OBLIGATIONS
(d) The Efficient Cause — Vinculum Juris or
ARTICLE 1156. An obligation is a juridical
necessity to give, to do, or not to do.
Definition In The Civil Code
● The definition in Article 1156 is incomplete.
○ It only considers obligations from
the side of the obligor, omitting the
creditor.
★ Definition By Arias Ramos
A
● An obligation juridical relation whereby the
creditor may demand from the debtor the
observance of a determinate conduct, and
in case of breach, may obtain satisfaction
from the assets of debtor.
[NOTE]: This is more accurate because it views
obligation from a total standpoint → both active &
passive
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Essential Elements Of Obligation
(a) Active Subject — Obligee/ Creditor →
Possessor of a right → he in whose in
favor the obligation is constituted
(b) Passive Subject — Obligor/ Debtor → He
who has the duty of giving, doing, or not
doing
(c) Object/ Prestation — Subject Matter →
prestation/ conduct required to be
observed → to give, to do, not to do
upon to enforce its fulfillment or in default
thereof, the economic value it represents
Juridical Tie → Reason why the obligation
exists → L-C-QC-D-QD
☆ BAR QUESTION: What is a prestation?
EXAMPLE:
A promises B to paint his picture as a result of an
A: A prestation is an obligation; more specifically, it
agreement.
is the subject matter of an obligation—and may
consist of giving a thing, doing or not doing a
A → Debtor/ Obligor; B → Creditor/ Obligee,
certain act. The law speaks of an obligation as a
Painting → Object/ Prestation; Agreement/
juridical necessity to comply with a prestation.
Contract → Efficient Cause
There is a “juridical necessity,” for non-compliance
can result in juridical or legal sanction.
Q: Would there be a limit as to the number of
persons who may act either as active subject or [NOTE]: Prestation = obligation = subject matter →
passive subject? to give, to do, not to do
A: There is no limit because the law recognizes the Requisites Of A Valid Prestation
concept of joint obligations, solidary obligations,
(1) Must be possible juridically and
joint indivisible obligations, etc. All of these would
physically;
allow for multiple personalities acting as passive
(2) Must be determinate or at least
subjects or acting as active subjects.
There is also no need for the number of active
subjects to correspond to the number of passive
subjects. We can have 1 person acting as a passive
subject versus multiple personalities acting as the
active subjects and vice versa → multiple creditors &
multiple debtors
determinable according
pre-established elements or criteria;
(3) Must have a possible equivalent in
money
to
Q: Do we add pecuniary value as a requisite for a
valid object or prestation?
Concept Of Prestation A: YES. The object or prestation must have a
● Prestation: Subject matter of an obligation pecuniary value and must be susceptible of
● Obligation: Juridical Necessity to comply economic valuation.
with a prestation
● Non-compliance → Juridical or legal
sanction → Courts of justice may be called
Juridical Necessity payment was no longer required → which do Sanction → Conscience, morality or the law of the
● If the debtor without any legal justification not grant a right of action to enforce their Church
fails or refuses to promptly, fully & properly performance, but after voluntary fulfillment
perform that which he is obliged to perform by the obligor, they authorize the retention EXAMPLE: The duty of a Catholic to hear mass
→ obligation is breached of what has been delivered or rendered by every Sunday
reason thereof.
Remedies In Case Of Non-Performance Of
NATURAL MORAL
Obligations
ARTICLE 1424. When a right to sue upon a civil
(1) Demand Performance; or obligation has lapsed by extinctive prescription, There is a juridical tie No juridical tie
(2) Demand Rescission the obligor who voluntarily performs the contract
cannot recover what he has delivered or the value Law recognizes certain Law does not recognize
of the service he has rendered. legal effects any legal consequence
KINDS OF OBLIGATIONS

A
arising
Natural obligation can
A. From the viewpoint of SANCTION Sanction → do not grant a right of action to enforce be ratified & converted
their performance into a civil obligation
ARTICLE 1423. Obligations are civil or natural.
Civil obligations give a right of action to compel
their performance. Natural obligations, not being EXAMPLE: A owes B 1M. Debt has already B. From the viewpoint of SUBJECT MATTER
based on positive law but on equity and natural prescribed. A knows that it has already prescribed, (1) REAL OBLIGATION — the obligation to
law, do not grant a right of action to enforce their but still knowingly & voluntarily pays B, then A GIVE
performance, but after voluntary fulfillment by
cannot later get back what he has paid. (a) Determinate or Specific Obligation
the obligor, they authorize the retention of what
— involves an obligation to deliver a
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has been delivered or rendered by reason
thereof. Some natural obligations are set forth in
the following articles.

(1) CIVIL OBLIGATION — Based on positive law

→ Perfect obligation → give right to compel
their performance
Q: What is an example of a natural obligation?
A: An obligation that has already prescribed.

[NOTE]: Since it has already been prescribed → it

can no longer be the subject of a right of action in
court.
● Prescription, however, does not extinguish
determinate or specific thing →
particularly

(b) Indeterminate
Obligation
obligation
—
to
designated
physically segregated from all

or
or

others of the same class or species

Generic
involves
deliver
the
an
the obligation → merely the right of action indeterminate or generic thing →
Sanction → Judicial Process
EXAMPLE: A promises B to pay his debt of 1M. designated merely by its class or
Other(s): genus
(3) MORAL OBLIGATION — Imperfect
(2) NATURAL OBLIGATION — Based on equity
obligation (2) PERSONAL OBLIGATION — the obligation
& natural law → The duty not to recover
what has voluntary been paid although the TO DO or NOT TO DO
(a) Positive
 (b) Negative
EXAMPLE: To do → to paint a house; Not to do → to
refrain from creating a nuisance
C. From the viewpoint of AFFIRMATIVENESS or
NEGATIVENESS OF OBLIGATION
(a) POSITIVE — to give or to do
(b) NEGATIVE — not to do (naturally includes
not to give)
A
Elements Of Cause Of Action
D. From the viewpoint of PERSONS OBLIGED
(a) UNILATERAL — Where only 1 of the parties
is bound
EXAMPLE: A owes B 1M → A needs to pay B
(b) BILATERAL – Both parties are bound
EXAMPLE: Contract of Sale → A is bound to pay B
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3M, while B is bound to deliver the Honda Civic
Type R → Buyer & Seller
(i)
(ii)
Reciprocal — Performance is
dependent upon the performance
of the other party
Non-reciprocal — Performance by
one is not dependent upon the
SOURCES OF OBLIGATION
performance of the other party
Concepts
(1) CREDIT — Right of a person to demand a
prestation or the observance of a particular
conduct
(2) DEBT — Duty of another person to render a
prestation or observe a particular conduct
(3) RESPONSIBILITY — right of the creditor to
obtain satisfaction from the debtor’s
patrimony in case of the debtor’s breach
ARTICLE 2236. The debtor is liable with all his
property, present and future, for the fulfillment
of his obligations, subject to the exemptions
provided by law.
(1) LEGAL RIGHT — in favor of a person by
whatever means & under whatever law it
arises or created;
(2) CORRELATIVE LEGAL OBLIGATION – on
the part of another to respect ot not to
violate the said right; and
(3) AN ACT OR OMISSION — in breach or
violation of said right by injury/ damage
to the plaintiff for which he may
maintain an action for the recovery of
damage or other applicable relief
ARTICLE 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or Omission Punishable by Law;
(5) Quasi-Delicts
(1) LAW — Obligations Ex Lege
ARTICLE 1158. Obligations derived from law are
not presumed. Only those expressly determined
in this Code or in special laws are demandable,
and shall be regulated by the precepts of the law
which establishes them; and as to what has not
been foreseen, by the provisions of this Book.
Not Presumed
● That the obligation must be clearly,
expressly, or impliedly set forth in law.
Q: What does that mean–that obligations derived
from law are not presumed and must be expressly
determined in the code or special laws?
A: It means that even if it may be morally right for
an act to be performed, but if the law is silent, then
it cannot be said that it is an obligation that is ought
to be performed by the supposed passive subject.
EXAMPLES:
● Obligation between spouses or parents &
children to provide support under the
Family Code.
● Obligation by the employer to provide
certain benefits under the Labor Code
● Duty to pay taxes
(2) CONTRACTS — Obligations Ex Contractu
ARTICLE 1159. Obligations arising from
contracts have the force of law between the
contracting parties and should be complied with
in good faith.
EXAMPLE: A duty to repay a loan by virtue of an
agreement
ARTICLE 1305. A contract is a meeting of minds
between two persons whereby one binds himself,
with respect to the other, to give something or to
render some service.
● While obligations arising from a contract
have the force of law between the parties,
this does not mean that the law is inferior to
contracts.
Meaning of Article 1159
● Neither party may unilaterally and upon his
own exclusive volition, escape his
obligations under the contract, unless the
other party assented thereto, or unless for
causes sufficient in law and pronounced
adequate by a competent tribunal.
Compliance in Good Faith
● “Compliance in good faith” means that we
must interpret “not by the letter that killeth
but by the spirit that giveth life.”
● A juridical relation arising from a lawful,
voluntary, and unilateral act → L-U-V
● In Quasi-Contracts, there is no consent →
there is no meeting of the minds → hence,
there is no contract
○ However, consent is presumed →
another may not be unjustly
enriched
● Not an implied contract
○ An implied contract is one which
arises where the intention of the

A
○ This is because before a contract parties is not expressed, but an
can be enforced, it must first be agreement in fact, creating an
valid, and it cannot be valid if it is obligation, is implied or presumed
OBLIGATIONS CONTRACTS
against the law. from their acts, or where there are
○ Moreover, the right of the parties to The result of a contract If valid → always results circumstances which, according to
or some other source in obligations the ordinary course of dealing and
stipulate is limited.
the common understanding of
ARTICLE 1306. The contracting parties may Does not necessarily A contract always
men, show a mutual intent to
establish such stipulations, clauses, terms and presuppose meeting of presupposes a meeting
the minds for all kinds of the minds contract.
conditions as they may deem convenient,
of obligations
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provided they are not contrary to law, morals,
good customs, public order, or public policy.

Principle of Autonomy of Will

● With regards to the contents of contracts,
the fundamental principle is freedom of
contract or party autonomy.
(3) QUASI-CONTRACTS
Quasi-Contractu
—

ARTICLE 1160. Obligations derived from

Obligations

quasi-contracts shall be subject to the provisions

of Chapter 1, Title XVII, of this Book.
Ex
QUASI-CONTRACT

✘ No meeting of the
minds

✘ Not predicated on
consent, being
unilateral act.
a

To the end that there be

IMPLIED CONTRACT

✔ Meeting
minds
of

✔ Requires consent of
the parties
the

Basis is the will of the

Rights of Parties to Stipulate
● Limited — may stipulate → parties may
agree to any terms → but should not be
contrary to law, morals, good customs,
public order or public policy
no unjust enrichment parties
ARTICLE 2142. Certain lawful, voluntary and
unilateral acts give rise to the juridical relation of Q: Who commits these lawful, voluntary, and
quasi-contract to the end that no one shall be unilateral acts?
unjustly enriched or benefited at the expense of
another.
A: We have a person who commits this lawful,
unilateral, and voluntary act, and because he
committed this lawful, unilateral, and voluntary act,
the other party now becomes indebted to him →
creditor
Q: Under what principle are we creating this
obligation on the part of the other party in favor of
the actor?
A: The Principle of Unjust Enrichment because we
do not want unjust enrichment to take place. Unjust
A
enrichment may take place at the expense of the
actor.
Types of Quasi-Contracts
(a) Negotiorum Gestio
ARTICLE 2144. Whoever voluntarily takes charge
of the agency or management of the business or
property of another, without any power from the
latter, is obliged to continue the same until the
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termination of the affair and its incidents, or to
require the person concerned to substitute him,
if the owner is in a position to do so. This
juridical relation does not arise in either of these
instances:
(1) When the property or business is not
neglected or abandoned;
(2) If in fact the manager has been tacitly
authorized by the owner.
In the first case, the provisions of Articles 1317,
1403, No. 1, and 1404 regarding unauthorized
contracts shall govern.
he takes over the management WITHOUT the
In the second case, the rules on agency in Title X
of this Book shall be applicable. authorization of the owner, or most likely, without
the knowledge of the owner.
● Unauthorized management or
administration on the behalf of another
It is likewise required, by way of a requisite, that the
person without the latter’s knowledge
actor or inofficious manager performs the act, not
○ Typically occurs in situations of
because he is motivated by profit, but because he
emergency or necessity where
simply wants to help out. He wants to save the
someone takes action to protect the
property or the business that has been abandoned.
interests of another person
It is likewise important that he is not taking action
■ Someone → creditor/ gestor/
on the mistaken notion that he owns the property
officious manager
or the business.
■ Another person → owner/
debtor
Requisites in Order for the Obligation to Arise
● Person undertaking → Gestor
○ While gestor acts without prior (1) A person/ officious manager/ gestor
voluntarily assumes the management or
authorization, he acts because he
agency of the business or property of
deems it necessary under the
another;
circumstance (2) The property must be neglected or
Elements of Negotiorum Gestio abandoned;
● Otherwise what results is a case
(1) That the business or property must be
abandoned or neglected;
(2) That the officious manager must not have
been authorized by the owner;
(3) The officious manager must be
compelled to act, not by the prospects of
profit, but by the beneficent idea of
averting losses and damages to the
owner of the property in question; and
(4) The officious manager must not be acting
(4) The
of unauthorized/unenforceable
contract and not negotiorum
gestio;
(3) There is no authorization from the
owner, whether express or implied;
● Otherwise, what results is a
contract of agency and not
negotiorum gestio; and
assumption of agency or
management must be done in good faith.
under a mistaken notion that the
property belongs to him.
[NOTE]: The actor, in negotiorium gestio, is known as Obligations of the Parties
A. On the Part of Officious Manager/ Gestor
the inofficious manager. He takes over the
management of a property or business which has
been neglected or abandoned. It is important that
 (1) He is obliged to continue with the agency/
management until the termination of the
affair & its incidents.
● He can only require the owner to
substitute him if the latter is in the
position to do so.
(2) In the performance of his duties as such, he
is obliged to observe the diligence of a
good father of a family.
● If the owner suffers damage by
reason of the fault or negligence of
the officious manager, the latter is
A
liable to pay damages.
(3) Ordinarily, the officious manager is not
liable for any loss or damage by reason of
fortuitous event.
GR Officious Manager/ Gestor is not liable
for any loss/ damage by reason of
fortuitous event
XPN Undertakes risky operation which
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owner was not accustomed to embark
upon;
Prefers his own interest of that of the
owner;
Fails to return the property or business
after demand by the owner;
Assumed the management in bad faith;
Manifestly unfit to carry on the
management, except when the same was
assumed to save the property or business
from imminent danger; and
Prevents, by his intervention, a more
competent person from taking up the
management except when the same was
assumed to save property or business
from imminent danger
(4) Officious Manager is personally liable for
contracts he has entered into with third
persons, insofar as the latter shall be
concerned, even though he acted in the
name of owner.
ARTICLE 2152. The officious manager is
personally liable for contracts which he has
entered into with third persons, even though he
acted in the name of the owner, and there shall
be no right of action between the owner and third
persons. These provisions shall not apply:
(1) If the owner has expressly or tacitly ratified
the management, or
(2) When the contract refers to things pertaining
to the owner of the business
GR
XPN
There shall be no right of action between
the owner & such 3rd persons
If the owner ratified the management
either expressly or tacitly; or
When the contract refers to things
pertaining to the owner of the business
(5) If the officious manager delegates to
another person all or some of his duties, he
is liable for the acts of the delegate,
without prejudice to the direct obligation of
the delegate to the owner
(6) Liability of Two or More Officious Manager
GR Obligation is solidary
XPN Merely joint when the management was
assumed to save the thing or business
from imminent danger
B. On the Part of Owner
The owner is liable to the officious manager for the
following:
(1) Obligations incurred in his interest;
(2) Necessary & useful expenses;
(3) Damages suffered by the officious manager
in the performance of his duties, in the
following situations —
(a) If the owner enjoys the advantages
of the officious management; or
(b) If the management had for its
purpose the prevention of an
imminent & manifest loss, although
no benefit may have been derived;
or
(c) Even if he did not derive any benefit
& there has been no imminent &
manifest danger to the property &
business provided that –
(i)
(ii)
The officious manager has
acted in good faith;
The property or business is
intact, ready to be returned
to the owner
Modes of Extinguishing the Officious Management
(1) Repudiation of management by the owner,
either expressly or tacitly;
 (2) Putting an end to management by the
owner;
(3) Death, civil interdiction, insanity or
insolvency of either the owner or the
officious manager; and
(4) Withdrawal from the management by the
officious manager, but he can only do so if
the owner is in the position to substitute for
him
Concepts
Requisites in Order for Solutio Indebiti to Arise
● JUST COMPENSATION
(3) If he acted in good faith, he is responsible
him when the management had for its purpose
the prevention of an imminent and manifest loss, for the impairment or loss of the thing or
although no benefit may have been derived. its accessories & accessions insofar as he
has thereby been benefited.
(a) If he has alienated it, he is obliged
(b) Solutio Indebiti
to return the price or assign the
● It is a juridical relation which arises when
action to collect the sum.
something is received when there is no
(4) The responsibility of 2 or more payees,
right to demand it & when it was unduly
when there has been payment of what is not
delivered through mistake.
due, is solidary.
EXAMPLE: Duty to refund an overcharge or because

