Chapter 1 - General Provisions
Article
1156.An obligation is a juridical necessity
to give, to do or not to do.
De Leon Perez
Meaning of Obligation
● tie of law or a juridical bond by
virtue of which one is bound in
favor of another to render
something
● legal relation established between
one party and another, whereby
the latter is bound to the fulfillment
of a prestation which the former
may demand of him
Meaning of juridical necessity
● in case of non-compliance, the
courts of justice may be called
upon to enforce its fulfillment
Essential requisites
● Passive subject (debtor/obligor) -
person bound to fulfillment; duty to
give/do/not do
● Active subject (creditor/obligee) -
entitled to demand fulfillment of
do/thing/not do
● Object or prestation - conduct or
subject matter. Without it - nothing
to perform
● Juridicial or legal tie - binds or
connects parties to obligation
 Obligation/Right/Wrong
● Obligation - act or performance
● Right - power to demand from
another a prestation
● Wrong - act or omission cursing
injury

Essential elements of cause of action

● Legal right in favor of a person
● LEgal obligation
● An or omission
- If any of these elements absent
complaint becomes vulnerable to
a motion to dismiss on the ground
of failure to state a cause of
action.
- Cause of action arises when there
is a wrong

Kinds of Obligation
● Real Obligation - to give subject
● Personal obligation - to do or not
do
○ Positive - to do
○ Negative - to not do

1157. Obligations arise from: Liaiim Sources of Obligations

1. Laws - imposed by law itself likes
(1) Law; taxes or support family
2. Contracts - arise from stipulation
(2) Contracts; of parties
3. Quasi contracts- lawful voluntary
(3) Quasi-contracts; uniletaral acts - return money paid
by mistake
(4) Acts or omissions punished by law; 4. Crimes or acts or omissions
and punished by law - rise from civil
 liability - thief return stolen car.
(5) Quasi-delicts. Killer indemnify heirs
5. Quasi-delicts - damaged cause to
another thru act or omission there
being fault or negligence

Source classified
1. Law
2. Private acts
a. Licit - contracts and quasi
b. Illicit - punished by law and
quasi felicts

1158. Obligations derived from law are ● Refers to legal obligation arising
not presumed. Only those expressly from law
determined in this Code or in special ○ not presumed because
laws are demandable, and shall be they are considered a
regulated by the precepts of the law which burden upon the obligor.
establishes them; and as to what has not ○
been foreseen, by the provisions of this
Book.

1159. Obligations arising from contracts Contractual Obligations

have the force of law between the ● contract is a meeting of minds
contracting parties and should be between two persons whereby
complied with in good faith. one binds himself
● Elements
○ Binding force - governed
by agreement of
contracting parties
○ Requirements of valid
contract
■ Valid and
enforceable
■ Cannot be contrary
to law morla good

1160.Obligations derived from
quasi-contracts shall be subject to the
provisions of Chapter 1, Title XVII, of
this Book. (n)
custom
○ Compliance in good faith -
ompliance or performance
in accordance with the
stipulations or terms of the
contract or agreemen
■
Quasi-contractual obligation
● juridical relation resulting from
certain lawful, voluntary and
unilateral acts by virtue of which
the parties become bound to each
other to the end that no one will
be unjustly enriched or
benefited at the expense of
another. (Art. 2142.)
● not, properly, a contract
● there is no consent but the same
is supplied by fiction of law.
Kinds of Quasi-contracts
● Negotiorum gestio - voluntary
management of property or affairs
of another
○ ex . X house burned down
Y took care of it. X
obligation to reimburse Y.
○ When does it not arise
■ 1317, 1403, 1404 -
when property or
business is not
neglected or
abandoned
■ 2144 - manager is
tacitly authorized by

1161.Civil obligations arising from
criminal offenses shall be governed by
the penal laws, subject to the provisions
of article 2177, and of the pertinent
provisions of Chapter 2, Preliminary Title,
on Human Relations, and of Title XVIII of
this Book, regulating damages.
owner
● Solutio indebiti - something is
received, there was no demand.
Unduly delivered by mistake
○ Arises when
■ Payment made
when there was no
binding relation
■ Made by mistake
Civil liability arising from crimes or delicts.
● Two prong effect
○ Breaches social order
○ Private victim is caused
personal suffering
● The commission of the crime
causes bothmoral evil and
material damage
Reservation o right to recover civil liability
● GR: only the civil liability arising
from the offense charged is
deemed instituted with the criminal
action
● ER: unless the offended party
waives the civil action
● reservation and waiver referred to
refer only to the civil action for the
recovery of the civil liability arising
from the offense charged
Scope of civil liability
● Restitution
● Reparation for damage caused
● Indemnification or consequential
damages
1162.Obligations derived from
quasi-delicts shall be governed by the
provisions of Chapter 2, Title XVII of this
Book, and by special laws.
Requisites
Crime v. Quasi-delict
Quasi-delicts
● A quasi-delict is an act or omission
by a person (tort feasor) which
causes damage to another in his
person, property, or rights giving
rise to an obligation to pay for
the damage done, there being
fault or negligence but there is no
pre-existing contractual relation
between the parties.21 (Art. 2176.)
● Must be act or omission by the
defendant
● Must be fault or negligence of the
defendant
● Must be damage caused to
plaintiff
● Direct relation or connection of
cause between omission and the
damage
● No pre existing contractual relation
● Crime: has criminal or malicious
intent, affects public interest, two
liabilities (crim and civil), purpose
is punishment, cannot be
compromised or settled, guilt of
accused must prove beyond
reasonable doubt, liability of
person responsible is subsidiary
● Quasi-delict- negligence only,
private interest, civil liability,
indemnification, liability can be
compromised, fault or negligence

Chapter 2 - Nature and Effect of Obligations
Article
1163.Every person obliged to
give something is also
obliged to take care of it
with the proper diligence of
a good father of a family,
unless the law or the
stipulation of the parties
requires another standard
of care.
proved by preponderance of
evidence
De Leon Perez
Standard of Care
● GR: proper diligence of a good father of a
family
○ equated with ordinary care or that
diligence which an average (a
reasonably prudent) person exercises
over his own property
● ER: law or stipulation requires another
standard of care
○ slight or extraordinary diligence
○ 1755 - carrier requires extraordinary
diligence
○ Banks require extraordinary diligence
Specific/Determinate Thing
● When it is particularly designated or
segregated from all others
○ Toyota with plate card number AAV334
Generic or indeterminate
● Refers only to a class or genus and cannot be
pointed out
Specific v. Generic
● determinate/specific identified by individuality.

1164..The creditor has a
right to the fruits of the thing
from the time the obligation
to deliver it arises. However,
he shall acquire no real right
over it until the same has
been delivered to him.
Cannot substitute it with another.
● Generic thing identified by its specie - debtor
can give anything
○ Debtor give anything of same class
Duties in giving determinate
● Preserve or take care of the thing due
● Deliver fruits of thing
● Deliver accessions and accessories
● Deliver thing itself
Duties in giving generic/indeterminate
● Deliver thing quality intended
● Liable for damages in case of fraud
negligence or delay
KINDS OF Fruits
● Natural fruits - products of the soil
● Industrial - produced by lands or cultivation,
and brought about by human labor
● Civil fruit -rent, prices of lease
Right of Creditor to Fruits
● Creditor is entitled to the fruits of the thing
to be delivered from the time the obligation to
make delivery of the thing arises.
● Case of rescission - parties are under
“obligation to return the things which were
the object of the contract, together with
their fruits and the price with its interest
When obligation to deliver arises
● GR: arises from perfection of the contract
○ refers to the birth of the contract or to
the meeting of the minds between the
parties.
● ER: obligation is subject to suspensive
 condition or period - arises upon fulfillment
of condition or arrival of period
● ER: contract of sale - perfection of contract
even if suspensive
● ER: arising from the sources - determined by
specific provisions of law

Personal v. Real Right

● Personal Right
○ right or power of a person (creditor) to
demand from another (debtor) the
fulfillment of the latter’s obligation to
give, to do, or not to do.
○ there is a definite active subject and a
definite passive subject
○
● Real Right
○ right or interest of a person over a
specific thing (like ownership,
possession, mortgage, lease record)
without a definite passive subject

Ownership acquired by delivery

● rights over property are acquired and
transmitted by law, by donation, by testate and
intestate succession, and in consequence of
certain contracts by tradition (Art. 712.) or
delivery
● creditor does not become the owner until the
specific thing has been delivered to him.
○ hen there has been no delivery yet, the
proper action of the creditor is not one
for recovery of possession and
ownership but one for specific
performance or rescission of the
obligation.

1165. When what is to be
delivered is a determinate
thing, the creditor, in addition
to the right granted him by
article 1170, may compel the
debtor to make the delivery.
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. (
1166.The obligation to give
a determinate thing
includes that of delivering all
its accessions and
accessories, even though
they may not have been
mentioned.
○
Remedies of Creditor in Real obligation
● Specific real obligation
○ Demand specific performance if still
possible + indemnity for damages
○ Demand rescission or cancellation +
rights to recover damages
○ Demand damages only
● Generic real obligation
○ Can be performed by a third person
○ Not necessary creditor compel debtor
■ May ask for performance
○ May ask for damages in case of
breach
Where debtor delays or has promised delivery to
separate creditors.
● Fortuitous Event does Not exempt when
debtor delays or promise same thing to two or
more persons
Accessions and Accessories
● Accessions - fruits of/additions/improvements
on a thign
○ House or trees on a land
● Accessories - things joined to or included to
the principal
○ Key to house, bracelet of watch
Right of Creditor
● GR: all accessions and accessories are
considered included in the obligation to deliver
a determinate thing although they may not

1167. If a person obliged to do Situations Contemplated
something fails to do it, the
same shall be executed at
his cost.
This same rule shall be
observed if he does it in
contravention of the tenor of
the obligation. Furthermore, it
may be decreed that what has
been poorly done be undone.
1168.When the obligation
consists in not doing, and
the obligor does what has
been forbidden him, it shall
also be undone at his
expense.
have been mentioned
○ Follow law that accessory follows
principal
● ER: Unless otherwise stipulated, an obligation
to deliver the accessions or accessories of a
thing does not include the latter
● Obligation to do
○ When fails to do
○ Performs obligation but contrary to
terms
○ Performs but poor manner
Remedies of Creditor in Positive Personal Obligation
● Debtor fails to comply with obligation to do -
creditor has
○ Have obligation performed by himself
or another at debtor’s expense
○ Recover damages
● Debtor does obligation in contravention/poorly
done
○ Ordered undone
Performance of a Third PErson
● A personal obligation to do, like a real
obligation to deliver a eneric thing, can be
performed by a third person
●
Remedies of creditor in negative personal obligation.
● in obligation not to do, the duty of the obligor
is to abstain from an act.
● GR: remedy of the obligee is the undoing of
the forbidden thing plus damages. (Art.
1170.)

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
● ER: if it is not possible to undo what was
done, either physically or legally, or because
of the rights acquired by third persons who
acted in good faith, or for some other reason,
his remedy is an action for damages
●
Meaning of Delay
● Oedinary delay - merely the failure to perform
an obligation on time.
● Legal delay (default/mora) - failure to perform
an obligation on time which failure,
constitutes a breach of the obligation.
Kinds of Delay
● Mora solvendi - delay part debtor fulfill
obligation (give/do)
● Mora accipeindi - delay part creditor without
justifiable reason to accept performance
● Compensatio morae - delay of obligors in
reciprocal pbligations
No Delay in Begative (Not Do) Personal Obligation
● delay is impossible for the debtor fulfills by not
doing what has been forbidden him. (see Art.
1168.)
Requisites of delay or default by debtor
● Failure of debtor to perform upon date agreed
upon
● Demand made by creditor (either judicial or
extra judicial)
● Failure of debtor to comply with demand
Effects of Delay
● Mora solvendi
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.
1170. Those who in the
performance of their
obligations are guilty of fraud,
negligence, or delay, and
those who in any manner
contravene the tenor thereof,
are liable for damages.
○ Debtor guilty of breach
○ Liable for interest or damages
○ Liable even for fortuitous event if
deliver determinate
● Mora accipiendi
○ Creditor guilty of breach
○ Liable for damages suffered
○ Bears risk of loss of thing due
○ Debtor not liable of interest
○ Debtor may release by consignation
● Compensatio morae
○ here is no actionable default on the
part of both parties, such that as if
neither one is guilty of delay
When demand not necessary to put debtor in delay
● GR: delay begins only from the moment the
creditor demands, judicially or extrajudicially,
the fulfillment of the obligation.
● ER:
○ When obligation so provides
○ Law so provides
■ taxes
○ Time of essence
■ Cakes for birthdays
■ Dresses for wedding
○ Demand is useless
○ Reciprocal obligations
Grounds for Liability Entitling Injured to Damages
● Fraud (deceit dolo)
○ Deliberate or intentional evasion of
the normal fulfillment of an obligation.
■ 1170 - dolo incidente
○ employed for the purpose of evading
the normal fulfillment of an obligation

1171.Responsibility arising
from fraud is demandable in
all obligations. Any waiver
of an action for future fraud
is void.
and its existence merely results in
breach thereof giving rise to a right by
the innocent party to recover damages.
● Negligence (fault or culpa) - voluntary act or
omission, there being no malice, which
prevents the normal fulfillment of an
obligation.
● Delay (mora) - delay in the performance of the
obligation under Article 1170 must be either
malicious or negligent.
● Contravention of the terms of obligation
Recovery o Damages for breach
- Breach of contract is the failure without
justifiable excuse to comply with the terms of a
contract
● Measure of Recoveralble Damages
● Contractual interest of obligee
○ Expectation interest - benefit of
bargain
○ Reliance interest - reimbursed for lost
○ Restitution interest - rinterest restored
any benefit
● Excuse from ensuing liability
● Duty of obligee to minimize dmaages
Responsibility arising from fraud demandable.
● refers to incidental fraud which is employed in
the fulfillment of an obligation. (Art. 1170.)
Waiverof action for future fraud
● This is void as being against the law and
public policy.
Waiver for past fraud valid

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.
● law prohibits is waiver anterior to the fraud
and to the knowledge thereof by the aggrieved
party.waiver is act og generosity to party who
is victim
○ What is renounced is effects of fraud
●
Responsibility arising from negligence demance
● Debtor is also liable for damages resulting
from his negligence or culpa
● courts, however, are given wide discretion in
fixing the measure of damages.
● If both party are mutually negligent ult of one
cancels the negligence of the other.
●
Validity of waiver of action arising from negligence
● action for future negligence may be renounced
● If negligence is gross/shows bad faith = fraud
Kinds of negligence
● Contractual - negligence in contract resulting
in breach
○ merely makes the debtor liable for
damages in view of his negligence in
the fulfillment of a pre-existing
obligation resulting in its breach or
non-fulfillment.
○ Does not result in crime
● Civil negligence - negligence is the source of
obligation
○ “Tort” / “quasi delict”
● Criminal negligence - resulting in commission
of crime
○ May produce civil liability

