito, the TV set was destroyed, Gaya can rescind the contract if she wants. In
case of rescission, the amount of P 5, 000.00 must be returned by Gaya with
interest. Tito, in turn, must pay Gaya the value of the TV set plus damages.
— ART. 1204. The creditor shall have a right to indemnity for
damages when, through the fault of the debtor, all the things which
are alternatively the object of the obligation have been lost, or the
compliance of the obligation has become impossible.

The indemnity shall be fixed taking as a basis the value of the last
thing which disappeared, or that of the service which last became
impossible.

Damages other than the value of the last thing or service may also be
awarded. (1135a)

— When right of choice is with debtor and all prestations were lost –
This article entitles the creditor to indemnity for damages when all the
alternative objects are lost through the fault of the debtor before he has
made his choice. The indemnity for which the creditor is entitled shall be
based on the value of the last thing which disappeared or lost or the
compliance of the obligation has become impossible.
— ART. 1205. When the choice has been expressly given to the
creditor, the obligation shall cease to be alternative from the
day when the selection has been communicated to the debtor.
Until then the responsibility of the debtor shall be governed
by the following rules

1) If one of the things is lost through a fortuitous event, he shall

perform the obligation by delivering that which the creditor
should choose from among the remainder, or that which
remains if only one subsists;

2) If the loss of one of the things occurs through the fault of the
debtor, the creditor may claim any of those subsisting, or the
price of that which, through the fault of the former, has
disappeared, with a right to damages

3) If all the things are lost through the fault of the debtor, the
choice by the creditor shall fall upon the price of any one of
them, also with indemnity for damages.
— The same rules shall be applied to obligations to do or
not to do in case one. Some or all of the prestations
should become impossible. (1136a)

— When Right of Choice is With Creditor and All Prestations

Were Lost
This article provides for the rules to be observed when
the right of choice is expressly granted to the creditor, the rules
are as follows:

1. When a thing is los through a fortuitous event

Example
Gaya obliged herself to deliver to Tito a TV set, or a
refrigerator, or a piano. If the TV set was lost through
fortuitous event, Tito can choose from among the
remainder or that which remains if only one subsists.
2. When a thing is lost through debtor’s fault
Example:
If the loss of the TV set occurs through the fault of Gaya, Tito
may claim the refrigerator or the piano with a right of damages or
the price of the TV set with a right of damages.

3. When all the things were lost through debtor’s fault

Example:
If all the items are lost through the fault of Gaya, then Tito can
demand the payment of the price of any one of them with a right
to indemnity for damages.

4. When all the thing are lost through a fortuitous event

Example:
The obligation of Gaya shall be extinguished if all the items
which are alternatively the object of the obligation are lost
through a fortuitous event (Art. 1174 will apply).
— ART. 1206. When only one prestation has been agreed
upon, but the obligor may render another in
substitution, the obligation is called facultative.
— The loss or deterioration of the thing intended as a
substitute, through the negligence of the obligor, does not
render him liable. But once the substitution has been
made, the obligor is liable for the loss of the substitute on
account of his delay, negligence or fraud.

— Meaning of Facultative Obligation –

— A facultative obligation is one where only one prestation has
been agreed upon but the obligor may render another in
substitution.
— Example:
— I will give you my piano but I may give my television set as a substitute.
 Alternative and Facultative
Distinguished –
1) As to choice – In facultative – the right for substitution is given
only to the debtor in Alternative – the choice may be given
either to the debtor or to the creditor;

2) As to things due – In facultative – only the principal obligation

is due by may substitute another; in alternative, there are
several things due but the delivery of one is sufficient;

3) As to validity or nullity – In facultative – if the principal thing

is unlawful or impossible, there is no need of delivering the
substitute in alternative – if one of the thing is unlawful or
impossible, there is still a need to deliver any of those which
remain valid or the only remaining one is valid.
— Section 4 – Joint and Solidary Obligations

— ART. 1207. 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 requires solidarity. (1137a)

— ART. 1208. 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 equal 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. (1138a)
— Joint Obligation –
It is an obligation where there is a concurrence of two or
more debtors or two or more creditors or of several
debtors and creditors, by virtue of which each of the
debtors is liable for a proportionate part of the credit.

— Example of different instances

1) A, B, and C borrowed P9, 000 for D. The presumption is that A,
B and C are jointly liable. D can demand only P3, 000 from each
or a total of P9, 000.
2) A borrowed from B, C and D P9, 000. There is one debtor and
three creditors. Each creditor can demand only P3, 000 from A.
3) A and B are liable to C and D for P9, 000. There are two debtors
and two creditors. Each creditor can demand only P4, 500 from
each debtor.
SOLIDARY OBLIGATION

There are solidary liability when

1) The obligation expressly so states, or

2) The law requires solidarity or

3) The nature of the obligation requires solidarity.

Kinds of Solidary Obligation
1. Passive – solidarity on the part of the debtors, where anyone of them
can be made liable for the fulfillment of the entire obligation.
— Example – A and B are solidary debtors of C in the amount of P 10, 000

2. Active – solidarity on the part of the creditors, where anyone of them

can demand the fulfillment of the entire obligation.
— Example – A is liable to B and C for the amount of P10, 000. B and C are
solidary creditors.

3. Mixed Solidarity – solidarity on the part of the debtors and creditors

where each one of the debtors is liable to render and each one of the
creditors has a right to demand, entire compliance with the
obligation.
— Example – A and B are solidarity debtors to C and D, solidary creditors
in the amount of P 10, 000.
— Solidarity not presumed
— The presumption, where there are two or more persons in the same
obligation, is that it is joint. The reason is that solidary obligations are very
burdensome for they create unusual rights and liabilities. Solidarity
between debtors increases their responsibility while solidarity between
creditors presuming that they are bound jointly and not solidarily.

— ART. 1209. 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.

— Indivisible Joint Obligation –

— The object is indivisible and the T/E between the parties are merely
proportionately liable.

— Example –
A and B are jointly liable to give C a particular car. The obligation is joint but since
the object is indivisible, the creditor must proceed against al the joint debtor. If any of
the joint debtors be insolvent, the others shall not be liable for others.
— ART. 1210. The indivisibility of an obligation does not
necessarily give rise t solidarity. Nor does solidarity of
itself imply indivisibility. (n)

— Indivisibility as Distinguished from Solidarity

Indivisibility refers to the subject matter while solidarity
refers to the Tie between the parties.
— Examples:
1. Joint divisible obligation – A and B are jointly liable to C for P10, 000.

2. Joint indivisible obligation – A and B are jointly liable to give C their

car.

3. Solidary divisible obligation – A and B are solidarily liable to give C

P10, 000.

4. Solidary indivisible obligation – A and B are solidarily liable to give C

their car.