A
ARTICLE 2168. When during a fire, flood, or
other calamity, property is saved from
destruction by another person without the
knowledge of the owner, the latter is bound to
pay the former just compensation.
● REIMBURSEMENT
ARTICLE 2175. Any person who is constrained to
(1) Payment is made when there exists no
binding relation between the payor, who
has no duty to pay, and the person who
received the payment; and
(2) Payment is made through mistake, and
not through liberality or some other
cause.
Obligations Created
(1) Recipient has the obligation to return what
of the quasi contract of solutio indebiti or undue
payment
Presumption of Mistake
● Mistake in payment is presumed if
something which had never been due or
had already been paid was delivered.
○ But the recipient may prove that the
delivery was made out of liberality

Rule

ARTICLE
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pay the taxes of another shall be entitled to
reimbursement from the latter.

2150. Although the

management may not have been expressly
officious

ratified, the owner of the property or business

who enjoys the advantages of the same shall be
has been unduly delivered
(2) If he acted in bad faith in accepting the
undue payment he is liable
(a) To pay legal interest, if a sum of
money is involved;
(b) To return the fruits he received or
those which should have been
received, if the thing products
or for any just cause.

Accion in Rem Verso

● A person who acquires or comes into
possession of something at the expense of
another without just or legal grounds, has
the obligation to return the same.

liable for obligations incurred in his interest, and fruits;
shall reimburse the officious manager for the (c) To answer for any loss or
necessary and useful expenses and for the impairment of the thing from any
damages which the latter may have suffered in cause, until it is recovered; and
the performance of his duties. (d) To pay the damages to the person
who delivered the things, until it is
The same obligation shall be incumbent upon recovered
Elements of Accion in Rem Verso
(1) That the defendant has been enriched;
(2) That the plaintiff has suffered a loss;
(3) That the enrichment is without just or
legal ground; and
(4) That the plaintiff has no other action
 (4) ACTS OR OMISSIONS PUNISHED BY LAW
based on contract, quasi contract, crime XPN Unless it involves the crime of treason,
or quasi-delict. OR DELICTS — Ex Delicto rebellion, espionage, contempt and others
ARTICLE 2177. Responsibility for fault or wherein no civil liability arises on the
negligence under the preceding article is entirely part of the offender either because there
Distinguished from Accion in Rem Verso are no damages to be compensated or
separate and distinct from the civil liability
SOLUTIO INDEBITI ACCION IN REM VERSO arising from negligence under the Penal Code. there is no private person injured by the
But the plaintiff cannot recover damages twice crime.
Mistake is an Mistake is not necessary for the same act or omission of the defendant.
essential element
Underlying Principle
Considered merely an
auxiliary action Basis for Civil Liability Ex Delicto ● Crime has a dual character
● Civil liability arising from Crime (1) As an offense against the State
Available only when because of the disturbance of the

A
● Under Article 100 of the RPC, every person
there is no other remedy social order; and
criminally liable is also civilly liable.
on
○ "every person criminally liable for a (2) As an offense against the private
contract,quasi-contract,
felony is also civilly liable." person injured by the crime
crime or quasi-delict
GR Civil liability is deemed instituted with
Effect of Acquittal of Accused
(c) Other Quasi-contracts under the the criminal action
(1) Not the author/ perpetrator of act/
Civil Code
XPN Unless the offended party: omission – closes the door to civil liability →
ARTICLE 2143. The provisions for (a) Waives the civil action; civil action based on delict shall be deemed
quasi-contracts in this Chapter do not exclude extinguished if there is a finding in a final
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other quasi-contracts which may come within the
purview of the preceding article.
Examples of Other Forms
1) Support — when support was given by a
stranger whose intention was to help
2) Funeral expenses — When borne by a 3rd
person without the knowledge of the
deceased’s relatives
●
(b) Reserves the right to institute it
separately; or

(c) Institutes the civil action prior to

the criminal action
In crimes, the defendant shall be liable for
all damages—which are the natural &
probable consequences of the act or
judgment in criminal action that the act or
omission from which the civil liability arise,
did not exist

[NOTE]: Applies only to a civil liability arising from

3) Accident — when a person is injured & he
cannot give his consent because he was
unconscious then he was helped & treated
4) Calamities – when there is a fire & a person
saved the house of the other from burning
Ex Delicto, NOT to civil action arising from
quasi-delict or culpa aquiliana.
omission complained of.
(2) Reasonable Doubt – even if the guilt of the
● Civil liability → proved by mere
accused has not been satisfactorily
preponderance of evidence
established, he is not exempt from civil
liability
GR Every person who is criminally liable is
also civilly liable
 ○ Again, civil liability based on delict
may be proved by mere
preponderance of evidence.
[NOTE]: The state may acquit the accused based on
reasonable doubt, and at the same time, order the
payment of civil liability already proved in the same
case without need for a separate civil action.
Instances where Acquittal does not Extinguish Civil
Liability —
(a) Acquittal based on reasonable doubt → mere
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preponderance of evidence is required
(b) Court declares that the liability of the
accused is civil
(c) Civil liability of the accused does not arise
from or is not based upon the crime of
which accused is acquitted
Effect of Death of Accused Pending Appeal of His
Conviction
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(1) Criminal Liability → Extinguished
(2) Civil liability arising from Ex Delicto →
Extinguished
[NOTE]: Because there is no final judgment
rendered yet by the time of his death
Independent Civil Action
● In the following cases, the offended party
may file an independent civil action, which
shall proceed independently — Articles 31,
32, 33, 34, 2176
(1) Article 31 —Civil action based on
an obligation not arising from the
act or omission complained of as
felony
EXAMPLE: A civil action for breach of contract of
deposit, independent of a criminal action for estafa
(2) Article 32 — Violation of civil or
constitutional rights & liberties
(3) Article 33 — Defamation, fraud &
physical injuries
(4) Article 34 — Failure of a policeman
or a police officer to render aid or
protection to any person in case of
danger to life or property
(5) Article 2176 —
Liability of an Insane Criminal
● Criminal Liability → Exempt ✗
● Civil Liability → on the guardian ✔
○ If guardian was diligent → exempt
✗
○ No guardian/ guardian is insolvent
→ Property
No Double Recovery
● In no case, even in independent civil
action, may the offended party recover
damages twice for the same act or
omission charged in the criminal action
(5) QUASI-DELICTS
ARTICLE 2176. Whoever by act or omission
causes damage to another, there being fault or
negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no
pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by
the provisions of this Chapter
● Fault/ act of negligence which causes
damage → to another → there being no
pre-existing contractual relations between
the parties
● Negligence is defined as the failure to
exercise the standard of care that a
reasonably prudent person would have
exercised in a similar situation
Requisites for Quasi-delicts to exist/ Requisite for
Recovery
(1) Fault or negligence on the part of the
defendant;
(2) Injury or damage suffered by the
plaintiff; and
(3) Causal connection between the fault or
negligence of the defendant and the
injury or damage suffered by the
plaintiff
[NOTE]: D → Fault/ Negligence; P → Injury/ Damage;
Connection → fault & damage → proximate cause
Distinguished from Delicts
● A quasi-delict is a separate legal institution
under the Civil Code with a substantivity all
its own, and individuality that is entirely
apart and independent from delict
DELICT QUASI-DELICT
Affect public interest Affect private concern
Not broad as Include all acts in which
quasi-delicts any kind of fault or
negligence intervenes
Distinguished from Other Sources of Obligations
Negligence may be classified into three (3):
(a) Culpa Contractual → Contract of Carriage
(b) Culpa Aquiliana
(c) Culpa Criminal
SAMPLE PROBLEM
Q: Taxi driver, driving recklessly, killed his
passenger. What are the sources of obligation?
A:
A
FIRST
(1) The source of liability is the breach of
contract → common carrier → obliged to
bring its passenger safely to his destination
(2) Liability devolves upon the employer →
driver is not a party to the contract of
carriage & may not be held liable under the
contract
(3) Employer cannot relieve himself of liability
SI
by provoking that he exercised all the
diligence of a good father of a family in the
selection & supervision of his employees
● Proof of diligence may only serve to
mitigate his liability.
(4) Plaintiff is not required to prove the
existence of negligence in order to recover.
● Proof of the contract & of its
non-performance is sufficient to
prima facie to warrant recovery.
○ Common carrier
presumed to have been at
fault or to have acted
negligently in case of death
or injuries to his
passengers.
SECOND
(1) The source of obligation is the crime
committed by the employee
(2) The employee → primarily liable; Employer
→ subsidiarily liable
PRINCIPLE: Subsidiarily liable because → Vicarious
liability under Article 2176 & 2180 of the Civil Code
ARTICLE 2180. The obligation imposed by Article
2176 is demandable not only for one's own acts or
omissions, but also for those of persons for
whom one is responsible.
The father and, in case of his death or incapacity,
the mother, are responsible for the damages
caused by the minor children who live in their
company.
Guardians are liable for damages caused by the
minors or incapacitated persons who are under
their authority and live in their company.
The owners and managers of an establishment or
enterprise are likewise responsible for damages
caused by their employees in the service of the
branches in which the latter are employed or on
the occasion of their functions.
Employers shall be liable for the damages caused
by their employees and household helpers acting
within the scope of their assigned tasks, even
is
though the former are not engaged in any
business or industry.
The State is responsible in like manner when it
acts through a special agent; but not when the
damage has been caused by the official to whom
the task done properly pertains, in which case
what is provided in Article 2176 shall be
applicable.
Lastly, teachers or heads of establishments of arts
and trades shall be liable for damages caused by
their pupils and students or apprentices, so long
as they remain in their custody.
The responsibility treated of in this article shall
cease when the persons herein mentioned prove
that they observed all the diligence of a good
father of a family to prevent damage.
EXAMPLE: A taxi passenger who became a victim of
a vehicular accident may sue the taxi operator
under their contract of carriage → this is culpa
contractual, and also sue the driver of the other
vehicle which collided with the taxi for quasi-delict,
since they had no pre-existing contractual
obligations → this is culpa aquiliana.
The negligent drivers may also be criminally
prosecuted for criminal negligence → this is culpa
criminal, which will also give rise to civil liability.
The acquittal of the accused in the criminal case
does not carry with it the extinction of the civil
liability based on quasi-delict, because they are
based on different sources of obligation.
CULPA CULPA CULPA
 CONTRACTUAL ACQUILLIANA CRIMINAL convicted employees; ARTICLE 1178. Subject to the laws, all rights
(2) They are engaged in some kind of acquired in virtue of an obligation are
Parties have a Parties Negligence industry; transmissible, if there has been no stipulation to
pre-existing generally have punished by (3) The crime was committed by the the contrary.
contractual no pre-existing Article 365 of employee in the discharge of their duties;
relations contractual the RPC (4) The execution against the employees has
relations not been satisfied due to insolvency GR Rights are transmissible

Negligence is an It is negligence Foregoing XPN (1) If the law provides otherwise

incident of the itself which liabilities & Prohibition Against Double Recovery (2) If the contract provides
performance of creates the corresponding ● Civil Code expressly prohibits plaintiff from otherwise;
the contractual obligation & liabilities are recovering damages twice under delict & (3) If the obligation is purely
obligation, and juridical independent quasi-delict “for the same act or omission” personal

A
serves to increase relation from each
the liability between parties other, provided
arising from the that the Assignment by a Guarantor
contractual offended party ● When a person with a time deposit assigns
obligation cannot recover the same to the bank to guarantee the debts
more than once or overdrafts of others, the assignor is NOT
Vinculum juris →
a mere guarantor.
exists
independently of ○ He is bound by all the terms
negligence
SI included in the assignment

Proof of the Burden of proof Negligence of KINDS OF OBLIGATION

contact & its rests upon the fault should be ● An obligation to give may either be:
non-performance plaintiff to clearly
(1) To give a specific/determinate thing; or
is sufficient prima prove the established
facie to warrant negligence & (2) To give a generic thing or object
recovery failure to do so
shall result in [NOTE]: The enumeration laid down in Article 1157 Q: What is a determinate thing?
Not necessary to the dismissal of is not scientific because in reality there are only two A: A thing that can be individualized or identified
prove → the action sources: the law and contracts, because obligations from all others of the same kind.
negligence arising from quasi-contracts, crimes, and
quasi-delicts are really imposed by the law. Q: What is a generic thing?
Requisites in Order for Subsidiary Liability of the A: One that is indicated solely by its kind without
Employer to Attach being designated and distinguished from all
others of the same kind.
(1) They are indeed the employers of the
TRANSMISSIBILITY OF RIGHTS
Q: Why is it important to know whether the
obligation to give involves a generic or a specific
object?
A:
1) A determinate obligation has accessory
obligations which are not available in
generic obligations to give;
2) The availability of remedies in case of loss,
specifically specific performance and
substitute performance, are different.
Substitute performance does not lie in
determinate obligation to give; and
GENERIC OR INDETERMINATE OBLIGATION TO
GIVE
ARTICLE 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.
If the thing is indeterminate or generic, he may
ask that the obligation be complied with at the
expense of the debtor.
If the obligor delays, or has promised to deliver
SPECIFIC/ DETERMINATE OBLIGATION TO GIVE
When Considered Determinate
● When it has been particularly designated
or physically segregated → from all others
of the same class or species
ARTICLE 1116. The obligation to give a
determinate thing includes that of delivering all
its accessions and accessories, even though they
may not have been mentioned.