1173. The fault or
negligence of the obligor
consists in the omission of
that diligence which is
required by the nature of the
obligation and corresponds
with the circumstances of the
persons, of the time and of
the place. When negligence
shows bad faith, the
provisions of articles 1171 and
2201, paragraph 2, shall
apply.
If the law or contract does
not state the diligence
which is to be observed in
the performance, that which is
expected of a good father of
a family shall be required.
Contractual v. Civil Negligence
● Civil - arises from mere, not breach of positive
obligation
Effect of Negligence on Injured?
● plaintiff’s own negligence was the immediate
and proximate cause of his injury, he cannot
recover damage
● if his negligence was only contributory, the
immediate and proximate cause of the injury
being the defendant’s lack of due care, the
plaintiff may recover damages, but the courts
shall mitigate the damages to be awarded
●
Meaning of Negligence
● negligence is conduct that creates undue risk
or harm to another. It is the failure to observe
for the protection of the interests of another
person, that degree of care, precaution and
vigilance which the circumstances justly
demand, such other person suffers injury.
Test for determining whether a person is negligenc
● Reasonable care and caution expected of a
prudent person
○ If prudent man foresee harm?
○ Law imposes duty to refrain from that
harm
● No hard and fast rule for measuring degree of
care
○ here is no hard and fast rule whereby
the degree of care and vigilance
required is measured.
○ It is dependent upon the

1174. Except in cases
expressly specified by the
law, or when it is otherwise
declared by stipulation, or
when the nature of the
obligation requires the
assumption of risk, no
person shall be responsible
for those events which
could not be foreseen, or
which, though foreseen, were
inevitable.
circumstances in which a person finds
himself situated.
Factors to be considered
● Nature of obligation - ex smoking while
carrying flammables
● Circumstances of person - guard sleeping on
duty
● Circumstances of tiem - driving at night
without headlights
● Circumstances at place
Measure of liability
● Civil Code - ase of fraud, bad faith, malice or
wanton attitude, the obligor shall be
responsible for all damages
● Contractual breach - in breaching the
contract, the defendant is not shown to have
acted fraudulently or in bad faith iability for
damages is limited to the natural and probable
consequences of the breach of the obligation
and which the parties had foreseen or could
have reasonably foreseen
Meaning of Fortuitous Event
● extraordinary event which cannot be
foreseen, or which, though foreseen, is
inevitable.
● a happening independent of the will of the
obligor and which happening, makes the
normal fulfillment of the obligation impossible.
Fortuitous event v. Force majeure
● Acts of man - fortuitous event is independent
of will of human.
● Act of God - events totally independent will of
 human being

Kinds of fortuitous event

● Ordinary fortuitous events - common and can
reasonably foresee
● Extraordinary fortuitous events - uncommon
and not foreseen

Requisites of fortuitous event

● Event independent of human will or obligor’s
will
● Event is unforeseeable, or if foreseeable -
unavoidable
● Event must be of character to render
impossible to comply obligation
● Obligor must be free from participation

Concurrent or previous negligence of obligor

● must be no concurrent or previous negligence
or imprudence on the part of the obligor by
which the loss or injury may have been
occasioned.

Rules to liability
● GR: person is not, as a rule, responsible for
loss or damage resultin from fortuitous events.
● ER:
○ When expressly provided by law
■ Guilty of fraud negligence or
delay
■ Promise to deliver same
specific thing to two persons
■ Debt of a thing certain and
determinate proceeds from
criminal offense
○ Declared by stipulation
 ■ Rests on freedom of contract
○ Nature of obligation requires
assumption of risk
■ Risk of loss is essential
element

Where Risk is Not Impossible to Foresee

● Risk is quite evident
● Mere difficulty is different from impossibility

1175.Usurious transactions Simple loan or mutuum

shall be governed by special ● contract whereby one of the parties delivers
laws. to another money or other consumable thing,
upon the condition that the same amount
of the same kind and quality shall be paid.
● It may be gratuitous or with a stipulation to pay
interest.

Usury
● contracting for or receiving interest in
excess of the amount allowed by law for
the loan or use of money, goods, chattels, or
credits.

Kinds of interest
● Simple - interest stipulated by parties art 2209
● Compound - interest earned is upon interest
due
● Legal interest - interest intended by parties is
presumed by law
● Lawful interest - allowed within maximum
allowed by usury law
○ 12% ang legal rate, 12% annum - 14%
annum is maximum

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.
● Unlawful - rate of interest beyond maximum
fixed by law
Requisites for recovery of monetary interest.
● Payment of interest expressly stipulated
● Agreement must be writing
● Interest must be lawful
- Stipulation to pay usurious interest is void
Liability for legal interest
● Loan or forbearance
○ Involves payment of money
○ Legal interest in the nature of damages
is recoverable even not in writing
● Other than loan
● Final judgement
Presumption
● inference of a fact not actually known arising
from its usual connection with another which is
known or proved.
Kinds of Presumption
● Conclusive - cannot be contradicted, everyone
presumed to know
● Disputable - can be contradicted
When do Presumptions Not APply
● With reservation as to interest
● Receipt for a part of principal
○ Implies creditor waives right to apply
payment
● Receipt without indication of particular interest
paid
● Payment of taxes
● Non-payment proven
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.
1178. Subject to the laws, all
rights acquired in virtue of
an obligation are
transmissible, if there has
been no stipulation to the
contrary.
Chapter 3. — Different Kinds of Obligations
Article
Remedies available for creditor
● Exact fulfillment + right to damages
● Pursue leviable property of debto
● Exercise all rights and bring actions of debtor
(collect from debtor or debtor)
● Ask court to rescind or impugn acts
● GR: rights acquired in virtue of an obligation
are generally transmissible
● ER:
○ When prohibited by law - partnership
agency, which are purely personal
■ Contract or partnership - two or
more persons
■ Contract of agency - person
render service
■ Commodatum
○ Prohibited by stipulation - ex. Upon
death of creditor, obligation
extinguoshed/creditor cannot assign
■ Must not be contrary to public
policy
De Leon Perez
Section 1. — Pure and Conditional Obligations
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
Meaning of pure obligation
● Not subject to condition or no specific date is
mentioned for fulfillment
● Is immediately demandable
Meaning of conditional obligation
● Consequences are subject to fulfilment of a
condition
○ s a future and uncertain event, upon
the happening of which, the effectivity
or extinguishment of an obligation (or
rights) subject to it depends.
Characteristics of condition
● Future and uncertain
● Past but unknown
Kinds of Condition
● Suspensive condition
○ Fulfilmlment will give rise to
obligation
○ Ex. If i win lottery i will buy you a house
○ Can be no rescission if non existent
● Resolutory -
○ fulfillment of condition extinguishes
obligation
○ Ex. When you pass the bar I will stop
giving you money
When is obligation demandable at once
● Pure obligation
● Subject to resolutory condition

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.
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.
● Subject to resolutory period
Where duration of period depends on will of debtor
- Period is future and certain event, arrival
makes arisal or extinguishment of obligation
● Debtor promise when means permit him
○ This has period
○ What depends is not if he will pay or
not
○ It is rather, the duration of period
● Others cases
○ Little by little, ASAP, time to time, “time
i have ,oney”
- article reiterates the distinction between a
suspensive (or antecedent) condition and a
resolutory (or subsequent) condition.
Effect ofhappening of condition
● Acquisition of rights
○ Suspensive Condition-
■ Acquisition of rights by the
creditor depends upon the
happening of the event which
constitutes the condition.
● Loss of rights already acquired
○ Resolutory Condition
■ happening of the event which
constitutes the condition
produces the extinguishment or
loss of rights already acquired.
Effect of non compliance with resolutory condition
● non-compliance with or non-fulfillment of the
condition resolves the contract by force of law
 without need of judicial intervention.

1182. When the fulfillment of Classification of Condition

the condition depends upon ● Effect
the sole will of the debtor, ○ Suspensive - happening gives rise to
the conditional obligation obligation
shall be void. If it depends ○ Resolutory - happening extinguishes
upon chance or upon the will ● Form
of a third person, the ○ Express
obligation shall take effect in ○ Implied
conformity with the ● Possibility
provisions of this Code. ○ Possible
○ Impossible
● Cause or origin
○ Potestative - will of one of parties
○ Casual - chance or third person
○ Mixed - partly chance and third person

Potestative conditions
● potestative condition is a condition suspensive
in nature and which depends upon the sole will
of one of the contracting parties.

Suspensive condition depends on will of debtor

● Conditional obligation is void - because its
validity and compliance is left to the will of the
debtor in order not to be liable, the debtor will
not just fulfill the condition.
○ There is no burden on the debtor and
consequently, no juridical tie is created.
○ Ex. “I will pay you if I want/Pay you
when I receive loan in bank”
Suspensive condition depends on creditor
● the obligation is valid.

1183. Impossible conditions, When Art 1183 applies
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.
Resolutory condition depends on will of debtor
● the obligation is valid although its fulfillment
depends upon the sole will of the debtor.
● fulfillment of the condition merely causes the
extinguishment or loss of rights already
acquired.
Casual condition
● Obligation is valid
Mixed condition
● valid
● Only to suspensive conditions, impossibility
already existed time obligatinon was
constituted
○ If imposisiblity arises after creation of
the obligation 1266 governs
Two Kinds of Impossible Conditions
● Physically impossible - nature of things -
cannot exist or be done
● Legally impossible conditions - contrary to
law/morals/GC/PO/PP
Effect of Impossible Conditions
● Conditonal obligation void - annul the
obligation that depends on it
○ Obligor knows the obligation cannot e
fulfilled
● Conditional obligation valid - if condition
negative - not to do an impossible -
disregarded
● Only affected obligation void - if obligation is
divisible - part not affected by impossibility is
valid

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.
1185.The condition that some Negative Condition
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 Ex. X give Y if, Y not marry W on December 30
condition shall be deemed
fulfilled at such time as may
have probably been
contemplated, bearing in mind
the nature of the obligation.
1186. The condition shall be
deemed fulfilled when the
obligor voluntarily prevents
its fulfillment.
● Only the condition void - obligation is pre
existing,
Refers to a positive (suspensive condition)
● Obligation is extinguished if:
○ Time expires and event does not
happen
○ Become indubitable that event will not
take place
○
● Negative condition event will not happen at a
determinate time
● Obligation shall become effective and binding
○ Moment time elapsed without event
take place
○ Moment evident event cannot occur
● No time fixed - determine intention parties
● X not liable to Y if Y marry W on Dec 30 or
prior
● X liable to Y if Y not married to W on Dec 30
● W dies - effective
Constructive fulfillment of suspensive condition
● Requisites for 1186
○ Condition is suspensive
○ Obligor prevents the fulfillment
○ Prevention is voluntary
Constructive fulfillment of resolutory
● 1186 applies also to an obligation subject to a
resolutory condition with respect to the debtor

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.
1188.The creditor may, before
who is bound to return what he has received
upon the fulfillment of the condition.
●
Retroactive effects of fulfillment of suspensive
condition
● Obligations to give
○ Obligation to give becomes
demandable upon fulfillment.
○ Once condition is fulfilled effects shall
retroact to day it was constituted
○ Condition is only accidental element of
a contract
○ Example
■ S agree S land to B for 100k if
B lose a case involving
recovery of parcel of land. S
sold land to C. B lost case on
Dec 4.
● Before Dec 4 - B had to
right to demand sale,
but when it was fulfilled -
it is as if B was entitled
to the land. Between B
and C - B has right.
● Obligations to do or not do
○ No fixed rule
○ courts are empowered by the use of
sound discretion and bearing in mind
the intent of the parties, to determine,
in each case, the retroactive effect of
the suspensive condition that has been
complied
○
Right spending fulfillment of suspensive condition
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.
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
● Rights of creditor
○ May take or bring appropriate action for
preservation of his right
○ May go to court to prevent alienation or
concealmeant of the property
● Right of the debtor
○ Recover what he paid by mistake prior
to the happening
Example
● S and B entered into contract to sell parcel of
land evidenced by memo of agreement
● S reserves herself ownership and possession
of the property until full payment by B -
payable 6 months
● S exerted efforts to register property, B had no
intention to buy it
● B entitled recover from T?
○ No - B no full payment
Requisites for application of Article 1189.
Article 1189 applies only if:
(1) The obligation is a real obligation;
(2) The object is a specific or determinate thing;
(3) The obligation is subject to a suspensive
condition;
(4) The condition is fulfilled; and
(5) There is loss, deterioration, or improvement of the
thing duri the pendency of the happening on one
condition.
Kinds of Loss
● Loss in civil law may be
○ Physical - thign persishes
○ Legal loss - thing goes out of
commerce/legal becomes illegal
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.
○ Civik loss - disappears in a way
existence is unknown, or cannot be
recovered
(1) Loss of thing without debtor’s fault. —
EXAMPLE:
D obliged himself to give C his car worth P100,000.00
if C sells D’s
property. The car was lost without the fault of D.
The obligation is extinguished and D is not liable to C
even if C sells the property. A person, as a general
rule, is not liable for a fortuitous event. (Art. 1174.)
(2) Loss of thing through debtor’s fault. —
EXAMPLE:
In the same example, if the loss occurred because of
the negligence
of D, C will be entitled to demand damages (Art.
1170.), i.e., P100,000.00
plus incidental damages, if any.
(5) Improvement of thing by nature or by time. — A
thing is improved
when its value is increased or enhanced by nature or
by time or at the
expense of the debtor or creditor. (see Art. 1187.)
EXAMPLE:
Suppose the market value of the car increased, who
gets the benefit?
The improvement shall inure to the benefit of C.
Inasmuch as C would suffer in case of deterioration of
the car through a fortuitous event, it is but fair that he
should be compensated in case of improvement of the
car instead.
(6) Improvement of thing at expense of debtor. —

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 XAMPLE:
applied to the party who is
bound to return.
As for obligations to do and
not to do, the provisions of the back the car.
second paragraph of article
1187 shall be observed as
regards the effect of the
extinguishment of the
EXAMPLE:
During the pendency of the condition, D had the car
painted and its seat cover changed at his expense.
In this case, D will have the right granted to a
usufructuary with respect to improvements made on
the thing held in usufruct.6
Usufruct - ives a right to enjoy the property of another
with the obligation of preserving its form and
substance,
Effects of fulfillment of resolutory condition
● Obligations to give
○ The obligation is extinguished
○ Obliged to return to each other what
they received under obligation
■ Return to the status quo
■ Mutual restitution
■ In case the thing to be returned
“is legally in the possession of a
third person who did not act in
bad faith” (see Art. 1384, par.
2.), the remedy of the party
entitled to restitution is against
the other.
D obliges himself to allow C to use the former’s car
until D returns
from the province. Upon the return of D from the
province, C must give
The effect of the happening of the condition is to annul
the obligation
as if it had never been constituted at all. In this case,
the parties intend the
obligation. return of the car.