A
the same thing to two or more persons who do
3) A determinate obligation may be not have the same interest, he shall be
extinguished by the loss of the thing due if responsible for any fortuitous event until he has ACCESSIONS ACCESSORIES
the same is on account of a fortuitous effected the delivery.
Fruits of a thing or Things joined to or
event, which does not apply in generic additions to or included with the
obligation to give. When Considered Generic improvements upon a principal thing for the
● Generic → If it has been designated merely thing latter’s embellishment,
by its class or genus better use or
DETERMINATE/ INDETERMINATE/ completion
SPECIFIC GENERIC
Remedies In Case of Breach
Has
SI
obligations

No
performance

Obligation
accessory

substitute

extinguished by the
is
None

May be substituted →
generic → genus never
perishes

Does not extinguish

(1) Right to compel the debtor to make the
delivery of the generic thing, with a right to
recover damages
(2) Right to ask another person to make the
delivery, at the expense of the debtor, with
a right to recover damages
(3) Right to rescind the obligation, in proper
case, with a right to recover damages
e.g. House or trees on
land; air conditioner in
a car
e.g. Key of a house;
charger of phone

Accessory Obligations in Determinate Ones

● Principal Obligation → deliver the specific
thing/ determinate thing due
○ The obligation to deliver comes
loss of a thing due → if with the delivery accessions &
the same is on account ARTICLE 1166. The obligation to give a accessories
of fortuitous event determinate thing includes that of delivering all ● Accessory Obligation → Obligation to
its accessions and accessories, even though they preserve the thing to be delivered with the
e.g. An iPhone 14+ e.g. iPhone 14+, purple, may not have been mentioned.
proper diligence of a good father of a
with serial # 1222
family
 ○ Unless the law or the stipulation of
the parties requires another
standard of care
Other Standard of Care
(1) Parties may validly agree on a kind of
diligence which is lower than that of a good
father of a family → SLIGHT CARE
(2) Parties may validly agree on a degree of
diligence higher than that of a good father
of a family → EXTRAORDINARY DILIGENCE
● Such waiver is contrary to public
policy
Obligation to Deliver Fruits if the Creditor is Already
Entitled to It
ARTICLE 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.
Kinds of Fruits
the source of obligation → birth of contract
→ meeting of the minds
● Except, if the obligation to deliver
is made to depend upon the
happening of a suspensive
condition → obligation only arises
upon the happening of the
condition
● Except, in a contract of sale → even
if subject to a suspensive term or
condition → IF debtor has already
paid the price → acquires right over

A
NATURAL INDUSTRIAL CIVIL
[NOTE]: The duty to preserve only applies to the fruits upon perfection of
specific obligations to give. It does not apply to Spontaneous Produced by Derived from contract
generic obligations to give. products of lands of any virtue of (c) But if the obligation to deliver the specific
the soil, and kind through juridical things is merely subject to a term or
Q: Why does it not apply to generic obligations to the young and cultivation of relations period → when another date has been fixed
give? other products labor for the delivery of thing → the right of the
of animals
creditor attaches from the moment the
A: Because in generic obligations, there is nothing Produced Brought about vinculum attaches or upon the perfection
to preserve. without by reason of the the contract
SI
PRINCIPLE: Since in generic obligations it can
always be substituted for another object that is the
same quality and quantity → Genus never perishes!

Other Stipulations on Liability of Debtor

(1) The parties may also validly agree to make
the debtor liable even if the loss or
intervention of
human labor

e.g. grass; al
trees & plants
human labor

e.g.
cane;
sugar

vegetables
e.g. rents of
buildings;
price of leases

(a) Creditor acquires a right to demand for the

[NOTE]: Article 1164 speaks of the arising or birth of
the obligation to deliver → not the demandability of
its performance

Q: With regard to the fruits, to whom will the fruits

belong?

A: It belongs to the owner. Once the thing has been

delivery of the fruits of the determinate
deterioration is by reason of fortuitous delivered, he would also be entitled to the fruits.
thing due from the time the obligation to
event However, by special provision under Article 1164,
deliver determinate thing arises
(3) Parties may not validly agree to make the once the obligation to give is constituted, once it
(b) The obligation to deliver the determinate
debtor absolutely exempt from any arises, then the creditor shall be entitled to the
thing ordinarily arises at the time of the
liability arising from his own negligence fruits. Since he still has no real right over the thing
perfection of the contract → if contract is
due then he also does not have any real right to the [NOTE]: Real right is acquired UPON the delivery of
fruits. the thing due
Q: What kind of right does he have?
A: Only a personal right. Alternative Remedies of the Creditor in Case of
Breach of Determinate Obligation
Q: How will you differentiate a personal right from (1) Right to compel the debtor to deliver the
a real right? determinate things due in an action for
specific performance, with a right to
A: recover damages;
(2) Right to rescind the obligation, in proper
REAL RIGHT PERSONAL RIGHT
cases, with a right to recover damages;
No Compulsion of Debtor
● In case of breach of an obligation to do, the
creditor may not compel the debtor to
perform the act required against the latter’s
will → amounts to involuntary servitude →
prohibited under the Constitution
Remedy in Case of Non-Performance
(1) Specific Performance
(2) Ask another person to perform the
obligation & to have the cost thereof
charged against the debtor in addition to his

A
A right that can be A right that can be (3) Right to recover damages where it is the right to recover damages from the debtor
enforced against the enforced against only feasible remedy (3) To recover damages
whole world specific person only
GENERIC OR INDETERMINATE OBLIGATIONS TO Remedy in Cases of Obligation Done in Poor Manner
Rights or interest of a Right or power of
person over a specific creditor to demand DO or In Contravention of the Tenor of the Obligation
thing → ownership, from debtor the ● Creditor has additional remedy for →
ARTICLE 1167. If a person obliged to do
possession, mortgage fulfillment of something fails to do it, the same shall be UNDOING of what has been done if the
obligation executed at his cost. same is still possible at the expense of the
debtor

subject
SI
There is only a definite
active subject without
any definite passive
There is a definite
active subject & a
definite passive subject

Ownership Acquired by Delivery

● “He shall acquire no real right over it until the
same has been delivered”
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.

When Considered Breach

a) If the debtor fails to do an obligation;
b) Even in case of performance, but the same
GENERIC OR INDETERMINATE OBLIGATIONS NOT
TO DO

ARTICLE 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.

○ Hence, if there has been no delivery Nature of Creditor’s Right

is done either in poor manner; or
yet → the remedy is not for recovery ● The right of the creditor is not to demand
c) Done in contravention of the tenor of the
→ but specific performance or an act, but an omission & its
obligation
rescission non-fulfillment consists in executing the
act of which the obligor is forbidden to do
● Duty → to abstain from an act
Remedies Of Creditor In Case Of Breach Of A: They cannot be availed of simultaneously
ORDINARY EXTRAORDINARY
Obligation REMEDIES REMEDIES because they are incompatible with one another.
● If the obligor does what he is forbidden to
do, the creditor may demand the undoing (1) Action for (1) To exhaust the Q: What are they incompatible?
of what has been done at the expense of the specific properties of the
obligor in addition to the creditor’s right to performance/ debtor; A: When you avail of specific performance, you are
substitute;
recover damages (2) To be subrogated to enforcing the obligation, while if you avail of
○ If it becomes physically or legally all of the rights & rescission, you are asking for the opposite—that the
Alternative Remedies:
impossible to exercise right to (2) Action to actions of the debtor obligation be set aside and the parties be restored to
demand the undoing of what has rescind; and → save those which the status quo before the obligation was constituted.
been done → simply recover (3) Action for are inherent in his
damages from debtor damages person → accion [NOTE]: This is why one of the consequences of

A
subrogatoria; and rescission is mutual restitution. The parties would
Q: What are the remedies available to the creditor (3) To impugn all of the have to give back whatever they have received
whenever there is a breach of the obligation to give acts which the under the obligation if they avail of rescission.
and obligation to do or not to do? debtor may have
done to defraud him PERFORMANCE IN REAL OBLIGATIONS
A: We have ordinary remedies and extraordinary → accion pailuana ● There are two kinds of performance as a
remedies. The ordinary remedies must be availed remedy:
first before availing the extraordinary remedies. Q: How are the ordinary remedies related to one (1) Specific performance;
another? (2) Substitute performance
SI
Remedies of Creditor & Enforce His Credit
(1) To exhaust the properties of the debtor;
(2) To be subrogated to all of the rights &
actions of the debtor → save those which
are inherent in his person → accion
subrogatoria; and
(3) To impugn all of the acts which the debtor
may have done to defraud him → accion
A: In case the specific performance would not be
available, the creditor has the option to rescind the
obligation and to ask for damages. It would be
alternative remedies.

[NOTE]: These are alternative remedies & not

SPECIFIC
PERFORMANCE

Performance of the
obligation by
debtor himself
the
SUBSTITUTE
PERFORMANCE

Asking
reimbursement from
the debtor for the
expenses incurred in
for

cumulative remedies. You cannot avail of both availing for substitute

pailuana specific performance and rescission at once. performance

[NOTE]: Remedies must be availed of IN ORDER; Q: Why can you not avail of specific performance i.e. contracting with a
2nd & 3rd remedies are subsidiary to the 1st third person to perform
and rescission at the same time?
the prestation
EXAMPLE: A is a supplier of tiles for a construction
& is obligated to deliver to B tiles for the
construction. However, A was not able to deliver &
comply with the delivery. Hence, B looked for
another tile supplier chargeable to A →
reimbursement
When available
● Specific performance → may be availed of
in both obligations to give a specific or a
generic thing.
● Substitute performance → may be availed of
A
in obligations to give a generic thing only
PERFORMANCE IN PERSONAL OBLIGATIONS
● In specific performance in obligations to
do, specific performance → out of question
already → proscription against involuntary
servitude
● Substitute performance → available
○ Except if the obligation is personal
SI in character, which contemplates a
situation where the prestation is
something which only the debtor
can perform
PRESUMPTION RELATING TO PAYMENT
ARTICLE 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.
● Paragraph 1 — A creditor of P1,000,000,
with 8% interest, received P1,000,000 in
payment of the principal. Interest was not
referred to in the payment.
○ It is presumed that the 8% interest
had already been previously paid.
○ This is because under Article 1253,
Civil Code, payment of the interest
as a rule precedes payment of the
principal.
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.
● Paragraph 2 — If a creditor receives the 4th
installment of a debt, it is understood that
the first 3 installments have been paid
RECISSION
ARTICLE 1191. The power to rescind obligations
is implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
The injured party may choose between the
fulfillment and the rescission of the obligation,
with the payment of damages in either case. He
may also seek rescission, even after he has
chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed,
unless there be just cause authorizing the fixing
of a period.
This is understood to be without prejudice to the
rights of third persons who have acquired the
thing, in accordance with Articles 1385 and 1388
and the Mortgage Law.
When Available
● When the creditor chose to rescind the
obligation instead of compelling its
fulfillment
○ Creditor may also seek rescission
after fulfillment → if latter becomes
impossible
● Arise from same cause
○ C ♺ D → Creditor & Debtors of one
another
○ More accurately called → Resolution
● The remedy of rescission is available in
reciprocal obligations → implied
When Applicable
● Rescission may take place as long as there is
a substantial breach
RECIPROCAL OBLIGATIONS
● Those which arise from the same cause, in
which parties are both creditors & debtors
of on another, and the obligation of one is
dependent upon the other
Requisites for Rescission under Article 1191
(1) The breach in the obligation must be
substantial;
(2) The rescission must be brought by the
 aggrieved party; lesion by more than one-fourth of the value of the Prescription 6 years → oral 4 years
(3) There must be mutual restitution of things which are the object thereof; 10 years → written
whatever they received;
(4) It must not be proper to grant the debtor (2) Those agreed upon in representation of How to Assail Direct Action Direct Action
additional time to perform the absentees, if the latter suffer the lesion stated in
obligation; and the preceding number; (Subsidiary
(5) There must be notice on the part of the nature: accion
plaintiff that he intends to rescind. (3) Those undertaken in fraud of creditors when pauliana)
the latter cannot in any other manner collect
Forms of Rescission Who can Only a party to a Parties to the
the claims due them;
Judicial & Extrajudicial Assail contract contract; 3rd
● Nissan Car Lease v. LICA — Extrajudicial (4) Those which refer to things under litigation if persons →
rescission is the default even if the they have been entered into by the defendant provided that

A
obligation is silent to its availability without the knowledge and approval of the there is economic
litigants or of competent judicial authority; damage
GR Extrajudicial rescission is the default even
if the obligation is silent to its availability (5) All other contracts specially declared by law to Period & Court may fix a Court cannot
be subject to rescission. Grant of period/ grant grant extension
XPN If the other party denies that rescission is Extension extension of time
justified, it is free to resort to judicial for the fulfillment
action on its own behalf, and bring the Article 1191 Distinguished from Article 1381(3) of obligation
matter to court → burden of proof → one
who disputes it ARTICLE 1191 ARTICLE 1381 Purpose Cancel the contact Seek reparation
for the damage
SI
[NOTE]: Court’s role is to → verify the validity of
the recission

[NOTE]: If the Court finds that the breach is not

substantial → defendant may be given additional
period of time to perform the obligation → POWER
OF THE COURTS TO FIX PERIOD
Nature

Nature of
Contract

Applicability
Principal

Perfectly Valid

Applies
exclusively
reciprocal
obligations
to
Subsidiary

Defective

Applicable to all
kinds
obligations
arising from
of
Characteristics of Right to Rescind
caused & restore
the parties status
quo ante