● Obligations to do or not do -
○ shall determine the retroactive effect of
the fulfillment of the resolutory
condition (par. 2.) as in the case where
the condition is suspensive. (Art. 1187,
par. 2.)
○ The courts in the exercise of discretion
may even disallow retroactivity taking
into account the circumstances of each
case.
○

1191.The power to rescind Kinds of obligations to the person obliged

obligations is implied in ● Unilateral
reciprocal ones, in case one ○ One party obliged to comply with a
of the obligors should not prestation
comply with what is incumbent ■ Contract of loan - lender gives,
upon him. debtor now pays
● Bilateral
The injured party may ○ Parties are mutually bound to each
choose between the other
fulfillment and the rescission ■ Reciprocal obligation
of the obligation, with the ● which arise from the
payment of damages in either same cause and in
case. He may also seek which each party is a
rescission, even after he has debtor and creditor of
chosen fulfillment, if the latter the other
should become impossible. ■ Non-reciprocal
● do not impose
The court shall decree the simultaneous and
rescission claimed, unless correlative performance
there be just cause authorizing on both parties.
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.
Remedies
● s predicated on a breach of obligation by the
other party that violates the reciprocity
between them.
Choice of remedy
1. Action for specific performance
2. Action for rescission
a. “to declare a contract void in its
inception and to put an end to it as
though it never were.’’
b. o abrogate it from the beginning and
restore parties to relative positions
which they would have occupied had
no contract even been made
Breach of an obligation
● occurs when there is a failure or refusal, by a
party without legal reason or excuse to
perform,
● eXISTENCE OF ECONOMIC PREKIDOCE
MPT REQIORED
● 1385 - LESION
Effect of rescission
● mutual restitution is required to bring back the
parties, as far as practicable, to their original
situation prior to the inception of the contract.
● creates the obligation to return the object of
the contract.
Court may grant guilty party term for performance
● court shall decree the rescission claimed
unless there should be just cause for granting
the party in default a term for the performance
 of his obligation

Remedies are alternative

● privileged to choose only one of the remedies,
and not both, subject only to the exception in
paragraph 2, to wit: he may also seek
rescission even after he has chosen fulfillment
if the latter should become impossible.

Damages recoverable
● Injured party not entitled pursue both remedies
○ amages which would only be
consistent with the conception of
specific performance cannot be
awarded in an action where rescission
is sought, and vice versa
○ case of rescission for non-delivery of
the thing sold, the purchaser is entitled
to interest on the amount he has p

Limitation to demand rescission

● This right is not absolute
○ Resort to the courts - rescission in
1191 is a judicial rescission
● Power of court to ix period - court has
discretionary power
● Compliance byn aggrieved party
○ party to a contract cannot demand
performance of the other party’s
obligation unless he is in a position to
comply with his own obligations. ght to
rescind a contract can be demanded
only if a party thereto is ready, willing,
and able to comply with his own
obligations t
● Right of third person - if the thing, subject

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.
Section 2. — Obligations with a Period
matter of the obligation, is in the hands of a
third person who acted in good faith,
rescission is not available as a remedy.
● Slight or substantial violation
○ GR: rescission will not be granted for
slight or casual breaches of contract.
The violation should be substantial and
fundamental as to defeat the object of
the parties in making the agreement.
○
When both parties are guilty of breach
- first infractor, on the other hand, is liable for
damages, but the same shall be equitably
tempered by the courts, since the second
infractor also derived or thought he would
derive some advantage by her own act or
neglect.
- the second infractor is not liable for damages
at all
● First fractor is known:
○ liability of the first infractor should be
equitably reduced.
● First infractor cannot be determine
○ contract shall be deemed extinguished
and each shall bear his own damages.
● oth parties to a transaction are mutually
negligent in the performance of their
obligations, the fault of one cancels the
negligence of the other and their rights and
obligations may be determined equitably under
the law proscribing unjust enrichment.
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. (
Meaning of obligation with a period.
An obligation with a period is one whose
consequences are subjected in one way or another to
the expiration of said period or term.
Period or term
● future and certain event upon the arrival of
which the obligation (or right) subject to it
either arises or is terminated. It is a day certain
which must necessarily com
Period v. Condition
● As to fulfillment
○ Period is certain event
○ Condition is uncertain
● As to time
○ Period is only future
○ Condition may refer to a past event
unknown
● Influence
○ Period - fixes time for effcaciousness of
obligation
■ Suspensive - cannot prevent
birth of obligation
■ Resolutoy - does not annul
○ Condition - causes obligation to arise
or cease
● Effect on debtors will
○ Empowers court to fix duration
● Retroactivity -
○ the arrival of a period does not have
any retroactive effect,
○ while the happening of a condition has
retroactive effec
Kind of period or term

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.
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.
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
● Suspensive - obligation begins from day upon
arrival of period
● Resolutory - obligation is valid until day certain
and terminates
- See 1189
● 1195 applies only to obligations to give
● creditor cannot unjustly enrich himself by
retaining the thing or money received before
the arrival of the period.
Debtor is never presumed aware of period
● presumption, however, is that the debtor knew
that the debt was not yet due.
In personal obligations
● it is physically impossible to recover the
service rendered, and as to the latter, as the
obligor performs by notdoing, he cannot, of
course, recover what he has not done.
●
General Rule:
Exceptions:
(1) Term is for the benefit of the debtor alone. — He
cannot be compelled to pay prematurely, but he can, if
he desires,
(2) Term is for the benefit of the creditor. — He may
demand fulfillment even before the arrival of the term
but the debtor cannot require him to
accept payment before the expiration of the stipulated
has been established in favor
of one or of the other.
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
period.
Acceleration by debtor of time payment
● ayment of interest may not be the only reason
why a creditor may not be bound to receive
payment before maturity.
● debtor has no right to accelerate the time of
payment even if the premature tender included
an offer to pay principal and interest in full.
Effect of acceptance of partial payment
● ceptance of a partial payment by a creditor
amounts to a waiver of the period agreed upon
during which payment should not be made. no
explanation is given why the creditor received
such partial payment before the maturity of the
obligation, it may be presumed that his
relinquishment was intentional, and his choice
to dispense with the term, voluntary.
Court generally without power tto fix a period.
The period mentioned in the above provision refers to
a judicial
period as distinguished from the period fixed by the
parties in their
contract which is known as contractual period.
Exception
● When can courts authorize fix period
○ No period is fixed but a period was
intended
■ (1) X agreed to construct the
house of Y. The parties failed to
fix the period within which the
construction is to be made.
under the circumstances have Here, the court can fix the term
been probably contemplated for it is evident that the parties
by the parties. Once fixed by intended that X should
the courts, the period cannot construct the house within a
be changed by them. certain period. (see Concepcion
vs. People, 74 Phil. 63 [1942].)
○ Duration of period depends upon the
will of the debtor
○ Separate action to fix
■ action that can be maintained is
to ask the court first to
determine the term within which
the obligor must comply with his
obligation
■

1198.The debtor shall lose GR: obligation is not demandable before the
every right to make use of the lapse of the period.
period: ER
1. Debtor becomes insolvent
(1) When after the obligation D owes C P10,000.00 due and payable on December
has been contracted, he 20. If D become insolvent, say on September 10, C,
becomes insolvent, unless he can demand immediate payment from
gives a guaranty or security for D even before maturity unless D gives sufficient
the debt; guaranty or security. The insolvency in this case need
not be judicially declared. It is sufficient that the assets
(2) When he does not furnish of D are less than his liabilities or D is unable to
to the creditor the guaranties pay his debts as they mature. Note that the insolvency
or securities which he has of D must occur after the obligation has
promised; been contracted

(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.

Section 3. — Alternative Obligations

1199.person alternatively Lind of obligation according to object

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.
● Simple obligation - only one prestation
● Compound obligation - two or more
○ Conjunctive - several prestation all due
○ Distribute - one or two prestations are
due
Alternative Obligation
● one wherein various prestations are due but
the performance of one of them is
sufficiently determined by the choice which,
as a general rule, belongs to the debtor.
●

1200. The right of choice GR: Right of choice debtor

belongs to the debtor, unless ER: expressly state that it is to creditor
it has been expressly granted
to the creditor. Right of choice of debtor is not absolute
1. The debtor cannot choose those prestations
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.
1201. The choice shall
produce no effect except
from the time it has been
communicated
1202.The debtor shall lose
the right of choice when
among the prestations
whereby he is alternatively
bound, only one is practicable.
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
which are: (a) impossible, (b) unlawful, or (c)
which could not have been the object of the
obligation.
2. debtor has no more right of choice, when
among the prestations whereby he is
alternatively bound, only one is practicable
3. debtor cannot choose part of one prestation
and part of another prestation.
Communication of notice that choice has been made
(1) Effect of notice. — Until the choice is made and
communicated, the obligation remains alternative.
● (a) Once the notice of the election has been
given to the creditor, the obligation ceases to
be alternative and becomes simple.
● Such choice once properly made and
communicated is irrevocable and cannot,
therefore, be renounced.
(2) Proof anf form of notice - burden of proving that
such communication has been made is upon him who
made the choice.
● Under Article 1202, if only one is practicable
(e.g., the others have become impossible), the
obligation is converted into a simple one.
●
XAMPLE:
D borrowed from C P20,000.00. It was agreed that
instead of
P20,000.00, D could deliver item one, or item two, or
item three.
contract with damages.
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.
If through the fault of C, item one is destroyed, D can
rescind the
contract if he wants. In case of rescission, the amount
of P20,000.00 must
be returned by D with interest. C, in turn, must pay D
the value of item
one plus damages.
D, instead of rescinding the contract, may choose item
two or three
with a right to recover the value of item one with
damages. If D chooses
item one, his obligation is extinguished. C is not liable
for damages.
Effect of loss or becoming impossible of objects of
obligation
● Some of the objects
○ some of the objects of the obligation
have been lost or have become
impossible even through the fault of the
debtor, the latter is not liable since he
has the right of choice and the
obligation can still be performed.
● All of the objects. —
○ If all of them have been lost or have
becomeimpossible through the debtor’s
fault, the creditor shall have a right to
indemnity for damages since the
obligation can no longer be
complied with.
○ Of course, if the cause of the loss is a
fortuitous event, the obligation is
extinguished.
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
Rules in case of loss before creditor
has made choice.
(1) When a thing is lost through a fortuitous event. —
S obliged himself to deliver to B item one, or item two
or item three, or item four. If item one is lost through a
fortuitous event, B can choose from among the
remainder or that which remains if three of the
items are ost.
(2) When a thing is lost through debtor’s fault. —
EXAMPLE:
If the loss of item one occurs through the fault of S, B
may claim item two or item three or item four with a
right to damages or the price of item one also with a
right to damages.
(3) When all the things are lost through debtor’s fault.
—
EXAMPLE:
If all the items are lost through the fault of S, then B
can demand the payment of the price of any one of
them with a right to indemnity for
Damages.
(4) When all the things are lost through a fortuitous
event. —
EXAMPLE:
The obligation of S shall be extinguished if all the
items which are alternatively the object of the
obligation are lost through a fortuitous
event. In this case, Article 1174 shall apply
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.
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.
Effect if loss
● Before substitution
○ principal thing is lost through a
fortuitous event, the obligation is
extinguished; otherwise, the debtor is
liable for damages.
Alternative v. Facultative
1. Number of Prestationsb-
a. Alternative- several prestation, one
sufficient
b. Facultative - one prest due, but debtor
allowed to substitute
2. Right of choice
a. Alternative - to debtor, creditor, third
person
b. Facultative - debtor only
3. Loss thru fortuitous
a. Alternative - Not extinguish
b. Facultative 0 extinguishes
4. Loss thru fault of debtor

Section 4. — Joint and Solidary Obligations
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 expressly so
states, or when the law or the
nature of the obligation
requires solidarity.
Article 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 shares as there are
creditors or debtors, the
credits or debts being
considered distinct from one
another, subject to the Rules
a. Alternative - loss of one of the alts does
not make him liable
b. Facultative - loss of thing due liable
Kinds of Obligation
● Individual - one obligor, one obligee
● Collective - two or more debtor, two or more
creditor. May be joint or solidary
○ There are two kinds of relation ships,
creditor-debtor, and among creditor
and debtor themselves
Joint and Solidary
● Joint obligation - whole obligation fulfilled
proportionalyl by different debtors or
proportionately by different creditors
● Solidary - debtors bound to render entire
compliance with the prestation
● Disjunctive or alternative condition refers to
several conditions and only one or some of
them must be fulfilled.
● A collectiveobligation is presumed joint
○ For example in joint:
■ A, B, C owe D 9k. D only collect
3k from each
■ A owe B, C, D 9k. Each of them
only collect 3k from A
■ A B owe C and D 9k. Each can
only collect 4.5k
● Characreristics of Solidary Obligation
○ Unity of object
● General Rule - If there is a collective
obligation, presumed joint. Each debtors
is liable only for proportion of prt
○ IIf law is silent to liability -
considered joint
● Exception: when is it solidary
○ Obligation expressly state - no
need precise word “solidary”,
enough “one pay entire debt”
○ When Law requires solidarity
■ Quasidelict
■ Liability arising from
crime
○ Nature of obligation requires
solidarity
● Effects - debt/cedit divided into many
shares
○ Joit creditor not act
representation of others
○ Effect of demand/prescription
limited only to particular
creditor/debtor or receive deman
d interruption
○ Extinguishment of obligation not
affect sharesif ci0debtors
○ Nullity or vices of obligation
affecting not necessarily extend
to share of co-debtors
of Court governing the
multiplicity of suits.
● When is it solidary
● Kinds of solidarity
○ Plurality of ties ○ Insolvency not increase liability
○ Essence if sikudaruty 0 each every
sikutary credturiy cab demand eacg if Kind of Solidarity
the debtors their parts. Of course the Active
creditor now has duty to pay Passive
co-creditors what belongs to the, Mixed - solidarity both creditors or debtors
○ Obligation expressly state Baried Solidarity - exist but not bound same
○ Law requires manner/oeriods and conditions
○ Nature obli require ● Ex. X Y Z liable J 30k. X liability mature
○ Imposed in final judgement Year 1, Y Yeae 2 , Z Year 3.
○ If Year 1- J may sue
○ Parties bound
■ Passive solidarity/solidarity part
of debtors - anyone of the
debtors can be liable for the
fulfillment of the entire
obligation (mutual guaranty)
● A and B solidary debtors
C for 10k. C may
demand from either A or
B the hole thing - but
A/B demand from each
other their parts
■ Active solidarity - creditors any
of them demand the fulfillment
of the obligation
● A owe B and C 10k. A
can either pay B or C/B
or C can demand A. B/C
now liable for each
other’s hare
○ According to source
■ Concentional - solidarity agreed
on by parties, and if nothing
mention - it is joint
 ■ Legal solidarity - imposed by
law
■ Real solidarity - imposed by
nature of the obligation
● Purpose ir intent of law

PASSIVE SOLIDARITY v. SOLIDARY GUARANTY

● Guaranty - Art 20147 - person bind solidarily
with principal debtor
● Similarities
○ Passive solidarity - guaranty is
characteristic predominates over
agency. Debtor answers for debt not
his, but may demand reimbursement
● Distinctions - guarantor binds to principal
debtor, liability of guarantor would be different
from solitary debtor
○ Solidary debtor liable for another, and
for own. Guarantor does not incur liable
unless principal debtor held liable.
○ Passive solidary - debtor pay can
reimburse from co debtor. Suretyship,
surety who paid is to be indemnified by
principal debtor
○ PAssive solidarity - extensio granted by
creditor to one solidary debtor w/o
consent of other debtors not release
latter from obligation

WHY IS SOLIDARITY NOT PRESUMED

● Creates unusual rights and liabilities. Debtors
have added responsibility, creditors increase
right of each creditor. Law will favpr debtor in
presuming they are bind jointly.
Article 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 (JOINT)
Article 1210. The indivisibility
of an obligation does not
necessarily give rise to
solidarity. Nor does solidarity
of itself imply indivisibility.
Article 1211. Solidarity may Obligations according to legal tie
exist although the creditors
and the debtors may not be
bound in the same manner and
by the same periods and Solidarity not affected by diverse stipulation
conditions.
● joint indivisible obligation ● In Joint - indivisibility does not prevent
● Ex. Car is indivisible you cant half it. The value obligation from being condered joint.
is 240k, And and B will deliver but C does not. ○ But in indivisible debt can be
○ D cant act against C alone. So has to enforced by proceeding against
go against everyone. Now everyone all debtors
pay 80l.
INDIVISIBILITY v. SOLIDARITY ● The indivisibility of an obligation does
1. Indivisivbility- refers to the prestation, solidarity not necessarily give rise to solidarity.
- juridical or legal tie Nor does solidarity of itself imply
2. Indivisible Obligation - Debtor guilty of breach indivisibility. (Art. 1210)
is liable for damages. In solidary obligation - all ●
debtors liable for breach committed by
co-debtor
3. Indivisibility can exist even if one debtor one
creditor. Solidarity demands two debtors or two
creditors
4. Indivisibile - others not liable if one insolvent,
1st sentence - liability in indivisible may be joint or
solidary
2nd - in solidary obligation, subject matter may be
divisible or indivisible
● A and B jointly liable to deliver to C a car.
PRestation is indivisible, but liability is joint
● Varied Solidarity. Solidarity may exist
1. Uniform - partiesbound by same stipulation although the creditors and the debtors
2. Non-uniform or varied may not be bound in the same manner
and by the same periods and conditions.
(Art. 1211)
● creditor may bring his action in toto against ●
 any of the solidary debtors less the shares of
the other debtors with unexpired terms or
unfulfilled conditions

An obligation can be joint in one side and solidary on

the other
● rules applicable to each subject of the
obligation should be applied, the character of
the creditors or the debtors determining their
respective rights and liabilities
● Ex - joint creditors, solidary debtors
○ Creditor demand only share, debtor
compelled pay entire

Article 1212. 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.
● Solidary creditor - do any act beneficial or
useful to another, but not act prejudicial
● Perform prejudicial act resulting to obligation
extinguished - responsible to others for
damages
● Based on theory of mutual agency. Joint
creditor cannot act in the representation of
others
● Ex. A owe B and C 2k. B makes demand, will
benefit C. If this is remiss or condoned by B 0
the obligation is extinguished, B imburse C.
In Solidarity
● Each of the solidary creditors may do
whatever may be useful to the others,
but not anything which may be
prejudicial to the latter. (Art. 1212)
● (1) Thus, a solidary creditor may
interrupt prescription or make a demand
(for the debtor to be in default and for
interest to run), which is beneficial to his
co-creditors.
●

Article 1213. A solidary creditor ● absence of consent given by the others, a

cannot assign his rights
without the consent of the
others.
solidary creditor cannot assign his rights to a
third person
● Each creditor represents the others
○ Assignee does not have confidence of
the original creditors
○ assignee after receiving payment may
not give the shares of the others.
● Assignment is made to co-creditor? Consent of
others not necessary

Article 1214. The debtor may
pay any one of the solidary
creditors; but if any demand,
judicial or extrajudicial, has
been made by one of them,
payment should be made to
him.
Article 1215. Novation,
compensation, confusion or
remission of the debt, made by
any of the solidary creditors or
with any of the solidary
debtors, shall extinguish the
Effect of unauthorized assignment?
● If solidary assign rights, will payment to
assignee extinguish it?
○ 1213 - assignment is invalid
○ rule is unjustifiable and places an
unnecessary restriction on the rights of
the solidary co-creditor upon his share
○ representation (by each creditor) of the
solidary creditors is created by law and
not by consent or agreement of the
parties.
○ Manresa: “solidary creditor who
assigns his rights without consent, shall
answer subidiarily for prejudice caused
to latter
Payment to any solidary creditors ● In general, payment of the debt to one of
● Debtor may pay any of the solidary creditors the solidary creditors, or made by one of
● Demand/judicial/extrajudicial nade by one of the solidary debtors, is sufficient to
the creditors 0 oaynebt should be made to that extinguish the debt. (Arts. 1214, 1217)
creditor
Article 1214 is applicable not only in cases of active
solidarity
but also where the solidarity is mixed although the
singular “debtor”
is employed.
● Novation, compensation, confusion, and
remission are modes or causes of
extinguishment of obligations.
● creditor who executed any of these acts
should be liable to the others for their
corresponding shares considering that such
obligation, without prejudice to
the provisions of article 1219.
The creditor who may have
executed any of these acts, as
well as he who collects the
debt, shall be liable to the
others for the share in the
obligation corresponding to
them.
acts are prejudicial to them
● Effect of extension of time given by creditor to
solidary debtor
○ Not a novation that will discharge other
solidary debtoors. Debtors will be liable
for the whole debt less the share of the
debtor granted the extension.
● Effect of novation where obligation joint
○ Does not extinguish or modify the
obligation except with respect to the
creditor or debtor affected
○

Article 1216. 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.
● 1216 not applicable to joint, reiterates rule that
passive solidarity - any one or some or all of th
solidary debtors simultaneously, may be made
to pay the debt so long as it has not been fully
collected.
● Liability solidarity - other solidary debtors not
indispensable persons
● Bringing of an action to a solidary debtor - not
inconsistent with/does not preclude bringing of
another to compel
● If one solidary debtor die - creditor may
proceed against the estate of the deceased
solitary debtor/surviving debtor
○ Choice is on the solidary creditor
● The creditor . may proceed against any
one of the solidary debtors or · some or
all of them simultaneously. (Art. 1216)
○ Choice is left to solidary creditor
sino kasuhan
○ No need to implead them all
○ May choose collect part of debt
from others, remaining sa iban
naman

Article 1217. Payment made
by one of the solidary debtors
extinguishes the obligation. If
two or more solidary debtors
offer to pay, the creditor may
choose which offer to
accept.
Effects of payment by a solidary debtor
1. Between solidary debtors and creditors
● One solidary debtor paying
extinguishes the obligation. Creditor
has right to choose if two debtors offer
to pay.
2. Among solidary debtors
● The paying debtor is generally entitled to
reimbursement of t11e shares of his
co-debtors.(Art. 1 217)
● (!) If the payment is made before the
debt is due, no interest for the
intervening period may be demanded.
(Art. 1217)

He who made the payment
may claim from his
co-debtors only the share
which corresponds to each,
with the interest for the
payment already made. If the
payment is made before the
debt is due, no interest for
the intervening period may
be demanded.
● Does not create case of subrogation
● Debor can claim reimbursement from
co-debtors only proportionate sahares
with legal interes
3. Among solidary creditors - receiving creditor is
jointly liable to the others for their
corresponding shares.
4.
● (2) When one of the solidary debtors
'cannot, because of his insolvency,
reimburse his share to the debtor paying
the obligation, such share shall be borne
by all his co-debtors, 111 proportion to
the debt of each. (Art. 1217)
●

When one of the solidary

debtors cannot, because of his
insolvency, reimburse his
share to the debtor paying the
obligation, such share shall be
borne by all his co-debtors, in
proportion to the debt of each.

Article 1218. Payment by a Effect of payment if obligation prescribed/illegal:

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.
● Debtor cannot get reimbursement if prescribed
(Art 1231)
○ “By prescription, one acquires
ownership and other rights through the
lapse of time in the manner and under
the conditions laid down by law.
○ In the same way, rights and actions are
lost by prescription.” (Art. 1106.)
■ “The following actions must be
brought within ten (10) years
from the time the right of action
accrues:
■ (1) Upon a written contract;
■ (2) Upon an obligation created
 by law;
■ (3) Upon a judgment.“ (Art.
1144.)
■ “The following actions must be
commenced within six (6)
years:
■ (1) Upon an oral contract;
■ (2) Upon a quasi-contract.“ (Art.
1145.)
■ “The following actions must be
instituted within four (4) years:
■ (1) Upon an injury to the rights
of the plaintiff;
■ (2) Upon a quasi-delict.’’ (Art.
1146.)
■ The statute of limitations,
however, may be superseded or
■ modified by a contract between
the parties
○
● Debtor cannot get reimbursement if illegal

Article 1219. 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 payment made first - remission/waiver no
effect
● Reissiov made previous payment - solution
indebiti arises
○ Debtor must prove remission to the
payment to release him
(1) A and B are liable in solidum to C in the amount of
P1,000.00. C
remitted A’s share. Subsequent payment by B of
P1,000.00 to C will not
entitle him to reimbursement from A since the
remission extinguished
the obligation with respect to A’s share. However, B
● 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.
○ The debtor whose share was
"remitted" must still pay his share
to reimburse the debtor-payor
●

Article 1220. The remission of
the whole obligation,
obtained by one of the solidary
debtors, does not entitle him
to reimbursement from his
co-debtors. (n)
Article 1221. If the thing has
been lost or if the prestation
has become impossible
without the fault of the
solidary debtors, the
obligation shall be
extinguished.
If there was fault on the part
of any one of them, all shall
be responsible to the
creditor, for the price and the
payment of damages and
interest, without prejudice to
their action against the guilty or
negligent debtor.
If through a fortuitous event,
the thing is lost or the
can demand the
return of P500.00 from C under the principle of solutio
indebiti.
If payment by B was made before the remission, A is
still liable to
B because the remission is without effect, the
obligation having been
extinguished already by the payment.
● ● Remission of whole obligation does not
entitle him to reimbursement from his
co-debtors.
Rules in case prestation lost/impossible ● Without Fault or Delay
1. Loss without fault anfd before delay ○ Without fault of solidary debtors -
● A B C oblige deliver truck valued 300k obligation extinguished
● Extinguished if fortuitous and without ● With Fault or Delay
fault and no delay ○ Fault on any one of the solidary
2. Losse due to fault on the part if solitary debtor debtors - all shall be responsible
● Same example but lost through fault of to creditor for price/payment of
C. A nd b also be responsible, even tho damages
wala sila sala bc mutual agency. But A ■ Faultless debtors may
and C can recover from C recover against
meg;ogemt debtor
3. Loss no fault but after delay ■ Same again if
● Truck bye bye due to fortuitous, there lost/become impossible if
was a demand upon C delayed
● D can still recover damages from A, B
or both
performance has become
impossible after one of the
solidary debtors has
incurred in delay through the
judicial or extrajudicial
demand upon him by the
creditor, the provisions of the
preceding paragraph shall
apply.
Article 1222. 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.
Section 5. — Divisible and Indivisible Obligations
1223. e divisibility or
indivisibility of the things that
are the object of obligations in
1. (1) Defenses derived from the nature of the
obligation.
a. Complete defense - nullifies obligation
b. fraud/prescription/remission/illegality/ab
sence of consideration
2. Defenses personal to, or which pertain to
share of, debtor sued
a. VIOLENCE/MINORITY
b. Complete defnese if applied to own
3. Defenses personal to other solidary debtors.
a. For ex, B is insane. A can invoke
partial defense - and only for B’s share.
Meaning of divisible and indivisible obligations.
(1) A divisible obligation is one the object of which,
in its delivery or
● Defenses derived nature of the
obligation
○ Total defenses and debtor
cannot be liable at all
● Defenses personal to them/pertain to
their share
○ Personal to defendant-debtor
(minority/insanity/vitiated
consent)
○ Pertain to their share - partial
● Defenses personally belong to other
debtors
○ these are partial defenses, i.e.,
the defendant-debtor cannot be
held liable for the portions
corresponding to the debtor with
the defense
○
which there is only one debtor performance, is capable of partial fulfillment.
and only one creditor does not (2) An indivisible obligation is one the object of
alter or modify the provisions which, in its deliveryor performance, is not
of Chapter 2 of this Title. capable of partial fulfillment.

Test for the distinction

● Hence, even though the object or service may
be physically divisible, an obligation is
indivisible if so provided by law or intended by
the parties. (Art. 1225, par. 3.)
● if the object is not physically divisible or the
service is not susceptible of partial
performance (Art. 1225, par. 1.), the obligation
● is always indivisible

nds of division.
They are:
(1) Qualitative division or one based on quality, not on
number or
quantity of the things that are the object of the
obligation.
EXAMPLE:
A and B are heirs of C. They agreed to divide the
inheritance as
follows: to A — a house and lot and home appliances
and to B — a
ricefield, a car and P100,000.00 cash.
(2) Quantitative division or one based on quantity
rather than on
quality.
EXAMPLE:
In the preceding example, if the inheritance consists
only of a ricefield
its partition by metes and bounds into two equal parts
is a quantitative
division. Another example, is when A and B divide 300

1224.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.
cavans of palay
harvested from the ricefield or the P100,000.00 cash.
(3) Ideal or intellectual division or one which exists
only in the
minds of the parties.
Kinds of indivisibility.
They are:
(1) Legal indivisibility. — where a specific provision of
law declares as indivisible, obligations which, by their
nature, are divisible (Art. 1225, par. 3.);
(2) Conventional indivisibility. — where the will of the
parties makes as indivisible, obligations which, by
their nature, are divisible (Ibid.); and
(3) Natural indivisibility. — where the nature of the
object o prestation does not admit of division, e.g., to
give a particular car, to
sing a song, etc. (Ibid., par. 1.)
Effect of non-compliance by a debtor in a joint
indivisible obligation.
If any one of the debtors does not comply with his
undertaking in a joint indivisible obligation, the
obligation is transformed into one for
damages, i.e., to pay money. 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.
1225.For the purposes of the
preceding articles, obligations
to give definite things and
those which are not
susceptible of partial
performance shall be
deemed to be indivisible.
When the obligation has for its
object the execution of a
certain number of days of
work, the accomplishment of
work by metrical units, or
analogous things which by
their nature are susceptible of
partial performance, it shall be
divisible.
However, even though the
object or service may be
physically divisible, an
obligation is indivisible if so
provided by law or intended by
the parties.
In obligations not to do,
divisibility or indivisibility shall
be determined by the character Divisibility or indivisibility in obligations not to do.
of the prestation in each
particular case.
(1) Obligations to give definite things (par. 1.). —
EXAMPLES:
To give a particular electric fan; to deliver a specific
car. Here, theobligation is indivisible because of the
nature of the subject matter.
(2) Obligations which are not susceptible of partial
performance
(Ibid.). —
EXAMPLES:
To sing a song; to dance the “tinikling.”
Here, the obligation is indivisible by reason of its
purpose whichrequires the performance of all the
parts. Is the obligation still indivisible, if there are more
than one participant?
The obligation becomes divisible as far as the
participants are concerned because it is capable of
partial performance.
(3) Obligations provided by law to be indivisible even if
thing or serviceis physically divisible (par. 3.). —
EXAMPLE:
Under the law, taxes should be paid within a definite
period. Although money is physically divisible, the
amount of tax payable must be delivered in toto, not
partially
In negative obligations not to do, the character of
the prestation in each particular case shall
determine their divisibility or indivisibility.
(Ibid.)
( EXAMPLES:
(1) Indivisible obligation. — X obliged himself to Y
not to sell cigarettes in his store for one year.