(a) It only exists in reciprocal obligations

● However, if reciprocal obligation
with a period → neither party can
contracts →
RESCISSION IN ARTICLE 1381 whether same are demand performance or be
reciprocal in considered default before the
ARTICLE 1381. The following contracts are
character or not expiration of the period
rescissible:
(b) May be demanded by the plaintiff, only
Grounds Breach of Economic
(1) Those which are entered into by guardians when he is ready, willing & able to comply
Obligation Prejudice/ Lesion
whenever the wards whom they represent suffer
 with his own obligation, and the other is
not.
● Guilty party may not rescind → he
who comes to equity must come
with clean hands
(c) The right to rescind is not absolute
● Trivial causes or slight breaches
will not cause rescission
(d) Right to rescind is implied → presumed to
exist & need not expressly stated upon
(e) The right to rescind may be waived →
expressly or impliedly
A
Choice by the Injured Party
1) Fulfillment of specific performance plus
damages
2) Rescission plus damages
Conditions
(a) The right is alternative
(b) The right is not conjunctive → cannot ask
SI
for both remedies
● However, in some cases, in the
interest of justice → partial
fulfillment & partial rescission
may be allowed
(c) The injured party who has elected
fulfillment, may, if fulfillment be
impossible, still ask for rescission
(d) If an action is brought for specific
performance, the damages sought must be
asked in the same action → otherwise, the
damages are deemed waived
FORMS OF RESCISSION
(1) Judicial Sufficiency of Written Notice
(2) Extrajudicial
GR Written Notice to rescind the contract is
sufficient
Requisites for Rescission under 1381
XPN ARTICLE 1592. In the sale of immovable
(1) The action for rescission must originate
property, even though it may have been
from any of the causes specified in
stipulated that upon failure to pay the
Articles 1381 & 1382;
price at the time agreed upon the
(2) The party suffering damages & who is
rescission of the contract shall of right
asking for rescission has no other legal
take place, the vendee may pay, even after
means to obtain reparation for the
the expiration of the period, as long as no
damage suffered by him;
demand for rescission of the contract has
(3) The person demanding rescission must
been made upon him either judicially or
be able to return what he may be
by a notarial act. After the demand, the
obliged to restore if rescission is granted
court may not grant him a new term.
by the court;
(4) The things which are the object of the Sections 3 & 4 of the Maceda Law/ RA 6552
contract must not be legally in
possession of third persons who do not
act in bad fact; Mutual Restitution
(5) The action for rescission must be filed ● Restoration of Status Quo
within 4 years from accrual of the right ● Required to bring back the parties, as far
of action.
as practicable, to their original situation or
Needed
When there has
JUDICIAL APPROVAL
been delivery of
the object
Not Needed
When there has been no
delivery yet
When there has been GR
position prior to the inception of the
contract
● Creates the obligation to return the object
of the contract
● Can be carried out only when the one who
demands the rescission can return
whatever he may be obliged to restore
Mutual restitution → both parties must
delivery, but the contract give back to each other what they received
stipulates that either party
can rescind the same or take XPN When there is an express stipulation to
possession of the property the contrary by way of a forfeiture or
upon non-fulfillment of the penalty clause in recognition of the
other parties' autonomy to contract; or →

automatic rescission
If the buyer was given possession or was
able to use the property prior to transfer
of title, where in such case, partial
payments may be retained and
considered as rentals by the seller to
avoid unjust enrichment
Requisites before the Action for Rescission may be
Bought
A
(a) Plaintiff must be able to return what has
been received by virtue of rescissible
contract;
(b) The thing object of the contract is not in
the legal possession of 3rd persons in
good faith;
(c) The must be no other legal remedy;
(d) The action must be brought within the
proper prescriptive period
Q: What should be returned in rescinding a
contract?
A:
SI
(1) The object of contract, with its fruits, must
be returned
(2) The price, with its interest, must be
returned
Q: A bought a real property from B. A brought
action to rescind the contract on the ground of
non-delivery of the property. Does B have to give
also the fruit received in the meantime?
A: NO. The right takes place only when delivery of
the thing sold has been made.
(d) Contravention of the Tenor of the
If Both Parties Committed a Breach in Reciprocal Obligation
Obligations
DAMAGES
ARTICLE 1192. In case both parties have
committed a breach of the obligation, the liability ARTICLE 1170. Those who in the performance of
of the first infractor shall be equitably tempered their obligations are guilty of fraud, negligence,
by the courts. If it cannot be determined which of or delay, and those who in any manner
the parties first violated the contract, the same contravene the tenor thereof, are liable for
shall be deemed extinguished, and each shall damages.
bear his own damages.
Grounds for Liability
GR The liability of the 1st infractor shall be (a) Fraud → deceit or dolo → intentional evasion
equitably tempered by the courts of fulfillment
(b) Negligence → fault or culpa → Article 1173
XPN If cannot be determined who 1st violated (c) Default or delay/mora → if imputable to the
→ The obligations are deemed
debtor
extinguished and each shall bear their
own damages (d) Contravention of the tenor of the
obligation/ Violation of the terms of
obligation
BREACH OF OBLIGATIONS
● Unless excused in proper cases by
● There is breach when a person fails or
fortuitous event
refuses to perform his obligation without
legal justification
Causes Of Non-Performance
(1) Involuntary — causes which are
independent of the will of the parties →
fortuitous event & force majeure → Article
1174
Kinds of Damages → M-E-N-T-A-L
(a) MORAL → mental & physical anguish
(b) EXEMPLARY → corrective to set an example
(c) NOMINAL → to vindicate a right → when no
other kind of damages may be recovered
(d) TEMPERATE → when the exact amount of
damages cannot be determined
(2) Voluntary → those which arise from the
(e) ACTUAL → actual losses as well as
will of the parties → M-D-C-C → Article
unrealized profits
1170
(f) LIQUIDATED → predetermined beforehand
(a) Mora or Delay
— by agreement
(b) Dolo or Fraud
(c) Culpa or Negligence
FRAUD OR DOLO
● The deliberate & intentional evasion of the
normal fulfillment of obligations
○ It is distinguished from negligence
→ by the presence of deliberate
intent
● Implies some kind of dishonesty
○ Does not cover cases of errors &
mistakes of judgment done in good
faith
● Synonymous with → bad faith → involves a
○ Rationale → obligor knows that
even if he commits fraud → he is
free from liability
○ But, waiver for past action may be
→ valid → generosity, magnanimity
& forgiveness of victim
Dolo Causante & Dolo Incidente
DOLO CAUSANTE/ DOLO INCIDENTE/
CAUSAL FRAUD INCIDENTAL FRAUD
Refers to those Deceptions employed
performance of an obligation which is already
existing.
Q: What is dolo causante?
A: Dolo causante is more appropriately referred to as
→ deceit. You deceive the other party with
falsehoods into entering a contract with you. The
result of dolo causante is to render the contract
voidable because the commission of dolo causante
vitiates consent.

A
design to mislead or deceive another
insidious words or or misrepresentations Whenever we have vitiation of consent in a
machinations resorted which are not serious contract it result to → voidable contract which is
Kinds of Fraud
by 1 of the contracting in character & without
● Fraud may be employed either: valid until annulled.
parties to induce the which the other party
1) During the birth or perfection of other to enter into a would still have
contract → either dolo causante → contract without entered the contract Requisites of Annulment Based on Fraud → Dolo
Article 1338 them, he would not Causante
2) Only during the performance of an have agreed to
1) It must have been employed by one
already existing obligation → dolo contracting parties upon the other;
Serious in character Not serious in
incidente → Article 1170 & 1171 2) It must have induced the other party to
SI ● Which renders the debtor
liable for the payment of
damages

Liability for Fraud or Dolo

ARTICLE 1171. Responsibility arising from fraud

is demandable in all obligations. Any waiver of an
Renders the contract
voidable

Determines or is the
essential cause of the
consent
character

Only
damages
liable

Refers only to some

particular
or accident of the
obligation
for
enter into the contract;
3) It must have been serious; and
4) It must have resulted in damage & injury
to the party seeking annulment

NEGLIGENCE OR CULPA

ARTICLE 1172. Responsibility arising from

action is void.
● Refers to → incidental fraud/ dolo incidente
● Any waiver for future action → void →
against the law & public policy
Q: What type of fraud are we referring to when we
discuss the right to ask for damages?
A: Dolo incidente, which is fraud in the
performance of the obligation—or the fraud in the
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.
ARTICLE 1173. The fault or negligence of the
 When Culpa Becomes Dolo Validity of Waiver
obligor consists in the omission of that diligence
which is required by the nature of the obligation ● When negligence shoes bad faith → (1) An action for future negligence may be
and corresponds with the circumstances of the tantamount to fraud renounced, except when the nature of the
persons, of the time and of the place. When obligation requires → extraordinary
negligence shows bad faith, the provisions of [NOTE]: Any waiver of action for future negligence diligence
Articles 1171 and 2201, paragraph 2, shall apply. is void. ● As in the case of common carriers
which requires extraordinary
If the law or contract does not state the diligence
diligence → Article 1733
which is to be observed in the performance, that DOLO CULPA
which is expected of a good father of a family ARTICLE 1733. Common carriers, from the
shall be required. Voluntary act nature of their business and for reasons of public
● Any voluntary act or omission → there policy, are bound to observe extraordinary
There is a DELIBERATE Although voluntary still diligence in the vigilance over the goods and for

A
being no bad faith or malice → prevents intention to cause there is NO the safety of the passengers transported by them,
the fulfillment of the obligation damage or prejudice DELIBERATE intention according to all the circumstances of each case.
● Negligence is the omission of that to cause damage
diligence which is required by the nature Such extraordinary diligence in the vigilance over
Liability cannot be Liability may be
of the obligation & corresponds with the the goods is further expressed in Articles 1734,
mitigated or reduced reduced in certain
circumstances of the persons, time & of the 1735, and 1745, Nos. 5, 6, and 7, while the
by the courts cases
place extraordinary diligence for the safety of the
passengers is further set forth in Articles 1755
● Failure to observe for the protection of the Waiver of an action to Waiver of an action to
and 1756.
interests of another persons that degree of enforce liability due to enforce liability due to
future fraud is void future culpa may in a
SI
care, precaution & vigilance which
circumstance justly demand, by reason of
which such other person suffers injury

Test in Determining Existence of Negligence

● Did the defendant in the performance of the
alleged negligent act use reasonable care &
caution which an ordinary person would have
Clearly proved

GROSS NEGLIGENCE
certain
allowed

Presumed
sense

SIMPLE NEGLIGENCE
be

in
contractual obligations
(2) When negligence shows bad faith → VOID
→ as it is tantamount to fraud

Kinds of Culpa according to Source of Obligation

used in the same situation?
○ If not, then he is guilty of
negligence.
(a) culpa contractual/ contractual negligence
— or that which results in a breach of a
contract
(b) culpa aquiliana/ civil negligence — source
Can never be excused May in certain cases be
of obligation between 2 parties who do not
in advance for this excused or mitigated
would be contrary to have pre-existing agreement — also called
public policy tort or quasi-delict
(c) culpa criminal/ criminal negligence —
negligence that which results in the
commission of a crime or a delict
 CULPA CULPA CULPA CRIMINAL As long as it is Victim has to Accused is
CONTRACTUAL AQUILIANA proved that prove the presumed
there was a negligence of innocent until the MORA OR DELAY
Negligence is Negligence Negligence here contract, and the defendant contrary is proved ● There is delay when there is
merely here is direct, that it was not non-performance of the obligation with
incidental, is direct, substantive, and carried out, it is respect to time.
incident to the substantive, independent of a presumed that
performance of and contra the debtor is at ARTICLE 1169. Those obliged to deliver or to do
an obligation independent fault, and it is something incur in delay from the time the
already existing his duty to obligee judicially or extrajudicially demands
because of a prove that there from them the fulfillment of their obligation.
contract was no
negligence in However, the demand by the creditor shall not be

A
There is a No pre-existing obligation carrying out the necessary in order that delay may exist:
pre-existing terms of the
obligation → contract (1) When the obligation or the law expressly so
contract declare; or

Proof needed — preponderance Proof needed in Effect of Negligence on the Part of the Injured Party (2) When from the nature and the circumstances
of a crime — proof ● When injured party is also negligent → his of the obligation it appears that the designation of
evidence of guilt beyond act was the immediate & proximate cause the time when the thing is to be delivered or the
reasonable service is to be rendered was a controlling motive
→ he may not recover damages
doubt for the establishment of the contract; or
○ Except, if the negligence of the
Defense

supervision of
employees
not a proper
complete
SI
of
“good father of
a family” in the
selection &

is

defense in culpa
Liability can
be

Defense
reduced
according to
circumstance

of
“good father,
etc,”
proper
is a
&
Employee’s guilt
is
the
automatically
employer’s
civil guilt, if the
former
insolvent
is
injured party is

→ may recover damages, BUT the

court may mitigate liability

Kind of Diligence Required

merely
contributory → proximate cause is
still the defendant’s lack of due care

(1) That stipulated by the parties, orally or in

(3) When demand would be useless, as when the
obligor has rendered it beyond his power to
perform.

In reciprocal obligations, neither party incurs in

delay if the other does not comply or is not ready
to comply in a proper manner with what is
incumbent upon him. From the moment one of
the parties fulfills his obligation, delay by the
contractual complete writing → slight, extraordinary other begins.
defense (2) In the absence of stipulation → what is
insofar as required by law (e.g. for common carriers →
employers or Q: We have ordinary delay and legal delay. How
extraordinary diligence)
guardians are would ordinary delay be different from legal delay?
concerned (3) If both contract & law are silent →
diligence of a good father of a family
A: There is ordinary delay if the obligor does not
perform the obligation on time. There will be legal
delay if the oblige has made a demand to the obligor
to perform the obligation, but the latter does not
perform the obligation upon demand.
In legal delay, there will already be legal
consequences. When legal delay sets in, there will
be a change in the status of the debtor. With this
change of status, there will be legal consequences
affecting him.
When Demand is not Necessary
[NOTE]: Mora may only occur in obligations to give
GR
& obligations to do, but not in obligations not to do
→ debtor fulfills by not doing what is forbidden
XPN
Requisites of Mora Solvendi
(1) The the obligation be demandable &
already liquidated;
(2) The the debtor delay performance; and
(3) That the creditor requires performance
judicially or extrajudicially
(a) Once the creditor makes a
Demand must be made → whether
judicially or extrajudicially
When the obligation expressly so
declares; → when parties stipulate to
dispense with demand
When the law expressly so declares;
When from the nature & the
circumstances of obligation it appears
that the designation of time when the

A
demand, whether judicial or thing is to be delivered or the service is
ORDINARY DELAY LEGAL DELAY extrajudicially → the debtor to be rendered was a controlling motive
incurs delay for the establishment of the contract; or
If the obligor does not If obligee has made
perform the obligation demand to the obligor When demand would be useless, as
on time to perform the Q: Explain judicial and extrajudicial demand. when the obligor has rendered it beyond
obligation, but the his power to perform
latter does not A: Extrajudicial demand is done outside the court, [NOTE]: There is no mora or delay when there is no
perform upon demand in which the obligee will just give a demand to the demand → cause of action against the obligor does
defaulting party, whether oral or written. not commence to run until demand is made
SI
Kinds of Delay
(1) Mora Solvendi — Debtor’s fault → imputable
to the debtor
● May be because of dolo or culpa
● Delay must be either malicious or
negligence, otherwise → cannot be
held liable for damages
(2) Mora Accipiendi — Creditor’s fault → delay
In judicial demand, it is done by the filing of an
action in court to compel performance.

Requisites of Mora Accipiendi

(1) An offer or performance by the debtor

who has the required capacity;
(2) The offer must be to comply with the
[NOTE]: Fixing of a period is noth enough. The
arrival of the period → merely makes the obligation
demandable

Mere Expiration of Period is Not Delay

on the part of obligee in accepting the
performance of the obligation by the
obligor
(3) Compensation Morae — default on the part
of both parties → neither has completed
their part in the reciprocal obligation
● It is not enough that the law or the
obligation fixes a period for the
prestation as it should be performed; performance of the latter → if upon
and
expiration thereof that delay shall
(3) The creditor refuses performance
without just cause commence
Effects of Mora Solvendi
● Debtor → guilty of breach of obligation
 ● Debtor becomes liable for damage
● If the obligations consists in the sum of
money & the debtor incurs delay, the
indemnity for damages there being no
stipulation to the contrary → shall be the
payment of the interest agreed upon
○ In the absence of stipulation → legal
interest which is 6% per annum
■ Whether constituting a loan
or forbearance of money or
not
A
● Liable even loss is due to fortuitous event
→ if determinate/ specific thing
Effect of Mora Accipiencdi
● Creditor → Guilty of breach of obligations
● Liable for damages suffered by debtor, if
any
● Bears the risk of loss of the thing due →
Article 1262
● When obligation involves paing a sum of
SI
money → debtor is not liable for interests
● Debtor may release himself from the
obligation by consignation
Delay in Reciprocal Obligations
GR Reciprocal obligations are
performed simultaneously
to be
XPN When different dates for the performance
are fixed
● Reciprocal obligations are to be performed
simultaneously
● Performance of one is conditioned upon the
fulfillment of the other → mutual inaction →
gives rise to compensation morae
● From the moment one of the parties
fulfilled his obligation → the other incurs
delay
[NOTE]: Demand is still necessary for reciprocal
obligations before the obligor can be considered in
default & before a cause of action for rescission will
accrue
CONTRAVENTION OF THE TENOR OF THE
OBLIGATION
● Violation of terms & conditions of the
obligation
● Means any illicit act, which impairs the
strict and faithful fulfillment of the
obligation, or every kind of defective
performance.
BARRING EFFECT OF CHOOSING ONE REMEDY
GR
XPN
Only one remedy can be exercised
Failure of obligations under Article
1170 (Damages) & Art. 1191 (Rescission
of Contract) does not preclude the use
of other remedies and may therefore
avail other remedies
EXTRAORDINARY REMEDIES
(1) Levy by Attachment & Execution
(2) Accion Subrogatoria
(3) Accion Pauliana
Concept
● The law protects the creditors
● The nature of a civil obligation is that it is
demandable & enforceable in a court of
law
● Since an obligor is either bound by the
prestation to give or to do, the creditor is
given by law all possible remedies to
enforce such obligations
○ Hence, the creditor, after
exhausting all means to satisfy his
claim, is given the opportunity to
bring all actions which the obligor
can institute against his own
debtors to protect and satisfy his
claims against the said obligor
Levy by Attachment & Execution
ARTICLE 2236. The debtor is liable with all his
property, present and future, for the fulfillment
of his obligations, subject to the exemptions
provided by law.
● Exhaust the properties of the debtor
through levying by attachment and
execution upon all the property of the
debtor, except such as are exempt by law
from execution
○ EXEMPT → family home under
Article 155
EXAMPLE: B can ask for the attachment on A’s car
so that the car may be sold & payment made from
the proceeds of the sale.
Accion Suborgatoria
ARTICLE 1177. The creditors, after having
pursued the property in the 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.
● Exercise all the rights and actions of the
debtor & save those personal to him
● An action where the creditor whose claims
A
had not been fully satisfied, may go after
the debtors of the defendant debtor → 3rd
persons → who owes debtor
● Creditor would be exercising rights that
belong to the debtor → action to collect
payment
○ Limitations would be creditor
cannot exercise rights which are
purely personal to the debtor
SI
○ e.g. revoking donations on the ground
of ingratitude
EXAMPLE: A owes S money. M owes A money. S
may collect payment from M who is indebted to A.
Accion Pauliana
ARTICLE 1381. The following contracts are
rescissible:
(1) Those which are entered into by guardians
whenever the wards whom they represent suffer
lesion by more than one-fourth of the value of the
things which are the object thereof;
(2) Those agreed upon in representation of
absentees, if the latter suffer the lesion stated in
the preceding number;
(3) Those undertaken in fraud of creditors when
the latter cannot in any other manner collect
the claims due them;
(4) Those which refer to things under litigation if
they have been entered into by the defendant
without the knowledge and approval of the
litigants or of competent judicial authority;
(5) All other contracts specially declared by law to
be subject to rescission.
ARTICLE 1383. The action for rescission is
subsidiary; it cannot be instituted except when
the party suffering damage has no other legal
means to obtain reparation for the same.
● Remedy of last resort → when there is no
other legal means for the creditor → seek
●
●
rescission of contracts
Article 1381 (3) → those undertaken in
fraud of creditors
Premised on the non-availability of other
legal remedies → made as against the
contracts that was entered into by the
debtor in fraud of the creditors
● Since an accion pauliana is a subsidiary
remedy, it is necessary that the following
successive measures must be taken by a
creditor before he may bring an action for
rescission of an allegedly fraudulent
contract
Requisites for Accion Pauliana
(1) The plaintiff asking for rescission has a
credit prior to the alienation, although
demandable later;
(2) The debtor has made a subsequent
contract conveying a patrimonial
benefit or to a third person;
(3) The creditor has no other legal remedy
to satisfy his claim;
(4) The act being impugned is fraudulent;
(5) The 3rd person who received the
property conveyed, if it is by onerous
title, has been an accomplice in the
fraud; and
(6) The conveyance must not be absolutely
simulated
[NOTE]: Basically you have to show that → you are a
judgment creditor; that you have an unsatisfied writ
of execution; that accion subrogatoria is no longer
available.
Accion Pauliana Presupposes The Following
(1) A judgment;
(2) The issuance by the trial court of a writ
of execution for the satisfaction of the
judgment; and
(3) The failure of the sheriff to enforce and
satisfy the judgment of the court
[NOTE]: All remedies are successive. For example,
one can only resort to accion pauliana when they
have resorted to accion subrogatoria & levy by
attachment and execution.
Q: Are you saying that at the time the contract with
this 3rd person was entered into, there must already
be a judgment against the debtor?
A: NO. We only require that the credit precedes the
contract with the 3rd person.
The judgment affirming the existence of the credit
making the creditor a judgment-creditor may come
after or subsequent to the contract with a 3rd
person, because after all, the effect of the judgment
will retroact to the time of the constitution of the
of creditors when the debtor’s transaction was
entered into after a judgment and a writ of
execution has been issued and remained
unsatisfied.
In case the transaction is gratuitous, the
presumption that the transaction was entered into
in fraud of creditors when the debtor did not
reserve sufficient properties to pay for his debts
contracted prior to the gratuitous transaction.
Prescription For Accion Pauliana
Q: With regard to the intention to defraud the
creditor, there is no doubt that it is present on the
part of the debtor when we speak of accion
pauliana. But the next logical question is “What
about the third party?” Do we require it for him to
be in connivance with the debtor?
A: NO. It depends on the type of transaction.
For onerous transactions – if the third person is in
good faith, accion pauliana does not lie.

A
credit in favor of the plaintiff. What we need to
establish is that the credit must be existing at the
time that the contract was entered into by the
debtor with the 3rd person.
Q: Why do we need the credit to precede the contract
with the third person?
● 4 years
● Since this provision of law is silent as to
when the prescriptive period would
commence, the general rule, i.e. from the
moment the cause of action accrues, therefore,
applies.
Defense of Good Faith on the Part of Third Party
For gratuitous transactions – accion pauliana lies
regardless of the good faith or bad faith of the third
person.
[NOTE]: To be clear, good faith would only be a
defense if the transaction with the third person
happens to be onerous in character.

ONEROUS GRATUITOUS
A: It is the only possible way by which we can say Q: If the transaction is gratuitous, we do not even
SI
that the contract was entered into with the
intention to defraud, because, if there is no credit,
how can you have the intention to defraud?

Q: We have been using the phrase “intention to

defraud.” Intention to defraud is a state of mind.
How do we prove that such an intention exists?
With

Exchange

Good
material
Material
Consideration

faith is
Through liberality

No
Consideration
Material

Did not give anything up

Good faith immaterial

care about the good faith or bad faith of the third
person. His good faith will not save him. Why?

A: Good faith will not save the 3rd person in a

gratuitous transaction because in such a
transaction, there is no consideration given by the
donee.

A: It can be proved depending on the nature of the However, in an onerous transaction, there is
Each party expects to Contract of pure
transaction. Under the law, there is the give and receive a beneficence is → one consideration given by the 3rd person. The
presumption of the intention to defraud: benefit or where one of the parties buyer/3rd person will now stand on the same
consideration intends to benefit the footing as the judgment creditor.
In case the transaction is onerous in character, it other without expecting
would be presumed that the transaction is in fraud anything in return
FORTUITOUS EVENT OR CASO FORTUITO
● An event which could not be foreseen, or
which though foreseen, is inevitable
● Extraordinary events not foreseeable or
avoidable
[NOTE]: It is not enough that the event should not
have been foreseen or anticipated → it must be
impossible to foresee or avoid → the mere
difficulty to foresee the happening is not
impossibility to foresee the same
A
Acts Of God & Force Majure
● A fortuitous event may either be
(1) An act of God/ Natural
Occurrences → floods, typhoons,
earthquake → independent of the
will of obligor, but not of other
human wills
(2) Act of Man → riots, war, strikes →
totally independent of other human
SI wills
Kinds of Fotuitous Events
(1) Ordinary Fortuitous → common & could
reasonably foresee → rain
(2) Extraordinary Fotuitous → uncommon →
parties cannot reasonably foresee
Act Of God Doctrine
● The act must be one occasioned exclusively
by the violence of nature & all human
agencies are to be excluded from creating
or entering into the cause of the mischief.
○ When the effect, the cause of which
is to be considered, is found to be
in part the result of the
participation of man, whether it be
from active intervention or neglect,
or failure to act, the whole
occurrence is thereby humanized,
as it were, and removed from the
rules applicable to the acts of God.
ARTICLE 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.
ARTICLE 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.
GR No one should be held to account for
fortuitous cases, which are those
situations that could not be foreseen, or
which though foreseen, were inevitable.
Requisites to Exempt Obligor from Liability
XPN If upon the happening of a fortuitous
event or an act of God, there concurs a
corresponding fraud, negligence,
delay or violation or contravention in
any manner of the tenor of the
obligation as provided for in Article
1170 of the Civil Code, which results in
damage, the obligor cannot escape
liability.
XPN When the law expressly so specifies;
TO
XPN When it is otherwise declared by the
parties;
When the nature of the obligation
requires the assumption of risks;
If the debtor has promised to deliver the
same thing to 2 or more persons who do
not have the same interest
Possessor in bad faith
Debtor contributed to the loss of thing;
The obligor is guilty of fraud,
negligence ot delay, or if he contrances
the tenor of the obligation; and
If the obligation arises from a criminal
offense and the loss of the thing due to
fortuitous event takes place, the
obligation will not be extinguished
unless the loss occurs after the obligor
has offered to deliver the thing to the
obligee and the latter refused without
any justifiable reason
(1) The cause of the breach of the obligation
must be independent of the will of the
debtor;
(2) The event must either be unforeseeable
or unavoidable;
(3) The event must be such as to render it

impossible for the debtor to fulfill his
obligation in a normal manner; and
(4) The debtor must be free from any
participation in, or aggravation of, the
injury to the creditor
KINDS OF OBLIGATION
Q: Give us the different kinds of obligations.
A:
1) Pure and conditional obligations;
his money is insufficient. It will not be reasonable
condition shall also be demandable, without
prejudice to the effects of the happening of the for you to immediately demand payment soon
event. after giving him the money. It defeats the purpose
of the constitution of the obligation.
● A pure obligation is one which is not
subject to a condition or not subject to a
What would be a reasonable time here? At least give
period
him time to go back to the classroom, get his things
● The hallmark of a pure obligation is it is
and his wallet to be able to pay you. That is what we
demandable at once
say "demandable at once."
○ Even though we say it is
demandable at once of course we
[NOTE]: Other obligations which are demandable at
take this to mean that you may
once: (a) obligations with a resolutory condition;

A
2) Joint and solidary obligations; demand at a reasonable time and
3) Positive and negative obligations; and (b) obligations with a resolutory term/ period
what is reasonable depend upon
4) Alternative obligations; the circumstances
5) Obligations with a penal clause; and Conditional Obligation

Q: What is the characteristic of a pure obligation? ARTICLE 1181. In conditional obligations, the
PURE AND CONDITIONAL OBLIGATIONS A: It is demandable at once. acquisition of rights, as well as the
extinguishment or loss of those already acquired,
PURE CONDITIONAL
shall depend upon the happening of the event
Q: When you say it is demandable at once, what do
which constitutes the condition.
Not subject to any Consequences are you mean by that?
condition subject in one way/ ● It is an obligation subject to a condition

Immediately
demandable
SI
No date specified for its
fulfillment

Pure Obligations
due &
another
fulfillment
condition
to
of
the
a
A: Not subject to any condition or term and must be
performed by the obligor within a reasonable
period of time.