Section 6. — Obligations with a Penal Clause
1226.In obligations with a
penal clause, the penalty
shall substitute the
indemnity for damages and
the payment of interests in
case of noncompliance, 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.
Here, the obligation should be fulfilled
continuously during a certain period.
(2) Divisible obligation. — If the obligation of X is
not to sell cigarettes in his stores only during
Sundays and holidays, the obligation is
divisible because the forbearance is not
continuous.
● Obligations “to do” and “not to do” are
generally indivisible.
● Obligations “to do” stated in paragraph 2 of
Article 1225 are divisible
Meaning of principal and accessory obligations.
(1) Principal obligation is one which can stand by
itself and does not depend for its validity and
existence upon another obligation.
(2) Accessory obligation is one which is attached
to a principal obligation and, therefore, cannot
stand alone.
Meaning of obligation with a penal clause.
An obligation with a penal clause is one which
contains an accessory undertaking to pay a previously
stipulated indemnity in case of breach of the principal
prestation intended primarily to induce its fulfillment
Meaning of penal clause.
A penal clause is an accessory undertaking attached
to an obligation to assume greater liability on the part
of the obligor in case of breach of the obligation, i.e.,

1227. 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
the obligation is not fulfilled, or is partly or irregularly
complied with.
Kinds of penal clause.
They are:
(1) As to its origin:
(a) Legal penal clause. — when it is provided for by
law; and
(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; and
(b) Punitive penal clause. — when the penalty is
imposed merely as punishment for breach.
(3) As to its dependability or effect:
(a) Subsidiary or alternative penal clause. — when
only thepenalty can be enforced; and
(b) Joint or cumulative penal clause. — when both the
principal
obligation and the penal clause can be enforced.
Penalty not substitute for performance.
Generally, the debtor cannot just pay the penal
instead of performing the obligation. Precisely,
the object of the penalty is to secure
compliance with the obligation
Penal clause presumed subsidiary
GR: reditor cannot demand the fulfillment of
the obligation and the satisfaction of the penalty at the
same time
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.
ER:
1. Where there is performance. — Once the
obligation is fulfilled, this purpose is attained
and, therefore, there is no need for demanding
the penalty
2. (2) Where there is no performance. — In case
of non-compliance, the creditor may ask for
the penalty or require specific performance.

When penal clause joint.

The debtor has the right to pay the penalty in lieu of
performance only when this right has been expressly
reserved for him

Liability for penalty, damages, and/or interests

(1) Penalty substitutes for damages and interests. —
As a general rule, in an obligation with a penal clause,
the penalty takes the place of the indemnity for
damages and the payment of interests in case of
non-compliance
(2) Penalty and interests enforceable. — The law
permits an
agreement upon a penalty apart from the interest.
Should there be
such an agreement, the penalty does not include the
interest and as
such, the two are different and distinct things which
may be demanded
separately.

1228.Proof of actual ● all that the creditor has to prove s the violation
damages suffered by the of the obligation by the debtor.
creditor is not necessary in ● not necessary to adduce evidence to prove
order that the penalty may be
demanded.
1229. The judge shall
equitably reduce the penalty
when the principal obligation
has been partly or irregularly
complied with by the debtor.
Even if there has been no
performance, the penalty may
also be reduced by the
courts if it is iniquitous or
unconscionable.
losses
● The creditor may enforce the penalty whether
he suffered damages or not.
● cannot recover more than the stipulated
penalty even if he proves that the amount of
his damages exceeds the penalty.
Liquidated Damages v. Penalty
● Liquidated Damages - agreed damages
● Penalty - latter is a punishment.
When can Penalty be Reduced in Courts
● When there is partial or irregular performance
○ GR: bligation is not deemed
performed unless the thing or service in
which it consists has been completely
delivered or rendered
● When the penalty agreed upon is iniquitous or
unconscionable
○ enalty may be reduced even if there is
no performance at
○ penalty is reasonable or iniquitous is
addressed to the sound discretion of
the court and on
○ several factors, including, but not
limited to, the following: the type,
extent, and purpose of the penalty, the
nature of the obligation, the mode of
breach and its consequences, the
supervening realities, th standing and
relationship of the parties, the extent of
the prejudice to the plaintiff, and the
like.
● Ex
○ ILLUSTRATIVE CASES:
 ○ 1. 5 of the 20 guns lost were
recovered.
○ Facts: X, etc. (municipal officials) failed
to return the 20 arms entrusted to
them. This failure constituted a
violation of the conditions of the bond
given and made them subject to the
penalty provided therein. It appears
that 5 of the 20 guns were recovered
by third parties with the aid of X, etc.
(municipal officials).
○ Issue: Should X, etc. be made liable for
the full amount of the bond?
○ Held: The judgment of the trial court for
the sum of P2,000 the full amount of
the bond, should be reversed, and the
recovery reduced to P1,500.
Construction of penal clause where performance
partial or irregular.
1. Penalty is punitive
● herein there has been a partial or
irregular compliance with the provisions
of a contract with a penal clause, the
courts will rigidly apply the doctrine of
strict construction
2. Penalty is compensatory - courts will be slow
in exercising the authority conferred upon
them
3. (3) Penalty, damages and interests
enforceable. — The creditor, i addition to the
penalty, may recover damages and interests:
(a) When so stipulated by the parties;
(b) When the obligor refuses to pay the
penalty; or
4. (c) When the obligor is guilty of fraud in the
fulfillment of the
 5. obligation.
6.
7. (4) Requirement to make penalty enforceable.
— The penalty may be enforced only when it is
demandable in accordance with the provisions
of the Civil Code. (Ibid., par. 2.) This means
that the penalty, as a stipulation in a contract,
is demandable only if there is a breac of the
obligation and it is not contrary to law, morals,
good customs,
8. public order, or public policy.
9.

1230.The nullity of the penal Effect of nullity of the penal clause.

clause does not carry with it ● If only the penal clause is void, the principal
that of the principal obligation remains valid and demandable.
obligation.
Effect of nullity of the principal obligation.
The nullity of the principal If the principal obligation is void, the penal
obligation carries with it that clause is likewise void. The reason is that the
of the penal clause. clause cannot stand alone without the principal
obligation to which it is subordinated.

But if the nullity of the principal obligation is due to

the fault of the debtor who acted in bad faith,
by reason of which the creditor suffered
damages on equitable grounds, the penalty may
be enforced.

Chapter 4. — Extinguishment of Obligations

ARTICLE DE LEON PEREZ

ART. 1231. 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.
Other causes of
extinguishment of obligations,
such as annulment,
rescission, fulfillment of a
resolutory condition, and
prescription, are governed
elsewhere in this Code.
Other causes of extinguishment: B. Other causes of extinguishment of obligations
(1) Death of a party in case the obligation is a which are
personal one (Art. governed elsewhere in the Civil Code: (Art. 1231)
1311, par. 1.); I. Annulment;
(2) Mutual desistance or withdrawal; 2. Rescission;
(3) Arrival of resolutory period (Art. 1193, par. 2.); 3. Fulfillment of a resolutory condition; and
(4) Compromise (Art. 2028.); 4. Prescription.
(5) Impossibility of fulfillment (Art. 1266.); and
(6) Happening of a fortuitous event. (Art. 1174.)
1) Voluntary:
(a) Performance:
1) Payment; and
2) Consignation.
(b) Substitution:
1) Dacion en pago (conveyance for payment); and
2) Novation.
(c) By release agreement:
1) Agreement subsequent to the constitution of the
obligation:
a) Mutual waiver;
b) Unilateral waiver; and
c) Remission.
2) Agreement simultaneous to the constitution of the
obligation:
a) Resolutory condition; and
b) Extinctive period.
(2) Involuntary:
(a) By reason of the subject:
1) Confusion; and
2) Death of the contracting parties in the cases where
the
obligations are personal.
(b) By reason of the object:
1) Loss of the thing due or impossibility of

ART. 1232. Payment means
not only the delivery of money
but also the performance, in
any other manner, of an
obligation.
(n)
performance;
And
(c) By failure to exercise (right of action):
1) Extinctive prescription.
Payment
● nt may consist of not only in the delivery of
money but also the giving of a thing (other
than money), the doing of an act, or not doing
of an act
Elements:
● (1) persons, who may pay and to whom
payment may be made;
● (2) thing or object in which payment must
consist;
● (3) the cause thereof;
● (4) the mode or form thereof;
● (5) the place and the time in which it must be
made;
● (6) the imputation of expenses occasioned by
it; and
● (7) the special parts which may modify the
same and the effects they generally produce
Burden of proving payment
● Burden of proof is the duty of a party to
present evidence of the facts in issue
necessary to prove the truth of his claim or
defense by the amount of evidence required
by law. (Dela Peña vs. Court of Appeals)
● e burden of proving extinguishment by
payment devolves upon the debtor who pleads

ART. 1233. 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.
(1157)
payment or offers such a defense to the claim
of the credito
● A receipt of payment, although not exclusive,
is deemed to be the best evidence of payment.
○ written and signed acknowledgment
that money has or goods have been
delivered, while voucher is a
documentary record of a business
transaction.
■ A voucher is not necessarily an
evidence of payment. merely a
way or method of recording or
keeping track of payments
made. (
■
○
Debt
● obligation to deliver money, to deliver a thing
(other than money), to do an act, or not to do
an act. (
When is debt considered pay
● Integrity of prestation
○ Prestation be fulfilled completely
○ GR: partial or irregular performance will
not produce extinguishment
○ late partial payment forestall a
long-expired maturity date.
○ Ex:
■ D promise pay C 10k, only pay
9k. C can refuse accept 9k
● Identity of prestation
○ very prestation due must be delivered
or performed.
ART. 1234. If the obligation
has been substantially
performed in good faith, the
obligor may recover as
though there had been a strict
and complete fulfillment, less
damages suffered by the
obligee. (n)
ART. 1235. When the obligee Requisites for 1235
accepts the performance,
knowing its incompleteness
or irregularity, and without
expressing any protest or
objection, the obligation is
deemed fully complied with. Meaning to Accept in 1235:
(n)
● first exception to the rule laid down in Article
1233.
Requisites for application
● (1) There must be substantial performance.
Its existence depends upon the
circumstances of each particular case; and
● (2) The obligor must be in good faith. Good
faith is presumed in the absence of proof to
the contrary
● Example
○ S oblige sell 1k bag cement. S
diligently did but 950 lang because
cement shortage.
○ S can recover as if may complete
delivery less the price of 50 bags. B
cannot require S to deliver remaining
50 bags. Pay 950, damages lang for 50
si B.
● Example 2: S sell two contracts for two lots to
B - installment 10 years, so 120 monthly
payments. Contract says failure B plus interest
= cancellation. After 95 installments B did not
make further. S cancelled payments and
forfeited. CA ordered cancel only one contract
and convey lot.
● (1) The obligee knows that the performance is
incomplete or irregular; and
● (2) He accepts the performance without
expressing any protest or objection.
● take as “satisfactory or sufficient,” or to “give
assent to,” or to “agree” or “accede” to an

ART. 1236. The creditor is
not bound to accept
payment or
performance by a third
person who has no interest
in the fulfillment of the
obligation, unless there is a
stipulation to the contrary.
Whoever pays for another
may demand from the
debtor what he has paid,
except that if he paid
without the knowledge or
against the will of the
debtor, he can recover only
insofar as the payment has
incomplete or irregular performance.
● acceptance must be made under
circumstances that indicate his intention to
consider the performance complete and to
renounce his claim arising from the defect.
● e failure of the respondent to object or protest
the non-payment of interesannot be
considered as full payment of the principal
obligation in the civil case
Form of protest of creditor
● does not require the protest or objection of the
creditor to be made in a particular manner or
at a particular time.
● evince that the former is not satisfied or
agreeable to said payment or performance,
the obligation shall not be deemed
extinguished. (
Creditor Accept from:
● (1) The debtor;
● (2) Any person who has an interest in the
obligation (like aguarantor); or
● (3) A third person who has no interest in the
obligation when there is stipulation that he can
make payment.
Creditor nay refuse payment by a third person
● the creditor should not be compelled to accept
payment from a third person whom he may
dislike or distrust.
○ They might not want to have dealings
with third person
Effect of payment hby a third person
● (1) If made without the knowledge or against
the will of debtor.
been beneficial to the debtor
P2 = No subrogation
ART. 1237. Whoever pays on
behalf of the debtor without
the knowledge or against
the will of the latter, cannot
compel the creditor to
subrogate him in his rights,
such as those arising from a
mortgage, guaranty, or
○ payer can recover from the debtor only
in so far as the payment has been
beneficial to the latter.only up to debt at
thime of payment
○ 3rd person not rubrogated to rights of
creditor
○
● (2) If made with the knowledge of the debtor.
○ Shall have rights of reimbursement and
subrogation
■ Recover what he has paid
■ Acrquire rights of creditor
● Examples
○ Parcel of land belong to M minors sold
to B. C, M’s uncle deposited w sheriff
iwhtout M knowledge the redemption
price. B refused turnover since C was
not legal guardian. Redemption was
valid since he had an interest.
Paying with or without knowledge
● can recover only insofar as the payment has
been beneficial to the debtor
○ defense that may beavailed of only by
the debtor, not by the creditor, for it
affects solely the rights of the former.
Right of Third Person to Subrogation
● pays on behalf of the debtor is entitled to
subrogation
● without the knowledge or against the will of the
debtor, the third person cannot compel the
creditor to subrogate him in the latter’s
accessory rights
● What i creditor willingly permits payor to be
penalty. subrogated?
○ for the benefit of the debtor, the
subrogation can only take place with
his consent.
○ Legal subrogation by operation of law
is presumed in certain cases.

Subrogation v. Reimbursement
● Subrogation
○ person who pays for the debtor is put
into the shoes of the creditor.
○ Acquires also all other rights which the
creditor could have exercised
pertaining to the credit
○ no real extinction of the obligation, but
only a change of creditor.
● Reimbursement
○ merely the bare right to be refunded to
the extent provided in the second
paragraph of Article 1236 without the
right to the guarantees and securities
of the original obligation.
● Example
○ D borrowed C 1k. G guarantor. X
without consent/know of D - paid C 1k.
■ X can claim reimbursement
from D whole amount of 1k,
● If D cant pay him, X cant
go against G - no
subrogation.
● If D gave consent, but
cant pay - C can go
after G.