Meaning Of Demandable At Once

● When we say demandable at once, what we
mean is that it may be demanded within a
●

ARTICLE 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
●
A condition is a future AND uncertain
event.
○ It is not a future or uncertain event.
○ It is BOTH in the future and it is
uncertain
But the law also speaks of a past event
unknown to the parties as may be
reasonable period of time constituting a condition
● The debtor must first be allowed to enjoy
what has been delivered to him Characteristics of a Condition
1) Future & uncertain
EXAMPLE: If a classmate borrows money from you 2) Past but unknown
to pay for his food because he forgot his money or 3) Must not be impossible
Q: What is a Condition?
A: Condition is a future AND uncertain event or a
past event unknown to the parties. It must happen
in the future and must not be certain to happen. It
may or may not happen.
If the uncertainty lies in the time when it will
happen but there is no doubt that it will happen,
what we have is a period.
EXAMPLE: When we speak of death, death is
certain to happen to everyone, no exceptions. So
A
death will constitute → a period because here the
uncertainty with death lies on when it will happen.
But, death in the context of who will die first or
who will die last, it now becomes → a condition
because the focus is no longer as to whether or not
the person will die but whether or not this person
will die ahead of or after another person, it now
becomes a condition.
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PERIOD
Death in the context
that everyone will die →
it is future & certain
CONDITION
Death in the context on
who will die first →
future & uncertain
Q: Explain how a past event can be a condition when
we said that the characteristics of a condition are
that it is in the future and it is uncertain. Explain
how a past event unknown to the parties may
constitute a condition even if it is in the past and
therefore no longer uncertain.
A: It may happen that although an event happened
in the past, there would still be an aspect of it that
will be uncertain or unknown even today. When
such a factor becomes known today, then that will
be the time when the condition is fulfilled.
In other words, the uncertainty here exists in the
mind of the parties. Although the event may have
already happened in the past, the outcome of the
event may not yet be known to them.
EXAMPLE: I will give Mr. Nelli 5k if it turns out that
his grade in Civil Law is higher than my grade in
civil law during my bar examination. What are we
referring to here? It is a past event that has taken
place because we had already taken the bar. The
uncertainty here lies in our acquisition of the
confirmation of whether or not he got a higher
grade than I did in civil law and that would be valid
as a condition.
[NOTE]: The condition must be imposed by the will
of the parties. It must not be a necessary legal
requisite of an act, for instance, we speak of
donation propter nuptias, the law requires that it
must take place before the marriage and in
consideration of an impending marriage. We
cannot read that event of impending marriage as a
condition because that is no longer imposed by law
and that is no longer imposed by the will of the
parties rather it is a requisite of the law for a valid
donation propter nuptias.
POTESTATIVE
ARTICLE 1182. When the fulfillment of the
condition depends upon the sole will of the
debtor, the conditional obligation shall be void. If
it depends upon chance or upon the will of a
third person, the obligation shall take effect in
conformity with the provisions of this code.
● A condition dependent on the will of the
debtor
Effect of Potestative Condition
A. Which is also Suspensive → happening of which
gives rise to the obligation → “if”
● An obligation subject to a suspensive
condition, the fulfillment of which is
dependent upon the sole will of the
debtor, is non demandable, and hence,
illusory.
● Such a condition renders the obligation
dependent upon it void.
○ However, where the fulfillment of
the condition which is dependent
upon the sole will of the debtor
relates to the fulfillment of an
already existing obligation and not
to its inception, it is only such
condition that is avoided as being
contrary to law and public policy,
leaving unaffected the obligation
itself → only the condition is void
EXAMPLE: I will pay you if I want; I will pay you if B
pays me
B. Which is also resolutory → happening of which
extinguishes the obligation → “until”
● Article 1182 is applicable only when the
condition is suspensive and not when the
condition is resolutory → void
● A condition that is both potestative and
resolutory is → valid, even though the
condition is made to depend upon the sole
will of the debtor.
EAMPLE: I will pay for your needs until you
graduate from High School.
A
Potestative on the part of creditor
● When the fulfillment of the condition
depends solely upon the will of the creditor
the obligation does not become illusory,
inasmuch as the creditor is interested in
its fulfillment and will fulfill the same.
EXAMPLE: The condition imposed by the
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corporation that the policy must have been
delivered to and accepted by the applicant while he
is in good health can hardly be considered as a
potestative or facultative condition.
On the contrary, the health of the applicant at the
time of the delivery of the policy is beyond the
control or will of the insurance company. Rather,
the condition is a suspensive one whereby the
acquisition of rights depends upon the happening
of an event which constitutes the condition.
In this case, the suspensive condition was the policy
must have been delivered and accepted by the
applicant while he is in good health. There was non
fulfillment of the condition, however, inasmuch as
the applicant was already dead at the time the
policy was issued. Hence, the non-fulfilment of the
condition resulted in the non perfection of the
contract.
CASUAL
● Fulfillment depends exclusively upon
chance or other factors (including the will of
third persons), and not upon the will of the
parties to the juridical relation → valid
EXAMPLE: Where S binds himself to sell his land to
S if he wins a case which is pending before the
Supreme Court.
Effects of Casual Conditions
● A casual condition is one the fulfillment of
which depends upon chance or other
factors, and not on the will of the
MIXED
contracting parties.
● Obligations which are made to depend on
casual conditions are valid.
● Fulfillment depends partly upon chance or
partly will of third persons → valid
EXAMPLE: Where X, building contractor, obliges
himself in favor of Y, owner, to repair at X’s
expense, any damage to the building taking place
after an earthquake if found by a panel of
arbitrators that construction defects contributed in
any way to the damage. Both conditions must take
place in order that X’s obligation will arise.
Third persons → panel; Chance → earthquake
Effect of Mixed Condition
● A mixed condition is one where the
fulfillment of which depends partly upon
the will of the contracting parties and partly
upon other circumstances, including the
will of a third person or chance.
● Obligations which are made to depend on
mixed conditions are valid.
● In such cases of mixed conditions, as to the
part that depends on the will of the debtor,
the provisions of Article 1186 will be
applicable.
○ Said article provides that the
condition shall be deemed fulfilled
when the obligor voluntarily
prevents its fulfillment
POSSIBLE OR IMPOSSIBLE
POSSIBLE
ARTICLE 1306. The contracting parties may
establish such stipulations, clauses, terms and
conditions as they may deem convenient,
provided they are not contrary to law, morals,
good customs, public order, or public policy.
● Fulfillment is possible.
IMPOSSIBLE
● The fulfillment is impossible, either
physically or legally → void
ARTICLE 1183. Impossible conditions, those
contrary to good customs or public policy and
those prohibited by law shall annul the obligation

which depends upon them. If the obligation is
divisible, that part thereof which is not affected
by the impossible or unlawful condition shall be
valid.
The condition not to do an impossible thing shall
be considered as not having been agreed upon.
When considered impossible
● The impossibility of a condition may either
be physical or legal.
○ Hence, conditions which are
A. If Attached To A Simple/ Remuneratory Donation
● The condition is considered as not imposed
and will simply be disregarded.
○ Hence, the impossible condition
shall not affect the validity of a
simple remuneratory donation.
B. If Attached To A Testamentary Disposition
● The impossible condition is considered as
not imposed and will simply be
disregarded.
written because the condition → is useless
→ it is as if there was no condition
● As a consequence, the obligation should be
regarded as → pure & valid
POSITIVE & NEGATIVE
POSITIVE
● Condition refers to an act
ARTICLE 1184. The condition that some event
happen at a determinate time shall extinguish
the obligation as soon as the time expires or if it

A
has become indubitable that the event will not
contrary to nature, as well as those ○ Hence, the impossible condition take place.
contrary to good customs or shall not affect the validity of the ● A positive condition that a certain event will
public policy and those prohibited testamentary disposition and shall happen within a specific period has the
by law are considered as in no manner prejudice the heir, effect of extinguishing the obligation
impossible conditions. even if the testator should dependent upon such condition from the
otherwise provide. moment:
Two Kinds of Impossible Conditions (1) Said period lapses without the
PHYSICAL LEGAL IMPOSSIBILITY C. If Attached To An Obligation Arising From condition having been fulfilled; or
IMPOSSIBILITY Contracts (2) When it becomes certain that the
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Contrary to nature

By nature of things →
cannot exist/ happen

e.g. I will pay you if it

will not rain for 1 year
in the PH
Contrary to good customs.
Public policy & those
prohibited by law

e.g. I will give you 20M if you

kill S; I will give you 20M if
you cheat on your GF
● The impossible conditions shall render
the obligation which depends upon them
void.
○ But if the obligation is divisible,
that part thereof which is not
affected by the impossible or
unlawful condition shall be valid.
event will not take place, even
before said period expires.

The Obligation is Extinguished

Effects Of Impossible Conditions
● Both obligation & condition are void
RATIONALE: Obligor knows that the obligation
cannot be fulfilled
D. Condition Not To Do An Impossible Thing
● The condition not to do an impossible thing
is considered as not agreed upon or not
(1) As soon as the time expires without the
event taking place; or
(2) As soon as it has become indubitable that
the event will not take place although the
time specified has not yet expired.
EXAMPLE: If X says: I will give Y P500,000 if he gets
married to W before reaching the age of 25 years. This
obligation will cease to exist from the moment Y
reaches the age of 25 years and is still a bachelor or,
even prior to the expiration of the said period, if
either Y or W dies before Y reached that age.
NEGATIVE
● Condition refers to an omission
ARTICLE 1185. The condition that some event
will not happen at a determinate time shall
render the obligation effective from the moment
the time indicated has elapsed, or if it has
become evident that the event cannot occur.
If no time has been fixed, the condition shall be
● However, if the object is not physically
DIVISIBLE divisible or the service is not susceptible
● If by its nature, by agreement or under the of partial performance [Article 1225(1)] →
law, it can be performed in parts. the obligation is always indivisible, the
○ Hence, the condition is susceptible intention of the parties to the contrary
of partial performance notwithstanding. This rule is absolute.
INDIVISIBLE ● An obligation is presumed indivisible
● If by its nature, by agreement or under the where there is only 1 creditor & only 1
law, it CANNOT be performed in parts. debtor (Article 1248).
○ Hence, the condition is not
susceptible of partial [NOTE]: object divisible → may still be an indivisble
obligation if so provided by law; an indivsble object

A
performance.
deemed fulfilled at such time as may have
→ will always be an indivisible obligation
probably been contemplated, bearing in mind
the nature of the obligation. DIVISIBLE INDIVISIBLE
● A negative condition that some event will ARTICLE 1225. For the purposes of the preceding
A divisible obligation is An indivisible obligation articles, obligations to give definite things and
not happen at a determinate time has the
one the object of which, is one the object of those which are not susceptible of partial
effect of rendering the obligation effective in its delivery or which, in its delivery or performance shall be deemed to be indivisible.
from the moment: performance, is capable performance, is not
(1) The period indicated has elapsed; of partial fulfillment. capable of partial When the obligation has for its object the
or fulfillment. execution of a certain number of days of work,
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(2) If it has become evident that the
event cannot occur.
EXAMPLE: If X says: I will give A P500,000 if Y will
not marry M within 2 years from now. This obligation
will become effective if, after 2 years, Y has not
married M yet or, even if the 2 year period has not
yet expired, if Y marries another or M dies.
Test For Distinction
● In determining whether an obligation is
divisible or not, the controlling
circumstance is not the possibility or
impossibility of partial prestation but the
purpose of the obligation or the intention
of the parties.
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.
DIVISIBLE & INDIVISIBLE ○ Hence, even though the object or
ARTICLE 1223. The divisibility or indivisibility of service may be physically
ARTICLE 1248. Unless there is an express
the things that are the object of obligations in divisible, an obligation is stipulation to that effect, the creditor cannot be
which there is only one debtor and only one indivisible if so provided by law or compelled partially to receive the prestations in
creditor does not alter or modify the provisions intended by the parties [Article which the obligation consists. Neither may the
of Chapter 2 of this Title. 1225(3)]. 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.
Applicability Of Article 1223
● While Article 1223 appears to be limited to
real obligations because it speaks of things,
the word is used in its broad sense as
A
referring to the object or prestation of the
obligation, which may be to deliver a thing
or to render some service.
● The divisibility of an obligation should
not, therefore, be confused with the
divisibility of the thing which is the object
thereof.
Kinds of Division
QUALITATIVE One based on quality, not on
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QUANTITATIVE
number or quantity of the
things that are the object of
the obligation.
One based on quantity rather
than on quality.
IDEAL/ One which exists only in the
INTELLECTUAL minds of the parties.
Kinds Of Indivisibility
LEGAL Where a specific provision of
law declares as indivisible,
obligations which, by their
nature, are divisible (Article
1225, paragraph 3).
CONVENTIONAL Where the will of the parties
is indivisible, obligations
which, by their nature, are
divisible.
NATURAL Where the nature of the
object or prestation does not
admit of division, e.g., to give a
particular car, to sing a song,
etc.
When There Is Only One Creditor & One Debtor
ARTICLE 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.
● Divisibility or indivisibility refers to the
object or prestation.
○ When there is only one creditor and
one debtor, the latter has to
perform the obligation in its
totality, whether or not the
prestation is divisible. Unless there
is an express stipulation to that
effect.
● The creditor cannot be compelled
partially to receive the prestations in
which the obligation consists; and
○ In accordance with Article 1232, an
obligation is not deemed paid
unless the thing or service in
which the obligation consists has
been completely delivered or
rendered.
Effect Of Non Compliance By A Debtor In A Joint
Indivisible Obligation
1. Obligation transformed into one for
damages
● 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.
● The creditor cannot ask for
2.
specific performance or rescission
because there is no cause of action
against the other debtors who are
willing to fulfill their promises.
Contribution of innocent debtors
limited to their respective shares.
● In a solidary obligation, the breach
by co-debtor makes all debtors
liable for damages.
● The obligation remains solidary
without prejudice to their right
against the guilty or negligent
debtor.
 ● In a joint indivisible obligation, the be delivered in toto, not ● Here, the obligation should be
effect of non-compliance by a partially. fulfilled continuously during a
debtor is to make all the debtors certain period.
liable for damages but the e.g. Obligation to give D P100k (2) Divisible Obligation — If the obligation of
innocent debtors shall not OBLIGATIONS → although money is divisible Xavier is not to sell cigarettes in his stores
contribute beyond their respective INTENDED BY THE → if intended by the parties only during Sundays and holidays
PARTIES TO BE that payment must be done in
shares of the obligation. ● Here, the obligation is divisible
full → indivisible
○ The obligation becomes a INDIVISIBLE EVEN because the forbearance is not
divisible one. IF THING OR continuous.
SERVICE IS
Obligations Deemed Indivisible PHYSICALLY [NOTE]: Obligations to do and not to do are
DIVISIBLE generally indivisible. Obligations “to do” stated in

A
OBLIGATIONS TO The obligation is indivisible paragraph 2 of Article 1225 are divisible.
GIVE DEFINITE because of the nature of the
THINGS subject matter Obligations Deemed Divisible CONJUNCTIVE & DISJUNCTIVE
1. Obligations which have for their object
e.g. To deliver a specific car the execution of a certain number of CONJUNCTIVE
days of work ● Requires the fulfillment of ALL conditions
2. Obligations which have for their object ○ There are several conditions & all
OBLIGATIONS The obligation is indivisible
the accomplishment of work by must be fulfilled
WHICH ARE NOT by reason of its purpose
metrical units
SUSCEPTIBLE OF which requires the
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PARTIAL
PERFORMANCE

OBLIGATIONS
PROVIDED BY LAW
TO BE INDIVISIBLE
performance of all the parts

Ex: to sing a song

e.g. Under the law, taxes

should be paid within a
definite period.
3. Obligations which by their nature are
susceptible of partial performance

Divisibility Or Divisibility In Obligations Not To Do

● In negative obligations not to do, the
character of the prestation in each
particular case shall determine their
divisibility or indivisibility.
DISJUNCTIVE
● Requires the fulfillment of ONE condition
○ There are several conditions and
only one or some of them must be
fulfilled

EXPRESS OR IMPLIED

EVEN IF THING OR EXPRESS

SERVICE IS Although money is EXAMPLES: ● The condition is stated.
PHYSICALLY physically divisible, the (1) Indivisible Obligation — Xavier obliged
DIVISIBLE amount of tax payable must himself to Yuno not to sell cigarettes in his IMPLIED
store for 1 year. ● The condition is merely inferred.