ART. 1238. Payment made by ● embodies the idea that no one should be
a third person who does not compelled to accept the generosity of another
intend to be reimbursed by
the debtor is deemed to be
a donation, which requires
the debtor’s consent. But
the payment is in any case
valid as to the creditor who
has accepted it.
ART. 1239. In obligations to
give, payment made by one
who does not have the free
disposal of the thing due
and capacity to alienate it
shall not be valid, without
prejudice to the provisions
of Article 1427 under the Title
on “Natural Obligations.’’
ARTICLE 1240. Payment
shall be made to the person
in whose favor the
● If third person does not intend to be
reimbursed
○ Need debtors consent
● If creditor accept payment
○ Valid to him even if debtor did not
consent to donation
● Example
○ D owes C 1k. No intent reimbursed, X
paid D’s obligation.
■ D not liable to X, obligation C
extinguished if consent.
■ If not consent - X may recover
from D.
Free disposal of thing due/capacity to alienate
● Free disposal
○ hing to be delivered must not be
subject to any claim or lien or
encumbrance of a third
○
● Capacity to alienate
○ person is not incapacitated to enter into
contracts / make disposition
Requirement of above
● GR: n obligations to give, payment by one who
does not have the free disposition of the thing
due or capacity to alienate it is not valid. This
means that the thing paid can be recovered.
● ER: reditor cannot be compelled to accept
payment where the person paying has no
capacity to make it.
Payment Shall be made to
● creditor/obligee
● Successor in interest
obligation has been
constituted, or his
successor in interest, or
any person authorized to
receive it. (1162a)
ARTICLE 1241. Payment to a
person who is incapacitated
to administer his property
shall be valid if he has kept
the thing delivered, or
insofar as the payment has
been beneficial to him.
Payment made to a third
person shall also be valid
insofar as it has redounded
to the benefit of the
creditor. Such benefit to the
creditor need not be proved in
the following cases:
(1) If after the payment, the
● Person authorized
(2) creditor must be the one time the payment is to be
made, not constitution of obligation. IF subrogated =
must be to new creditor
(3) if made to wrong party, obligation is not
extinguished. even if the debtor acted in outmost good
faith and by mistake
“Any person authorized to receive it”
● Includes person authorized by law to receive
the payment, such as a guardian, executor or
administrator of the estate of a deceased, and
assignee or liquidator of a partnership or
corporation
● Ther emust be evidence they were authorized
Effect Payment Incapacitated Person
● Generally not valid
○ unless such incapacitated person kept
the thing paid or delivered
○ payment should be made to his legal
representativ
■ If not possible - relieve thru
consignation
Effect Payment Third Person
● GR: not valid
● ER: redounded to the benefit of the creditor.
● Good faith defense and by mistake is
immaterial
third person acquires the
creditor’s rights;
(2) If the creditor ratifies the
payment to the third person;
(3) If by the creditor’s
conduct, the debtor has
been led to believe that the
third person had authority
to receive the payment.
(1163a)
ARTICLE 1242. Payment
made in good faith to any
person in possession of the
credit shall release the
debtor. (1164)
ARTICLE 1243. Payment
made to the creditor by the
debtor after the latter has
been judicially ordered to
retain the debt shall not be
valid. (1165)
● possession of the credit itself and not merely
of the document or instrument evidencing the
credi
● Example
○ D indebted to C 1k. Evidenced by
promissory note signed by D. C lost
note, found by X - demanded payment
drom D. Payment not valid since X is
possessor of the document.
When Payment Creditor Not Valid
● If the debtor is also the credtor of another, may
be ordered to retain the debt
● invoked by the creditor who secures the order
of retention.
Garnishment of Debtor’s credit
● subjecting a debtor’s credit to the payment of
his debt to another
● nature of an involuntary novation by the
substitution of one creditor for another.
●
ARTICLE 1244. The debtor
of a thing cannot compel
the creditor to receive a
different one, although the
latter may be of the same
value as, or more valuable
than that which is due.
In obligations to do or not
to do, an act or forbearance
cannot be substituted by
another act or forbearance
against the obligee’s will.
(1166a)
ARTICLE 1245. Dation in
payment, whereby property is
alienated to the creditor in
satisfaction of a debt in
money, shall be governed by
the law of sales. (n)
Very prestation due must be complied with
● Refers to real obligation (P!) to deliver specific
thing. Thing different cannot be offered or
demanded
● P2 - personal obligation. Act to perform or act
prohibited cannot be substituted
When Can Prestation Be Substituted
● Facultative obligation - debtor given right to
render another prestation
● Waiver by creditor
● Substitution allowed in stipulation w consent of
creditor
Four Special Forms of Payment
(1) dation in payment (Art. 1245.);
● e conveyance of ownership of a thing by the
debtor to creditor
● Requisites of dation/dacion
○ Performance of prestation in lieu of
payment (delivery of a
thing/right/credit)
○ Different between prestation due and
what is given
○ Agreement between creditor and
debtor that obligation is extinguished
by performance of a prestation different
due
● Example
○ D owesC 15l. D, with consent of C -
delivers piano. If piano less 15k
extinguish obligation extend only of the
piano value, unless piano is by
agreement full payment
● Governing Law

ARTICLE 1246. When the
obligation consists in the
delivery of an indeterminate
or generic thing, whose
quality and circumstances
have not been stated, the
creditor cannot demand a
thing of superior quality.
Neither can the debtor
deliver a thing of inferior
quality. The purpose of the
obligation and other
circumstances shall be taken
into consideration. (1167a)
ARTICLE 1247. Unless it is
otherwise stipulated, the
extrajudicial expenses
○ law of sales governs because dation in
payment may be considered a specie
of sale
● Sale Distinguished
○ Sale - no pr existing credit, obligation is
created, cause is price pied, more
freedom in fixing price, buyer has to
pay price, parties deliver and receive
thing as seller buyer
○ Dacion/Dation - there is existing credit,
obligation extinguished, less freedom,
oayment received before contract is oe
(2) application of payments (Art. 1253.);
(3) payment by cession (Art. 1255.); and
(4) tender of payment and consignation. (Arts.
1256-1261.)
Rule o medium quality
● there is lack of precise declaration in the
obligation of the quality or kind of thing to be
delivered.
Example
● B owns race horses - S must deliver race
horse
● B is calesa driver - S must deliver that
● B is vet - examine organs - Pld sickly horse
Debtor pays for extrajudicial
( obligation is extinguished when payment is made
ER: may stipulation
required by the payment
shall be for the account of
the debtor. With regard to
judicial costs, the Rules of
Court shall govern. (1168a)
ARTICLE 1248. Unless there
is an express stipulation to
that effect, the creditor
cannot be compelled
partially to receive the
prestations in which the
obligation consists. Neither
may the debtor be required
to make partial payments.
However, when the debt is in
part liquidated and in part
unliquidated, the creditor may
demand and the debtor may
effect the payment of the
former without waiting for the
liquidation of the latter.
(1169a)
ARTICLE 1249. The payment
of debts in money shall be
made in the currency
stipulated, and if it is not
possible to deliver such
currency, then in the
currency which is legal
tender in the Philippines.
The delivery of promissory
notes payable to order, or
Losing party generally pays judicial costs
● Judicial costs are the statutory amounts
allowed to a party to an action for his
expenses incurred in the action.
●
Complete Performance of Obligation NEcessary
● 1Cred-!Debtor only
● debtor has the duty to comply with the whole
of the obligation but he cannot be required to
make partial payments if he does not wish to
do so.
When is Partial Performance Allowed
1. Express stipulation
2. Debt is part liquidated/part unliquidated
3. Different prestations are subject to different
terms or conditions
● . There is no longer any legal impediment to
having obligations or transactions paid in a
foreign currency as long as the parties agree
to such arrangement
Legal Tender
● currency which a debtor can legally compel a
creditor to accept in payment of a debt in
money w
Legal Tender in PH
bills of exchange or other
mercantile documents shall
produce the effect of
payment only when they
have been cashed, or when
through the fault of the
creditor they have been
impaired.
In the meantime, the action
derived from the original
obligation shall be held in
abeyance. (1170)
ARTICLE 1250. In case an Inflation and Deflation
extraordinary inflation or
deflation of the currency
stipulated should supervene,
the value of the currency at
the time of the
establishment of the Requisites for Application
obligation shall be the
basis of payment, unless
there is an agreement to the
contrary. (n)
● all coins and notes issued by the Bangko
Sentral ng Pilipinas constitute legal tender for
all debts, both public or private
Payment by means of instruments or credits
1. Right of creditor to refuse or accept in promiss
notes/checks (not legal tender)
a. Creditor may accept without
acceptance producing effect of
payment
i. Demandability is suspended
unless payment is realized
2. Payment for purpose of redemption
a. Redemption of property sold under
execution is not invalid
3. Effect on obligation
GR: mercantile docs do not extinguish
obligation
● Until cashed
● Impaired thru fault of creditor
● Inflation
○ Sharp increase of money or credit
● Deflation
○ Redictopn om vp;i,e and circulation
1. Official declaration of extraordinary inflation or
deflation
2. Obligation is contractual in nature
3. Parties agreed to consider effects
Basis of Payment
● e purchasing value of the currency at the time
of the establishment of the obligation shall be

ARTICLE 1251. Payment
shall be made in the place
designated in the
obligation.
There being no express
stipulation and if the
undertaking is to deliver a
determinate thing, the
the basis of paymen
○ Subject to agreement
When is Extraordinary
● one that neither party had reason to foresee
when the obligation was established
● there is an unimaginable increase or
decrease in the purchasing power of the
Philippine currency, or fluctuation in the value
of pesos which could not have been
reasonably foreseen or was manifestly beyond
Example
● D borrowed C 5k payable after 5 yrs. Upon
maturity, value of 5k dropped to 2500 bc of
inflation (or increased 10k upon deflation). D
must pay equivalent value (10k or 5k(
Devaluation/Depreciation
● Devaluation - value of one currency from an
officially fixed level imposed by monetary
authorities.
● Depreciation - ownward change in the value of
one currency in terms of the currencies of
other nations
●
Places obligation made
● If stipulation - place designated
● If no stipulation, thing is specific - where the
thing was at perfection
● If no stipulation, thing is generic - Domicile of
debtor. Creditor bears expenses to go
Domicile
● Domicile is the place of a person’s habitual
payment shall be made residence. (Art. 50.) Residence is only an
wherever the thing might be element of domicile.
at the moment the ●
obligation was constituted.

In any other case the place

of payment shall be the
domicile of the debtor.

If the debtor changes his

domicile in bad faith or after
he has incurred in delay, the
additional expenses shall be
borne by him.

These provisions are without

prejudice to venue under the
Rules of Court. (1171a)

SUBSECTION 1 Application of Payments

ARTICLE 1252. He who has Application of debts

various debts of the same
kind in favor of one and the
same creditor, may declare
at the time of making the
payment, to which of them
the same must be applied.
Unless the parties so
stipulate, or when the
application of payment is
made by the party for whose
● Application of payments is the designation of
the debt to which should be applied the
payment made by a debtor who has various
debts of the same kind in favor of one and t
same creditor.
Requisites
● 1 Cred 1 Debt
● 2 or more debts
● Debts are same kind
benefit the term has been
constituted, application shall
not be made as to debts
which are not yet due.
If the debtor accepts from the
creditor a receipt in which an
application of the payment is
made, the former cannot
complain of the same, unless
there is a cause for
invalidating the contract.
(1172a)
ARTICLE 1253. If the debt
produces interest, payment
of the principal shall not be
deemed to have been made
until the interests have
been covered. (1173)
● Debts become due
● Payment made is not sufficient to cover all
debts
Application as to debts not due cannot be made
unless
● Stipulate
Rules on application pf payments
● Debtor has first choice, indicate at payment
which debt is beign paid.
● Right to makeapplication is irrevocable unless
creditor consents to change
● Debtors right to apply payment is not
mandatory, but directory. If not apply, creditor
can make designation
● If creditor also not make, debt most onerous is
deemed satisfied
● If debts are same nature and burden, payment
applied proportionately
● Court will supply if there is disagreemtn
Interest earned is paid ahead of principal
● Mandatory
● Debtor cannot credit payment to principal
before interest
● Payment is first applied to interest, balance left
is credited to principal
● Subject to
○ Agreemtn by [parties
○ Waiver by creditor
● In contract involving installment
○ Duty od creditor inform amount of
interest
ARTICLE 1254. When the
payment cannot be applied
in accordance with the
preceding rules, or if
application can not be
inferred from other
circumstances, the debt
which is most onerous to
the debtor, among those
due, shall be deemed to
have been satisfied.
If the debts due are of the
same nature and burden, the
payment shall be applied to
all of them proportionately.
SUBSECTION Payment by Cession
ARTICLE 1255. The debtor
may cede or assign his
property to his creditors in
payment of his debts. This
cession, unless there is
stipulation to the contrary,
shall only release the
debtor from responsibility
for the net proceeds of the
thing assigned. The
agreements which, on the
effect of the cession, are
made between the debtor
● Application of payments is the designation of
the debt to which should be applied the
payment made by a debtor who has various
debts of the same kind in favor of one and t
same creditor.
How to Determine Onerousness
1. Interest bearing debt is more onerous
2. Debt as sole debtor is onerous than a solidary
debt
3. Older debts
4. Debts secured by mortgage or pledge
5. If two interest bearing - one with higher rate
6. Obligation with penalty clause
Different Burdenrs
To all of them proportionately.
Payment by cession
● assignment or abandonment of all the
properties of the debtor the benefit of his
creditors in order that the latter may sell the
same and apply the proceeds thereof to the
satisfaction of their credits
Requisites
● 2 or more creditors
● Debtor is partially insolvent
● Assignment involve all properties of debtor
● Cession accepted by creditors
and his creditors shall be
governed by special laws.
(1175a)
SUBSECTION 3 Tender of Payment and Consignation
ARTICLE 1256. If the
creditor to whom tender of
payment has been made
refuses without just cause
to accept it, the debtor shall
be released from
responsibility by the
consignation of the thing or
sum due.
Consignation alone shall
produce the same effect in
the following cases:
(1) When the creditor is
absent or unknown, or does
not appear at the place of
Effect
● assignment does not make the creditors the
owners of the property of the debtor
● debtor is released from his obligation only up
to the net proceeds of the sale of the property
assigned.
Dation in payment / Cession
● Dacion/Dation - one creditor, not presuppose
insolvency, not involve all property, creditor
becomes owner of thing given, an act of
novation
● Cession - several creditors, debtor is insolvent,
extends to all property, acquire right to sell
thing only and proceeds to credit, not act of
novation
Dumbed Down: U dont wanna accept my payment?
Fine i dont have to give give it to you
Tender of Payment/Consignation
● Tender of payment - offering the creditor the
amount due. Showing debtor has in
possession the prestatino. Preparatory act to
consignation
● Consignation - depositing the thing or
amount due with the proper court if
creditor does not desire or refuse
○ Judicial
○ Requires prior tender of payment
Nature of Consignation
● It is a facultative remedy debtor may/may not
avail of
payment;
(2) When he is incapacitated
to receive the payment at
the time it is due;
(3) When, without just
cause, he refuses to give a
receipt;
(4) When two or more
persons claim the same
right to collect;
(5) When the title of the
obligation has been lost.
(1176a)
ARTICLE 1257. In order that
the consignation of the
thing due may release the
○ If availed: creditor merely accepts if
wishes, court declares it is made
○ Debtor has right of withdrawal: has
right to refuse to make the deposit
● Avoidance of greaterliability
Requisites for valid consignation - absence of any
of the requisites is enough ground to render
consignation ineffective
● Existence of valid debt thats due
○ Credutor debtor relationship exist
● Tender of payment, refusal without just reason
○ Tender of payment validly done
○ Substantial compliance not enough
● Notice of consignation to persons interested
● Consignation of the thing or sum due
● Notice of consignation
Requisites for valid tender of payment
● Comply with rules of payment
● Unconditional and for whole amount
○ Only portion may be refused
● Actually made
○ Manifestation or desire is not enough
Proof of tender of payment
● Precede consignation
When not required
● Creditor informs payment will not be accpeted
● Bank had long foreclosed
Prior notice
● Absence oif prior notice makes consignation
void
obligor, it must first be
announced to the persons
interested in the fulfillment
of the obligation.
The consignation shall be
ineffectual if it is not made
strictly in consonance with the
provisions which regulate
payment. (1177)
ARTICLE 1258. Consignation
shall be made by depositing
the things due at the
disposal of judicial
authority, before whom the
tender of payment shall be
proved, in a proper case, and
the announcement of the
consignation in other cases.
The consignation having been
made, the interested parties
shall also be notified thereof.
(1178)
RTICLE 1259. The expenses
of consignation, when
properly made, shall be
charged against the creditor.
(1179)
● Givecreditor chance to reflect previous refusal
Consignation comply with provisions of payment
● Payment in legal tender
● Consignation with proper judicial authority is
necessary to effect payment
○ Cannot be elsewhere unless
prescribed by special law
● Written tender without consignation in couiurt
does not suspend accruing of interest
● If obligor fails to make consignation, court may
allow him to pay
● Judgement of CA is final and records are
remanded, CA no longer the entity
Notice given to interest parties
● Interest parties must be notified
● Second notice is to enable creditor to withdraw
thing/sum and take possession
Consignation only applicable to payment of debt
Liability of creditor
● Consignation is made necessary because of
the fault or unjust refusal of the creditor to
accept payment.
○ If not properly made, consignation
expenses is to debtor