TWO PRINCIPAL KINDS OF CONDITION
● These classifications are not mutually
exclusive, we can combine these
classifications in the same condition.
● The condition can be both suspensive and
at the same time mixed or casual.
○ Each classification when combined
with the others will have their
respective consequences.
SUSPENSIVE CONDITION
A
● Condition precedent or condition
antecedent
● The happening of which → gives rise to an
obligation
● A suspensive condition attaches to an
obligation & determines whether that
obligation will come into existence.
● The obligation and demandability will
only arise upon the happening of the
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future condition.
[NOTE]: This is the difference between a condition
and a period. In a condition, it is not only the
demandability of the obligation which is affected,
but also its very existence. It goes without saying
that if the obligation is inexistent then it cannot be
demanded. In a way, if you are to analyze it, the
scope of a condition is broader since the
demandability is also affected simply because you
do not have an obligation in existence yet for one of
fulfillment of a suspensive condition.
In a period, you already have an existing
obligation, but only the demandability of the
obligation is affected by the suspensive period.
Doctrine Constructive Fulfillment Of Suspensive
Condition
ARTICLE 1186. The condition shall be deemed
fulfilled when the obligor voluntarily prevents its
fulfillment.
3 Requisites for application
(1) The condition is suspensive;
(2) The obligor actually prevents the
fulfillment of condition;
(3) He acts voluntarily
[NOTE]: Thaw law does not require that obligor
acts with malice or fraud → as long as the purpose
of to prevent the fulfillment of the condition
[NOTE]: In suspensive conditions, we ought to
divide the period of the condition into 2:
(a) before it happens; and
(b) upon its fulfillment
During the Pendency of Obligation
A. Debtor has No Obligation Yet
● There is no obligation to speak of yet
● Obligation does not arise yet → hence
cannot be demanded
● Debtor → may recover what during the
same time has been paid by mistake
B. Creditor No Right Yet
● Does not acquire a right until the
happening of an event which constitutes
the condition
● Has an expectancy based upon the
occurrence of the condition & one of which
he has the right to protect by taking
appropriate actions.
ARTICLE 1188. The creditor may, before the
fulfillment of the condition, bring the
appropriate actions for the preservation of his
right.
The debtor may recover what during the same
time he has paid by mistake in case of a
suspensive condition.
Q: What will be the rights and obligations of the
parties in obligations subject to a suspensive
condition prior to the fulfillment of the condition?
A: When the obligation is subject to a suspensive
condition, prior to the fulfillment of the suspensive
condition, there is no obligation to speak of yet.
[NOTE]: Is there a potential obligation? Yes. The
situation is different when the parties have not even
interacted. In the past, since they have not yet even
interacted, they have not even thought of
constituting an obligation, then absolutely, there is
no obligation to speak of. There is even no potential
for the obligation to exist between them.
However, if what we have is an obligation subject to
a suspensive condition, at the very least, there is a
potential for that obligation to exist. Even though
we say that until the condition is fulfilled, the
creditor cannot make a demand upon the debtor
and the debtor cannot be compelled to perform the
obligation, the law nonetheless provides for a right
in favor of the creditor to preserve whatever rights
he may have on account of the obligation that is
yet to come into existence, that is subject to a
suspensive condition. What is our basis? Article
1188.
A
IMPROVEMENT, LOSS, AND DETERIORATION
● It is also possible that pending the
fulfillment of the condition, the thing due
(in an obligation to give) may suffer loss,
deterioration, and improvement.
Rules that Must be Followed
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ARTICLE 1189. When the conditions have been
imposed with the intention of suspending the
efficacy of an obligation to give, the following
rules shall be observed in case of the
improvement, loss or deterioration of the thing
during the pendency of the condition:
(1) If the thing is lost without the fault of the
debtor, the obligation shall be
extinguished;
(2) If the thing is lost through the fault of the
debtor, he shall be obliged to pay
damages; it is understood that the thing
is lost when it perishes, or goes out of
commerce, or disappears in such a way
(3) Civil loss – When a thing disappears in such
that its existence is unknown or it cannot
a way the its existence cannot be
be recovered;
ascertained → it may or may not exist/ may
(3) When the thing deteriorates without the
or may not be retrieved
fault of the debtor, the impairment is to
be borne by the creditor;
(4) If it deteriorates through the fault of the GR If the lost is without the fault of debtor →
extinguished
debtor, the creditor may choose between
the rescission of the obligation and its
XPN Unless there is a stipulation
fulfillment, with indemnity for damages
in either case;
LOSS
(5) If the thing is improved by its nature, or
by time, the improvement shall inure to (1) If the thing is lost without the fault of the
the benefit of the creditor; debtor, the obligation shall be
extinguished;
(6) If it is improved at the expense of the
(2) If the thing is lost through the fault of the
debtor, he shall have no other right than
debtor, he shall be obliged to pay damages.
that granted to the usufructuary.
DETERIORATION
[NOTE]: If the debtor is at fault, the option is always
(3) When the thing deteriorates without the
given to the creditor, plus damages. If, on the other
fault of the debtor, the impairment is to be
hand, the debtor is not at fault, then it results in the
borne by the creditor;
extinguishment of the obligation.
Concept of Loss
(1) When a thing perishes
(2) Goes out of commerce
(3) Disappears in such a way its existence is
unknown or cannot be recovered
(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;
IMPROVEMENT
(5) If the thing is improved by its nature, or by
Kinds of Loss
time, the improvement shall inure to the
(1) Physical loss — Persishes → lost through fire
benefit of the creditor;
(2) Legal loss — When a thing goes out of
(6) If it is improved at the expense of the
commerce → when a thing is expropriated
debtor, he shall have no other right than
or forbidden/ became illegal
that granted to the usufructuary.
[NOTE]: If there is such a reference made in the law,
you go to that referred provision. Do not just stop
with the rights of the usufructuary.
ARTICLE 579. The usufructuary may make on the
property held in usufruct such useful
improvements or expenses for mere pleasure as
he may deem proper, provided he does not alter
its form or substance; but he shall have no right
to be indemnified therefor. He may, however,
remove such improvements, should it be possible
A
to do so without damage to the property.
ARTICLE 580. The usufructuary may set off the
improvements he may have made on the
property against any damage to the same.
[NOTE]: If you look at Articles 579 & 580, the
usufructuary’s right will be limited to limited right
of removal for useful improvements and the right
SI
to set off the improvements against any damage he
may have caused to the property.
Q: What if the condition has not yet been fulfilled but
the creditor went to the debtor and the debtor paid?
What can be done by the debtor since the obligation
is not yet due and technically, there is no obligation
to speak of yet?
A: He should be allowed to recover what he has
paid.
Q: When speaking of an obligation consisting of the
payment of a sum of money, would he be able to
recover interest when he asks it from the creditor?
Can the debtor say that the creditor should return
the P10,000 he paid because he just realized that his
obligation is subject to a suspensive condition which
was not fulfilled yet, with interest because while the
money was with the creditor, he was not able to use
it?
A: The law is silent with regard to the liability of the
creditor for interest and like in the case of an
obligation subject to a suspensive period where
there is premature payment.
Q: What is the solution?
A: We can look into the rules on solutio indebiti
and apply it. If there is bad faith, he will have to
pay interest. And if it is an obligation to give a
specific thing, the creditor is also liable to return
the fruits (not just the fruits he received, but also
the fruits which he would have received on account
of his bad faith).
Q: What happens if the obligation is fulfilled?
A: If the obligation is fulfilled, then the obligation
comes into existence and the obligation is now
demandable (demandability flows from the
existence of the obligation). One characteristic of an
obligation subject to a suspensive condition is that
the effect of the fulfillment of the condition
retroacts to the time that the obligation has been
constituted.
Effects of Fulfillment
Birth of the Obligation
● The happening of the suspensive condition
gives birth to the right of the creditor &
obligation of the debtor
Retroactivity
ARTICLE 1187. The effects of a conditional
obligation to give, once the condition has been
fulfilled, shall retroact to the day of the
constitution of the obligation. Nevertheless,
when the obligation imposes reciprocal
prestations upon the parties, the fruits and
interests during the pendency of the condition
shall be deemed to have been mutually
compensated. If the obligation is unilateral, the
debtor shall appropriate the fruits and interests
received, unless from the nature and
circumstances of the obligation it should be
inferred that the intention of the person
constituting the same was different.
In obligations to do and not to do, the courts shall
determine, in each case, the retroactive effect of
the condition that has been complied with.
In Obligations to Give
● Once a suspensive condition is fulfilled, the
effect of a conditional obligation is to
retroact to the day on which the obligation
was constituted.
● Obligation is considered as if it were pure &
simple from the 1st day
In Obligations which Imposes Reciprocal Prestations
● When the obligation to give imposes
reciprocal prestations upon the parties, the
fruits and interests during the pendency
of the condition are deemed to have been
mutually compensated.
● The purpose is to avoid the necessity of
mutual accounting of the fruits and interest
received.
In Unilateral Obligations
● When the obligation to give is unilateral,
A
the debtor owns all the fruits and interests
received up to the day the condition is
fulfilled, unless by nature and
circumstances of the obligation it should be
inferred that the intention of the person
constituting it was different.
In Obligations to do & not to do
● The courts may, in each case, determine the
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retroactive effect of the condition that has
been complied with, including fixing the
date of such retroactive effect.
RESOLUTORY CONDITION
ARTICLE 1190. When the conditions have for
their purpose the extinguishment of an
obligation to give, the parties, upon the
fulfillment of said conditions, shall return to each
other what they have received.
In case of the loss, deterioration or improvement
of the thing, the provisions which, with respect to
the debtor, are laid down in the preceding article
shall be applied to the party who is bound to
return.
As for the obligations to do and not to do, the
provisions of the second paragraph of Article
1187 shall be observed as regards the effect of the
extinguishment of the obligation.
● A resolutory condition does not affect the
obligation’s existence.
○ It does not suspend the
demandability of the obligation.
○ In fact, as we pointed out, if an
obligation is subject to a resolutory
condition, then it is immediately
demandable, only what is
threatened here is the existence of
the obligation because it may be
extinguished at any time.
● The happening of the condition
extinguishes the obligation, and the
●
parties will have to give back what they
have received from one another.
In cases of loss, deterioration or
improvement, we apply Article 1189, but
there will be a role reversal—the creditor
in the beginning, once the resolutory
condition is fulfilled, will now become our
debtor. (since the creditor is now ordered to
return the thing to the original debtor)
EXAMPLE: While Spetty is in law school, Nelli will
let Spetty borrow his Honda Civic for the latter’s
transportation, but when once Spetty’s graduates →
Spetty has to return the Honda Civic to Nelli → role
reversal comes to play
Q: When will it happen?
A: If the resolutory condition is fulfilled. This is the
difference between a resolutory condition and
resolutory period. In resolutory period, the
question on the extinguishment of the obligation
need not be asked because it is certain to happen.
The period is intended to happen. In all aspects, an
obligation subject to a resolutory condition and one
subject to a resolutory period, they are basically the
same. Only for one extinguishment is certain, for
the other depends if the obligation is fulfilled.
Upon Fulfillment Of Resolutory Condition
A. In obligations to give
● The obligation is extinguished, and
the parties shall return to each
other what they have received
(Article 1190).
B. In obligations to do and not to do
● The courts shall determine, in each
case, the effect of
extinguishment of the obligation
the
(Article 1190, in relation to Article
1187)
 as a result of a juridical act, and either ○ It is true that period may have
CONDITION PERIOD
suspends their demandableness or either a suspensive or resolutory
Future and uncertain Future and certain produces their extinguishment. effect; but in the former, it cannot
prevent the birth of the obligation
ARTICLE 1193. Obligations for whose fulfillment
a day certain has been fixed, shall be demandable in due time, and in the latter, it does
SUSPENSIVE RESOLUTORY not annul the fact of its existence.
only when that day comes.
● Because of this difference, a period does
Demandability Only arises Immediately
Obligations with a resolutory period take effect at not carry with it, except when there is a
when the demandable
once, but terminate upon arrival of the day special agreement, the same
conditions
certain.
happens/ accompaniment of retroactive effects that
term arrives follow a condition
A day certain is understood to be that which must

A
Extinguishment Obligation is Obligation is necessarily come, although it may not be known
when. As to the will of the debtor
extinguished extinguished
after upon the ● If the fulfillment of a condition is left
obligation has happening of If the uncertainty consists in whether the day will exclusively upon the will of the debtor
been fulfilled the condition/ come or not, the obligation is conditional, and it (and the condition is also suspensive in
period shall be regulated by the rules of the preceding
character), the same renders the obligation
Section.
dependent upon it void.
○ On the other hand, if the
CONDITION PERIOD Distinguished From Condition
designation of the period is left to
Fulfillment
SUSPENSIVE I will buy I will buy the exclusive will of the debtor, the
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RESOLUTORY
Spetty a V6
Camry IF she
passes the bar.

I will pay for

the
expenses
Spetty
gas
of
until
Spretty a V6
Camry on July
1, 2029, on her
birthday.

I will pay for

Spetty’s gas
expenses until
the end of this
● A condition is an uncertain event, but a
term or period is an event which must
happen sooner or later, at a date known
beforehand or at a time which cannot be
determined but must necessarily happen.

Influence on Obligation
● A condition may cause an obligation to have
obligation remains valid but it
empowers the court to fix the
period for its performance.