ARTICLE 1260. Once the
consignation has been duly
made, the debtor may ask
the judge to order the
cancellation of the
obligation.
Before the creditor has
accepted the consignation, or
before a judicial declaration
that the consignation has
been properly made, the
debtor may withdraw the
thing or the sum deposited,
allowing the obligation to
remain in force. (1180)
ARTICLE 1261. If, the
consignation having been
made, the creditor should
authorize the debtor to
withdraw the same, he shall
lose every preference which
he may have over the thing.
The co-debtors, guarantors
and sureties shall be
released. (1181a)
When is consignation deemed properly made
● Creditor accepts thing/sum deposited without
objection
● Creditor questions validity of consignation
● Creditor neither accepts/questions then orders
cancellation of obligation
When can Debtor Withdraw
● (1) before the creditor has accepted the
consignation or
● (2) before a judicial declaration that the
consignation has been properly made
● Then obligation is in force and expenses paid
by debtor
Risk of loss of consigned
● If requisites fior consignation complied -
creditor
● Risk of loss before acceptance
creditor/approval court is mutual
● If no valid consignation - debtor
Effect of withdrawal with authority of creditor
● Benefit of creditor ang consignation
● MAy authorize debtor to withdraw after court
issued cancellation of obligation
○ Relations return before acceptance
○ But creditor loses every preference
● Co debtors released
Example
● D indebted to C in amount of 10k;. G is

SECTION 2 Loss of the Thing Due
ARTICLE 1262. An obligation
which consists in the
delivery of a determinate
thing shall be extinguished
if it should be lost or
destroyed without the fault
of the debtor, and before he
has incurred in delay.
When by law or stipulation,
the obligor is liable even for
fortuitous events, the loss of
the thing does not extinguish
the obligation, and he shall
be responsible for damages.
The same rule applies when
the nature of the obligation
requires the assumption of
risk. (1182a)
ARTICLE 1263. In an
obligation to deliver a generic
thing, the loss or destruction
of anything of the same kind
guarantor
● Diedate og obligation - D offered payment C
refused tpo accept
● D makes consignation, D withdrew after
consent of C
○ C loses preference over the amount
When is a thing lost
● Perishes
● Goes out of commerce
● Disappears that existence is unknown/cannot
be recovered
When loss of thing will extinguish obligation
● Obligation is deliver specific/determinate
● Loss of thing without fault o debtor
● Debtor not guilty of delay
When loss of thing not extinguish liability
● Law provides - Art 1170, 1165
● Stipulation provides
● Nature of obligation requires assumption of
risk
● Obligation to deliver specific thing arrises from
crime - Art 168
Effect of loss of generic thing
● Debtor still compel to deliver thing of same
kind
● Creditor cannot demand thing of superior
does not extinguish the
obligation. (n)
ARTICLE 1264. The courts
shall determine whether,
under the circumstances, the
partial loss of the object of
the obligation is so
important as to extinguish
the obligation. (n)
ARTICLE 1265. Whenever
the thing is lost in the
possession of the debtor, it
shall be presumed that the
loss was due to his fault,
unless there is proof to the
contrary, and without
prejudice to the provisions of
article 1165. This
presumption does not apply
in case of earthquake,
quality
● Debtor cannot deliver thing of inferior
Example
● S deliver rice 100x. Rice lost to flood. S is still
liable since rice is genric.
● S obligation deliver rice by him. Rice is lost. S
no longer liable, since S’s rice is determinate.
Effect of partial loss of specific thing
● Partial loss if portion of thing is lost or suffers
depreciation
● Court is given discretion to determine if it is so
important to extinguish obligation
Example
● S obliged to deliver B specific race horse.
Horse lost leg, inury permanent. Court
declared loss is so important it must
extinguish.
○ If fault of S - debtor, pay value of horse
and damages
○
Presumption of loss in possession of debtor
● Debtor who has the custody and care of the
thing can easily explain the circumstances of
the loss.
● Creditor has no duty to show debtor was at
fault
● Obligor not at fault is still liable if guilty od
delay
When presumption not applicable
● In case of natural calamities, the presumption
flood, storm or other
natural calamity. (1183a)
ARTICLE 1266. The debtor
in obligations to do shall
also be released when the
prestation becomes legally or
physically impossible
without the fault of the
obligor. (1184a)
ARTICLE 1267. When the
of fault does not apply. Lack of fault on the part
of the debtor is more likely. So it is unjust to
presume negligence on his part
Example
● B borrowed Car of L. Due date of obligation B
told L car was stolen. B is liable, since his own
fault
Effect of impossibility
● upervening impossibility of performance will
result in the extinction of the debtor’s
obligation
● impossibility must take place after the
constitution of the obligation.
● If impossible from beginning - obligation is void
● Only applies in obligations to do or personal
○ Inapplicable to not to do
Kinds of impossibility
● Purely personal obligation
○ Personal qualifications of obligor
■ Death
■ Incapacitation
○ Legal impossibility
■ Impossible by provision of law -
kill urself
Natural impossibility v. Impossibility in fact
● NAtural impossibility - nature in thing to be
done, not inability. Thing to be done cannot by
any means be accomplished
● Impossibility in fact - absence of inherent
impossibility, it is improbable or out of the
power of the obligor
Effect of difficulty of performance
service has become so
difficult as to be manifestly
beyond the contemplation
of the parties, the obligor
may also be released
therefrom, in whole or in
part. (n)
GR: impossibility releases obligor
Court is authorized to release obligor
Ex. X construct road near mountain. Typhoon fucked
it up, making it dangerous. X may be released in
whole or part.

Modification of contract not covered

● Only authorizes total/paratial release
● Not modify terms or conditions

ARTICLE 1268. When the Example

debt of a thing certain and ● Creditor refused to accept stolen property
determinate proceeds from a without justification
criminal offense, the debtor
shall not be exempted from
the payment of its price,
whatever may be the cause
for the loss, unless the thing
having been offered by him
to the person who should
receive it, the latter refused
without justification to
accept it. (1185)

ARTICLE 1269. The Right of creditor proceed third person

obligation having been ● creditor is given the right to proceed against
extinguished by the loss of the third person responsible for the loss.
the thing, the creditor shall ●
have all the rights of action
which the debtor may have
against third persons by
reason of the loss. (1186)
SECTION 3 Condonation or Remission of the Debt
ARTICLE 1270. Condonation
or remission is essentially
gratuitous, and requires the
acceptance by the obligor. It
may be made expressly or
impliedly.
One and the other kinds shall
be subject to the rules which
govern inofficious donations.
Express condonation shall,
furthermore, comply with the
forms of donation. (1187)
Condonation / Remission
● gratuitous renunciation by the creditor of his
right against the debtor resulting in the
extinguishment of the latter’s obligation in its
entirely or in that part
● Form of donation
Requisites of condonation or remission
● Must be gratuitous
○ Essential characteristic
○ If not gratuitous it is
■ Dation
■ Cession - assignment for
creditors
■ Novation - object or
circumstances are changed
■ Compromised
● Accepted by obligor/debtor
○ Bilateral act
○ Expressly requires acceptance by
debtor
○ If creditor authorized impose favors -
remission is converted into an act of
humiliation
● Parties may have capacity
● Not be inofficious
● Made expressly
Kinds of remission
1. Extent
a. Complete - covers entire obligation
b. Partial - not cover entire

ARTICLE 1271. The delivery
of a private document
evidencing a credit, made
voluntarily by the creditor
to the debtor, implies the
renunciation of the action
which the former had against
the latter.
If in order to nullify this
waiver it should be claimed
to be inofficious, the debtor
and his heirs may uphold it by
proving that the delivery of
the document was made in
virtue of payment of the debt.
(1188)
ARTICLE 1272. Whenever
the private document in
which the debt appears is
found in the possession of
the debtor, it shall be
2. Form
a. Express - verbally or in writing
b. Implied - inferred from conduct
3. Effectivity
a. Inter vivos - lifetime of donor
b. Mortis causa - effective upon death of
donor
Effect of inofficious remission
( Excess donation is inofficious
Presumption in case of document of indebtedness
voluntarily delivered by creditor
● {resumption of implied or tacit remission
● Priv document voluntary act of creditor
● Contrary evidence
● Extent of remission
○ Oif obligation is joint, remission is only
to share of the debtor in possession of
document
○ If solidary - total obligation
● Only private document ang presumption
○ Speaks of a priv document in 1271
Payment, not remission (p2)
● Renunciation may be nullified if shown that
waiver is inofficious
Presumption if document found in possession of
creditor
● Document evidencing debt is usually with
creditor
● has in his favor the legal presumption that his
presumed that the creditor
delivered it voluntarily,
unless the contrary is proved.
(1189)
ARTICLE 1273. The
renunciation of the
principal debt shall
extinguish the accessory
obligations; but the waiver of
the latter shall leave the
former in force. (1190)
ARTICLE 1274. It is
presumed that the accessory
obligation of pledge has
been remitted when the
thing pledged, after its
delivery to the creditor, is
found in the possession of
the debtor, or of a third
person who owns the thing.
(1191a)
SECTION 4 Confusion or Merger of Rights
ARTICLE 1275. The
obligation is extinguished
from the time the characters
of creditor and debtor are
merged in the same person.
credit is as yet uncollected
● If document is in debtor, unknown how come
possession
○ Presumption is delivered voluntarily
by creditor -> presumption of
remission
Effect of renunciation of principal debt on accessory
● Accessoryfollows principal
● Accessory obligation cannot stand without
principal
Presumption if thing pledged found with debtor
● Contract of pledge - thing pledged be placed in
creditor
● If the thing pledged is later found in the hands
of the debtor or the third person, only the
accessory obligation of pledge is presumed
remitted, not the obligation itself
Confusion or merger
● Meeting in one person the qualities of creditor
and debtor
Reason for confusion
● a mode of extinguishing obligations because if

aRTICLE 1276. Merger which
takes place in the person of
the principal debtor or
creditor benefits the
guarantors. Confusion which
takes place in the person of
any of the latter does not
extinguish the obligation.
ARTICLE 1277. Confusion
a debtor is his own creditor, enforcement of
the obligation becomes absurd
● when there is a confusion of rights, the
purposes for which the obligation may have
been created are deemed realized
Requisites
1. Take place between principal debtor
2. Complete and definite
Example
● D owes C 1k, D executed promissory note to
C. C indorsed X the note, indorsed to Y.
● Y bought goodsfrom D store, instead of paying
cash - indorsed note to D
● Now D owes himself. Extinguishes obligation
What if confusion not complete
● A and B entered partnership to construct
railroad. Pay equal parts. A entrusted admin.
During construction B sold jacienda to C, C
then bought ½ from A rail road line. B failed to
pay ½ railroad.
Effect of merger in principal debtor or creditor
● Merger extinguishes obligation
● Accessory obligation of guaranty is also
extinguished
Effect of merger in person of guarantor
● Extinguishment of accessory does not carry
principal obligation
Confusion in joint obligation
does not extinguish a joint
obligation except as
regards the share
corresponding to the creditor
or debtor in whom the two
characters concur.
SECTION 5 Compensation
ARTICLE 1278.
Compensation shall take
place when two persons, in
their own right, are creditors
and debtors of each other.
(1195)
● Many debts - debtors
● Credits - creditors
● Confusion will extinguish only the shar
corresponding to the creditor or debtor in
whom the two characters concur. (
● Example
○ A B C jointly liable to D in amount of
9k. D endorsed note to E, endorsed it
to A. Then A’s share is extinguished.
Bye 3k.
○ B and C owe 3k each to A.
Confusion in solidary obligation
● Merger in the person of one of the solidary
debtors shall extinguish the entire obligation
because it is also a merger in the other
solidary debtors
● Example:
○ A B C solidary. Endorsement to A
extinguish 9k. A can demand
reimbursement from B and C.
Compensation C
● extinguishment to the concurrent amount of
the debts of two persons who, in their own
right, are reciprocally principal debtors and
creditors of each other.
● simultaneous balancing of two obligations
● Example
○ A owes B 1000
○ B owes A 700
○ A now has 700, still owes B 300
 ■ There is no actual transfer of
money

Object and importance of compensation

● , compensation is a specie of abbreviated
payment
○ Facility of payment
○ Guaranty for effectiveness of credit
● Simplified payment
● Guaranty against fraud

Compensation v. Confusion
● Confusion - one person is creditor debtor in
self, one obligation, impossible ang payment
● Compensation - two persons are creditor and
betor to other,two obligations, indirect payment

Compensation v. Payment
● Compensation - operation of law, not need
have capacity to give and receive, necessary
nga partial
● Payment - act of parties, free disposal of the
thing due and capacity to alienate it,
necessary payment is complete

Kinds of compensation
● Extent/effect
○ Total - obligations are same amount
and are entirely extinguished
○ Partial - different amounts and a
blaance remains
● Cause/origin
○ Legal - operation of law
○ Conventional or voluntary - agreement
of parties
○ Judicial - by order of court in litigation.

ARTICLE 1279. In order that
compensation may be proper,
it is necessary:
(1) That each one of the
obligors be bound
principally, and that he be
at the same time a principal
creditor of the other;
(2) That both debts consist
in a sum of money, or if the
things due are consumable,
they be of the same kind,
and also of the same quality
if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated
and demandable;
(5) That over neither of them
there be any retention or
controversy, commenced by
third persons and
communicated in due time to
the debtor. (1196)
○ Facultative - can be set up by one of
the parties
● Debts must be both money or thing of same
kind
○ Compensation cannot take place if A
owes B 10k, but B owes A and electric
range.
○ Compensation not take place if A owes
B jasmine rice and B owes A any sacks
of rice
○ Compensation not take place if A owes
B 10k, B owes A 10k or a cow. If right
of choice is A, it may take place
● Two debts liquidated - debt is liquidated if
amount is known or determined by
computation
○ Proof liquidation is necessary
○ Example
■ A owes B 10k. B owns A share
of business - amount yet to be
ascertained. Compensation not
take place since wala pa
liquidation
Compensation against Government
● Taxes are not subject to set off or
compensation, since obligation of publci
interest
● Contractual obligation - may be compensated
ARTICLE 1280.
Notwithstanding the
provisions of the preceding
article, the guarantor may
set up compensation as
regards what the creditor may
owe the principal debtor.
(1197)
ARTICLE 1281.
Compensation may be total
or partial. When the two
debts are of the same
amount, there is a total
compensation. (n)
ARTICLE 1282. The parties
may agree upon the
compensation of debts
which are not yet due. (n)
ARTICLE 1283. If one of the
parties to a suit over an
obligation has a claim for
damages against the other,
Compensation bnefits the guarantor
● extinguishment of the principal obligation as a
consequence of compensation carries with it
the accessory obligations such as guaranty
Total and partial
● Total compensation results when the two debts
are of the same amount. (Art. 1281.)
● If they are of different amounts, compensation
is total as regards the smaller debt, and partial
only with respect to the larger debt.
Voluntary Compensation
● Exception to the general rule that only debts
which are due and demandable can be
compensated. (Art. 1279
● includes any compensation which takes place
by agreement of the parties even if all the
requisites for legal compensation are not
present.
● Requisites
○ (1) each of the parties has the right to
dispose of the credit he seeks to
compensate, and
○ (2) they agree to the mutual
extinguishment of their credits.
○
Judicial Compensation
● eclared by a final judgment of a court in a suit.
● Counterclaim must be pleaded
the former may set it off by
proving his right to said
damages and the amount
thereof. (n)
ARTICLE 1284. When one or
both debts are rescissible
or voidable, they may be
compensated against each
other before they are
judicially rescinded or
avoided. (n)
ARTICLE 1285. The debtor
who has consented to the
assignment of rights made
by a creditor in favor of a
third person, cannot set up
against the assignee the
compensation which would
pertain to him against the
assignor, unless the
assignor was notified by
the debtor at the time he
gave his consent, that he
reserved his right to the
compensation.
If the creditor communicated
the cession to him but the
debtor did not consent
thereto, the latter may set up
Rescissible (Art. 1381.) and voidable obligations (Art.
1390.) are valid until they are judicially rescinded or
avoided.
Ex.
A owe B 10k. A through fraud made B sign
promissory that B also owe A 10k.
Debt of A is voidabLE, b IS NOT.
Where copensation take place before assignment
● When compensation takes effect by operation
of law or automatically, the debts are
extinguished to the concurrent amount.
● IF xtinguished debt is assigned by the creditor
to a third person, the debtor can raise the
defense of compensation with respect to the
debt.
● Example:
○ A owes B 3k due yesterday
○ B owes A 1k due yesterday
○ Both are extinguished. A still owes B
2k.
○ B assigns right to C 0 C can only
collect 2k…
○ But if A gave consent to assignment
before it was made, A liable 3k, but still
owe 1k.
the compensation of debts
previous to the cession, but
not of subsequent ones.
If the assignment is made
without the knowledge of
the debtor, he may set up
the compensation of all
credits prior to the same and
also later ones until he had
knowledge of the assignment.
(1198a)
ARTICLE 1286.
Compensation takes place
by operation of law, even
though the debts may be
payable at different places,
but there shall be an
indemnity for expenses of
exchange or transportation
to the place of payment.
(1199a)
ARTICLE 1287.
Compensation shall not be
proper when one of the debts
arises from a depositum or
from the obligations of a
depositary or of a bailee in
commodatum.
When compensation take place after assignment
● Assignment with consent of debtor
○ A owe B 3k, B owe A 1k. Due Nov 15.
B assigned right to C on Nov 1,
consent of A givent.
○ On Nob 15, A cannot set up against C.
A liable to C 3k, collect 1k of B
● Assignment without consent of Debtor
○ * A owe B 1k on Nov 1. B owes A 2k
on Nov 10. A owes B on Nov 15.
○ A assign rights to C on Nov 12.
○ B did not consent
■ B set up compensation of debts
on Nov 10. Assignment valid
only up to 1k.
Debts payable at different palces
● Legal compensation
● indemnity contemplated above does not refer
to the difference in the value of the things
● in their respective places but to the expenses
of monetary exchange (in case of money
debts) and expenses of transportation (in case
of things to be delivered)
●
When is legal compensation not allowed by law
● Debt arises from depositum
○ a loan which creates the relationship o
debtor and creditor.
● Debts arose from commodatum
○ one of the parties delivers to anothe
something not consumable so that the
latter may use the same for a certain
time and return it
ARTICLE 1288. Neither shall
there be compensation if one
of the debts consists in civil
liability arising from a penal
offense. (n)
ARTICLE 1289. If a person
should have against him
several debts which are
susceptible of
compensation, the rules on
the application of payments
shall apply to the order of the
compensation. (1201)
ARTICLE 1290. When all the
requisites mentioned in article
1279 are present,
compensation takes effect
by operation of law, and
extinguishes both debts to
the concurrent amount,
even though the creditors and
debtors are not aware of the
compensation. (1202a)
SECTION 6. NOVATION
ARTICLE 1291. Obligations
may be modified by:
(1) Changing their object or
principal conditions;
● arises from a claim for support due by
gratuitous title.
● Where one of the debts consists in civil liability
arising from a penal offense.
●
Rules on application of payments applicable
to order of compensation.
● debtor has various debt which are susceptible
of compensation, he must inform the creditor
which of them shall be the object of
compensation
● fails to do so, then the compensation shall be
applied to the most onerous obligation.
●
Consent not required in legal comepnsation
● Compensation occurs automatically by mere
operation of the law
● Full legalc apacity of parties are not required
Compensation a matter of defense
● It is usually necessary to set it up a defense in
an action demanding performance.
●
Novation
● total or partial extinction of an obligation
through the creation of a new one which
substitutes it.
● substitution or change of an obligation by
another, which extinguishes or modifies the
(2) Substituting the person of
the debtor;
(3) Subrogating a third person
in the rights of the creditor.
(1203)
Kind of novation
first, either by changing its object or principal
conditions, by or substituting another in place
of the debtor, or by subrogating a third person
in the rights of the creditor.
● Extinctive if:
○ Old obligation is terminated by creation
of new obligation taking place of former
○ It has twin effects of extinguishing
existing obligation and creating a new
one
■ New one should not be
complete in itself
■ Certain terms and conditions
may be carried expressly or
explicityly
● Not extinctive
○ Merely mofificatory
○ Newagreement not have effect of
extinguishing first but only supplement
it/supplant provisions
○ Old obligation still subsists
● According to origin
○ Legal - operation of law
○ Conventional - agreement of parties
● How constituted
○ Express - declared in unequivocal
terms
○ Implied - old and new are essentially
incompatible
● Extend or effect
○ Total or extinctive - old obligation is
extinguished
○ Partial or modificatory - old is merely
mofief

ARTICLE 1292. In order that
an obligation may be
extinguished by another
which substitute the same, it
is imperative that it be so
declared in unequivocal
terms, or that the old and the
new obligations be on
every point incompatible
with each other. (1204)
● Subject
○ real/objective - object or principal
conditions are changed
○ Personal or subjective - person of
debtor is substituted/3rd person
subrogated
○ Mixed - both
Requisites of novation
● (1) The existence of a previous valid
obligation;
● (2) The intention or agreement and capacity of
the parties to extinguish or modify the
obligation;
● (3) The extinguishment or modification of the
obligation; and
● (4) The creation or birth of a valid new
obligation.
Novation of judgement
● final judgment of a court that had been
executed but not yet fully satisfied, may be
novated by compromise.
Novation with respect to criminal liability
● not a mode of extinguishing criminal liability
● prevent the rise of criminal liability as long as it
occurs prior to the filing of the criminal
information in court
Novation is not presumed
● GR: must be clearly and unmistakably
established by express agreement or by the
acts of the parties, as novation is never
presumed.
● Presumptive rule (Art. 1299.) is that

ARTICLE 1293. Novation
which consists in substituting
a new debtor in the place of
the original one, may be
made even without the
knowledge or against the
will of the latter, but not
without the consent of the
creditor. Payment by the new
debtor gives him the rights
mentioned in articles 1236
and 1237. (1205a)
conditions attached to the old obligation also
attach to the new obligation.
Burden of showing novation.
● on the party who asserts its existence.
Incompatibility between two obligations
● When not expressed, incompatibility is
required so as to ensure that the parties have
indeed intended such novation despite their
failure to express it in categorical terms.
○ Take place inL
■ Juridical relation
■ Object - chang eit
■ Subjects - substitution of debtor
or subrogation of creditor
Kinds of personal novation.
(1) Substitution. — when the person of the debtor is
substituted (Art. 1291[2].); or
(2) Subrogation. — when a third person is subrogated
in the right of the creditor.
Kinds of Substitution
● Expromision - third person of own inititative or
against will of original debtor assumes original
debtor’s obligation, with consent of creditor
○ Old debtor is released from obligation
● Delegacion - creditor accepts third person to
take place of debtor at instance of debtor
themselves.
○ Old debtor, new debtor, creditor must
agree
Right of new debtor

aRTICLE 1294. If the
substitution is without the
knowledge or against the will
of the debtor, the new
debtor’s insolvency or
non-fulfillment of the
obligation shall not give
rise to any liability on the
part of the original debtor.
(n)
ARTICLE 1295. The
insolvency of the new debtor,
who has been proposed by
the original debtor and
accepted by the creditor, shall
not revive the action of the
latter against the original
obligor, except when said
insolvency was already
existing and of public
knowledge, or known to the
debtor, when he delegated his
debt. (1206a)
● Expromision - gives right to reimbursement
● Delegacion - reimbursement and subrogation
Consent necessary in substittion
● Implies waiver of creditor of credit
● Substitution may be prejudicial to him
○ Take in form of delay/non performance
● Creditor has right to refuse payment by third
person without interest in obligation (Art 1236
P@)
●
Effect of new debtor’s insolvency or non-fulfillment of
obligation.
● In expromision
○ new debtor’s insolvency or
nonfulfillment of the obligation will not
revive the action of the creditor against
the old debtor
● In delegacion
○ GR: old debtor is not liable to the
creditor in case of the insolvency of the
new debtor.
○ ER:
■ nsolvency was already existing
and of public knowledge (
■ insolvency was already existing
and known to the debtor
■
ARTICLE 1296. When the
principal obligation is
extinguished in
consequence of a novation,
accessory obligations may
subsist only insofar as they
may benefit third persons
who did not give their
consent. (1207)
ARTICLE 1297. If the new
obligation is void, the
original one shall subsist,
unless the parties intended
that the former relation
should be extinguished in
any event. (n)
GR: principal obligation carries with it that of the
accessory obligations. (see Arts. 1230, 1273, 1280.)
ER: cessory obligation created in favor of a third
person which remains in force unless said third
person gives his consent to the novation
A owes B P2,000.00 with interest at 14%.
B owes C P280.00.
It was agreed among the parties that A would pay the
interest of
P280.00 to C. In this case, besides the principal
obligation of A, there is a
stipulation in favor of C, a third person. (see Art. 1311,
par. 2.) Later on,
A and B executed another contract whereby they
agreed that A would
deliver to B a television set in payment of the loan.
In spite of the novation, the accessory obligation to
pay the interest
of P280.00 to C still subsists unless C gives his
consent to the novation.
● Effect new obligation void
○ GR: there is no novation if the new
obligation is void, therefore original
subsist
○ ER: parties intended that the old
obligation should be extinguished in
any
● Effect new obligation vodable
○ GR: new obligation is only voidable,
novation can take place, if annulled -

ARTICLE 1298. The
novation is void if the
original obligation was
void, except when annulment
may be claimed only by the
debtor, or when ratification
validates acts which are
voidable. (1208a)
ARTICLE 1299. If the
original obligation was
subject to a suspensive or
resolutory condition, the
new obligation shall be under
the same condition, unless it
is otherwise stipulated. (n)
ARTICLE 1300. Subrogation
of a third person in the rights
of the creditor is either legal
or conventional. The former is
not presumed, except in
cases expressly mentioned in
this Code; the latter must be
clearly established in order
that it may take effect.
(1209a)
original enforeced
○ ER: intention of the parties is
otherwise.
Effect where the old obligation void or voidable.
● void obligation cannot be novated because
there is nothing to novate
●
GR: first obligation is subject to a suspensive or
resolutory condition, the second obligation is deemed
subject to the same condition
ER: unless the contrary is stipulated by the parties in
the stipulation
Subrogation
● substitution of one person in the place of
another with reference to a lawful claim or
right, so that he who is substituted succeeds to
the right of the other in relation to a debt or
claim, including its remedies and securities.
● cannot succeed to a right not possessed by
the subrogor.
Kinds:
(1) Conventional. — when it takes place by express
agreement of the original parties (the debtor and the
original creditor) and the third person (the new
creditor) (Art. 1301.); or
(2) Legal. — when it takes place without agreement
 but by operation of law. (Art. 1302.)

Consent of all parties required in

ARTICLE 1301. Conventional
subrogation of a third person
requires the consent of the
original parties and of the
third person. (n)
conventional subrogation.
In conventional subrogation, the consent of all the
parties is an essential requirement.
(1) the debtor. — because he becomes liable under
the new obligation to a new creditor.
(2) the old or original creditor. — because his right
against the debtor
is extinguished.
(3) the new creditor. — because he may dislike or
distrust the debtor.

Conventional Subrogation v. Assignment

ARTICLE 1302. It is
presumed that there is legal
subrogation:

(1) When a creditor pays

another creditor who is
preferred, even without the
debtor’s knowledge;

(2) When a third person, not

interested in the obligation,
pays with the express or tacit
approval of the debtor;

(3) When, even without the

knowledge of the debtor, a
person interested in the
fulfillment of the obligation
pays, without prejudice to the
effects of confusion as to the
latter’s share. (1210a)

ARTICLE 1303. Subrogation

transfers to the person
subrogated the credit with all
the rights thereto
appertaining, either against
the debtor or against third
persons, be they guarantors
or possessors of mortgages,
subject to stipulation in a
conventional subrogation.
(1212a)

ARTICLE 1304. A creditor, to

whom partial payment has
been made, may exercise his
right for the remainder, and
he shall be preferred to the
person who has been
subrogated in his place in
virtue of the partial payment
of the same credit. (1213)