OBLIGATIONS WITH A PERIOD

● Obligations with a period or term are those
which become demandable or which
she graduates year. or not to have any effects, or to cause it to
terminate upon the arrival of a "day
law school. exist or to cease to exist; a period does not
certain".
go beyond imposing limitation as to time on
● A day certain is that which must necessarily
the production of the effects and the
OBLIGATIONS SUBJECT TO TERM OR PERIOD come, although it may not be known when.
efficacy of the obligation.
● A term or period consists in a space of time
which, having an influence on obligations
EXAMPLES:
● January 1, 2025 is a day certain because it
must necessarily come.
● The death of a certain person, X, is also a
day certain, because it must necessarily
come, although it is not known when
[NOTE]: 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 Article 1193.
Q: What is a period?
A
A: A period would be a space of time which affects
an obligation by either suspending their
demandability or determining their
extinguishment.
Period May Be Suspensive Or Resolutory
Q: What are the different kinds of terms?
DIE)
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A: Resolutory and Suspensive.
OBLIGATIONS WITH A SUSPENSIVE PERIOD (EX
● Obligations for whose fulfillment a day
certain has been fixed, and shall be
demandable only when that day comes.
EXAMPLE: Promissory note payable next year on
July 25, 2024; Repainting of a ceiling of the unit
after 1 year from the date of the execution of the
contract.
OBLIGATIONS WITH RESOLUTORY PERIOD (IN
DIEM)
● They take effect at once, but terminate upon
arrival of the day certain.
Effects
In Case Of Loss, Deterioration Or Improvement
● In case of loss, deterioration or
improvement of the thing before the arrival
of the day certain, the rules in Article 1189
on conditional obligations shall be
observed.
ARTICLE 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.
● Article 1194 makes reference to Article
1189, so this is also applicable to obligations
subject to a suspensive period.
● For obligations subject to a suspensive
condition where there is premature
payment, we said earlier that the law is
silent regarding liability as to interest or
fruits.
○ But let’s look at Article 1195.
Advance Payment By Mistake
● If the obligor is unaware of the period or
believes that the obligation has become due
and demandable, and thus pays or delivers
before the arrival of the period, he may
recover the thing paid or delivered, with
the fruits and interests.
○ Unlike a condition, a period has no
effect on the existence of the
obligation, but only on their
demandability or performance.
○ Thus, the arrival of a period does
not have a retroactive effect.
ARTICLE 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.
● Apart from being categorical about the
obligation of the creditor to return what is
not yet due along with its fruits and
interests, Article 1195 does not give weight
or bearing to the good faith or bad faith of
the creditor.
○ What is focused upon here is the
●
obligor.
○ It must be shown that the obligor
is unaware of the period or has
believed that the obligation has
become due and demandable.
It is the obligor’s bad faith (awareness that it
is not yet due) which may defeat his
entitlement to recover what he has paid,
along with the fruits and interest.
Debtor is Presumed Aware of the Period
● He has the burden of prvoing that he was
unaware or that the payment was made by
 the mistaken notion that the period had
already arrived
● Article 1195 states that once the period
arrives → debtor may no longer recover the
payment → only the fruits & interests from
the date of the premature payment
No Recovery in Personal Obligations
● To do → it is physically impossoble to undo
something that has been done/ service
rendered
A
Benefit Of Period
ARTICLE 1196. Whenever in an obligation a
period is designated, it is presumed to have been
established for the benefit of both the creditor
and the debtor, unless from the tenor of the same
or other circumstances it should appear that the
period has been established in favor of one or of
the other.
GR
XPN
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Whenever in an obligation a period is
designated, it is presumed to have been
established for the benefit of both the
creditor and the debtor.
Unless from the tenor of the same or
other circumstances it should appear
that the period has been established in
favor of one or of the other
● Thus, in such a case, the debtor may not be
compelled to perform the obligation
before the arrival of the period, and the
creditor may not be compelled to accept
performance before the arrival of the
period.
● Also, because the term is generally
for the benefit of both creditor and
debtor, a contract whose term has
already expired may only be
renewed if both parties consent.
Q: When an obligation is subject to a period, who is
intended to be benefited by that period?
A: Both parties are intended to benefit from it. It is
important to know that both parties benefit from it
because the imposition of a period is also a right
which may be waived. There is also an important
qualification to this.
● If the period is for the benefit of the
debtor, he may not be compelled to
perform the obligation before the arrival
of the period, but he may validly do so
(prepayment) if he so wishes.
EXAMPLE: If the obligation provides that payment
may be made "within" the stipulated period, or "on
or before" the stipulated date, the period is for the
benefit of the debtor. The debtor then has the right,
but not the duty, to pay before the deadline.
EXAMPLE: If debtor A borrows money from B, the
creditor tells A: “you can pay within 1 year.” There is
also no interest that is imposed.
Under these circumstances, it is obvious that the
period is meant to benefit the debtor alone. It is
within the debtor’s power to pay shortly after B has
lent him money or to wait it out until the end of the
1 year period. If A pays within 3 months, B cannot
say “I do not want to accept the money yet.” This is not
allowed because under the circumstances and
looking into their agreement as a whole, the one
who has the benefit of the period is the debtor → to
pay within the period of 1 year.
EXAMPLE: You lent money to A, saying “here’s the
money instead of being stuck in a bank. You can just
pay me interest that is slightly higher than what is given
by the bank, and you can pay me within 1 year.” In this
case, the debtor will be benefited by the period,
but the creditor is also benefited since you also
have an interest earned which is higher than those
in the bank to be paid within 1 year.
PERIOD BENEFIT OF THE CREDITOR
● He may not be compelled to accept
performance before the arrival of the
period, but he may validly demand
performance if he so wishes.
● The creditor may decline pre-payment for
various reasons
○ He may want the interest on his
money;
○ He may want to avoid the risk of
holding his money;
○ Risk of near-term depreciation in
currency
LOSS OF BENEFIT OF THE PERIOD
Q: Is the debtor’s right to make use of a period ever
lost?
A: YES. Article 1198.
Q: When does the debtor lose the right to make use of
the period?
A:
ARTICLE 1198. The debtor shall lose every right
A
to make use of the period:
(1) When after the obligation has been
contracted, he becomes insolvent,
EXAMPLE: When the debtor undertakes to pay "as
unless he gives a guaranty or security for
soon as possible," or as soon as he has money, or
the debt;
"little by little,” or when his means permit him to do
(2) When he does not furnish to the
so
creditor the guaranties or securities
which he has promised;
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(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.
Fixing Of Period
ARTICLE 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.
● The courts may fix the duration of the
period in the ff cases:
a) If the obligation does not fix a
period, but from its nature and the
circumstances it can be inferred
that a period was intended
GR If the obligation does not fix a period & no
period is intended → court is not
XPN
authorized to fix a judicial period
RATIONALE: The contract is the law between the
parties & its terms cannot be changed by the
court
No period is fixed → but a period was
intended
Duration of the period depends → upon
the will of the debtor
ARTICLE 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.
b) If the period depends upon the will
of the debtor
● But if the performance of the obligation
depends upon the sole will of the debtor
(purely potestative) → the obligation is
void.
c) In case of breach of reciprocal
obligation, the court may fix a
period (instead of ordering rescission)
if there is just cause for the same.
Premature Until Period Is Fixed
● Until the period is first determined, there
can be no breach of contract or failure to
perform the obligation.
○ Before the fixing of the period, it
would be premature for the creditor
to complain of the debtor's alleged
breach.
Standard In Fixing The Period
● The courts shall determine such a period as
may under the circumstances have been
probably contemplated by the parties.
Finality of Period
● Once fixed by the Courts, the period cannot
be changed by the courts.
ALTERNATIVE OBLIGATIONS
● There is more than one object, and the
fulfillment of one is sufficient, determined
 by the choice of the party who has the
right to choose.
ARTICLE 1199. A person alternatively bound by
different prestations shall completely perform
one of them.
The creditor cannot be compelled to receive part
of one and part of the other undertaking.
Q: What are alternative obligations?
A
A: This is a kind of obligation falling under those
which have multiple objects. In multiple objects,
there would be several prestations due. As to how
the prestations should be performed would depend
on the classification of the obligation with multiple
objects, it could be alternative, conjunctive or
facultative. In conjunctive, you have to perform all
of the objects. If it is alternative there would be
several prestations due but you only need to
EXAMPLES:
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perform one to bring about the extinguishment of
the obligation.
1) Obligation to deliver a TV or a refrigerator:
it is sufficient for the debtor to deliver
either, not both
2) Obligation of the fire insurance company to
rebuild the insured house destroyed by fire
or to pay its value.
[NOTE]: Prestations and objects referred here are
one and the same. In a facultative, there is only one
prestation due but the debtor has been given the A: Yes. Only if that right is expressly granted to him.
right to substitute the prestation with another.
Q: If the choice belongs to the debtor by default,
would there be any limit to his discretion in
ALTERNATIVE CONJUNCTIVE FACULTATIVE
exercising his right of choice?
Several Objects One object
A: Yes. First, the right to choose is indivisible. The
Only need to Perform ALL/ Only ONE, but debtor cannot perform a part of a prestation and
perform ONE both of the may substitute
then perform another part of another prestation to
objects another object
complete the performance. He has to choose one
prestation & perform it in its entirety.
Contrast With Conjunctive Obligations
● There are also several objects, but all must Second, he cannot perform any prestation which
be fulfilled has become impossible or unlawful, or which could
● TV and Refrigerator, BOTH not have been the object of the obligation.
Contrast With Facultative Q: Is the other party given the power to consent or to
● There is only one object, but the debtor may withhold approval to the choice of the party given
substitute another object. the choice?
Complete Performance A: No. Under the law, the person who was given the
● A person alternatively bound by different
prestations shall completely perform one
of them.
● The creditor cannot be compelled to
receive part of one and part of the other
undertaking.
Q: In an alternative obligation, who chooses which
choice does not need the consent of the other
party. He only needs to communicate his choice.
That would produce a legal consequence. Once the
choice has been communicated then the obligation
ceases to be alternative.
Q: What is the effect of the loss of the things due or
impossibility of the prestation before the choice is
prestation to perform? made known?
A: The default is that it would be the debtor who A: If the choice belongs to the debtor: If all the
gets to choose. choices are rendered impossible due to the fault of
the debtor, the creditor shall have the right to
Q: Can the creditor make the choice? indemnity under Article 1204, i.e., amount of the last
thing/service which disappeared or became impossible,
plus other damages If some but not all of the things due
are lost, then look into the circumstances under which
they were lost.
ARTICLE 1200. The right of choice belongs to the
debtor, unless it has been expressly granted to
the creditor.
The debtor shall have no right to choose those
prestations which are impossible, unlawful or
which could not have been the object of the
A
obligation.
ARTICLE 1306. The contracting parties may
establish such stipulations, clauses, terms and
conditions as they may deem convenient,
provided they are not contrary to law, morals,
good customs, public order, or public policy.
GR
XPN
LIMITS
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The right of choice belongs to the
debtor
Unless it has been expressly granted to
the creditor.
To 3rd persons when the right is given
to him by common agreement
The debtor cannot choose part of one
prestation & part of another
prestation
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
e.g. If the obligation permits payment in
local or foreign currency, but the
government outlawed all foreign
currency, the debtor may only pay in the
local currency.
The debtor shall lose the right of
choice when among the prestations
whereby he is alternatively bound,
only one is practicable
ARTICLE 1202. The debtor shall lose the right of
choice when among the prestations whereby he
is alternatively bound, only one is practicable.
Effectivity
● The choice shall produce no effect except
from the time it has been communicated.
● The selection may be made in any form, as
long as it is unequivocal. It may even be
made tacitly, such as by actually performing
the chosen prestation.
Impairment Of Right To Choose
● If through the creditor's acts the debtor
cannot make a choice according to the
terms of the obligation, the latter may
rescind the contract with damages.
ARTICLE 1203. If through the creditor's acts the
debtor cannot make a choice according to the
terms of the obligation, the latter may rescind the
contract with damages.
Effects Of The Loss Of The Things Due To Or
Impossibility Of Prestation Before The Choice Is
Made Known
(1) The choice belongs to the debtor
a. 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;
b. If the creditor's fault prevents the
debtor from making a choice, the
latter may rescind the contract
with damages.
c. If some are lost but several
remain, the obligation subsists
regardless of the reason for the loss
and the debtor may choose from
what remains.
d. If all but one are lost, the
obligations subsists and the debtor
must deliver what remains.
ARTICLE 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.

fault because of the
(2) The choice belongs to the creditor: creditor)
a. If all the choices are rendered
impossible due to the fault of the The debtor is
debtor, the creditor shall have the relieved of liability
right to indemnity under.
Due to
b. If the loss of one of the things
Creditor’s
occurs through the fault of the fault
debtor, the creditor may claim any
of those subsisting, or the price of
that which, through the fault of the
EXAMPLE: There are 4 things due, the first 3 were
former, has disappeared, with a
Right To Choose By Creditor
● The creditor has the right to choose
between alternative prestations only when
it is expressly given to him
○ When the choice has been
expressly given to the creditor, the
The debtor may
obligation shall cease to be
choose to rescind
the obligation, alternative from the day when the
with damages selection has been communicated
to the debtor

A
lost due to the fault of the debtor. And the last thing ARTICLE 1201. The choice shall produce no
right to damages; effect except from the time it has been
was lost due to a fortuitous event.
c. If all the things are lost through communicated.
the fault of the debtor, the choice
Q: How should we treat the loss of the last thing due
by the creditor shall fall upon the
to a fortuitous event? Should this have the effect of
price of any one of them, also with ARTICLE 1205. When the choice has been
extinguishing the obligation? Or should it make the expressly given to the creditor, the obligation
indemnity for damages.
debtor liable for the loss? shall cease to be alternative from the day when
LOSS OF ALL LOSS OF SOME the selection has been communicated to the
A: debtor.
Due to Creditor shall have Debtor is not
Debtor’s
fault
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a right
indemnity
damages.
to
for

Indemnity shall be
fixed taking as a
basis the value of
the last thing
which
liable because he
may still comply
by choosing the
remaining
prestations
available.
at that
CAGUIOA

He should not be liable

because the obligation
point has
become simple.

Since the last remaining

possible thing due was
TOLENTINO

The debtor should still be

liable.

Where there is only one

possible thing due would
not have arisen were it not
for the fault of 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;

disappeared, or lost due to a fortuitous (2) If the loss of one of the things occurs through
that of the service event then that should The fact that the last the fault of the debtor, the creditor may claim any
which last became have the effect of possible thing due was of those subsisting, or the price of that which,
impossible extinguishing the lost due to a fortuitous through the fault of the former, has disappeared,
obligation. event should not excuse with a right to damages;
Not Due to (i.e. because of the debtor from incurring
Debtor’s fortuitous event, or any liability.
 (3) If all the things are lost through the fault of obligation → is alternatives, as long as FACULTATIVE ALTERNATIVE
the debtor, the choice by the creditor shall fall extinguished, even if other alternatives are
upon the price of any one of them, also with substitutes are # OF 1 prestation is Several
still available
indemnity for damages. available PRESTATIONS due → prestations →
substitution is compliance of
The same rules shall be applied to obligations to allowed 1 → suffient
do or not to do in case one, some or all of the Effect of Loss
prestations should become impossible. A. Before Substitution RIGHT OF Credior/ 3rd Debtor
● If principal thing is lost through fortuitous CHOICE person chooses
event → obligation is extinguished
[NOTE]: The same applies in obligations to do or not LOSS Extinguishes Loss of 1 or
● If principal thing is lost through fault of
to do, in case one, some or all of the prestations THROUGH the obligation more → does
debtor → liable for damages FORTUITOUS not extinguish
should become impossible

A
● The loss or deterioration of the thing EVENT obligation
intended as a substitute, through the
FACULTATIVE OBLIGATIONS LOSS Loss of thing Loss of one →
negligence of the obligor, does not render
ARTICLE 1206. When only one prestation has THROUGH due → liable not liable
him liable
been agreed upon, but the obligor may render DEBTOR’S
○ RATIONALE: The thing intended as FAULT
another in substitution, the obligation is called
a substitute is not due → effect of
facultative.
loss → merely ceases for the
JOINT AND SOLIDARY OBLIGATIONS
The loss or deterioration of the thing intended as obligation to be facultative
a substitute, through the negligence of the ARTICLE 1207. The concurrence of two or more
obligor, does not render him liable. But once the Upon Substitution creditors or of two or more debtors in one and

●
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substitution has been made, the obligor is liable
for the loss of the substitute on account of his
delay, negligence or fraud.
This is when only one prestation has been
agreed upon, but the obligor may render
another in substitution

FACULTATIVE ALTERNATIVE
● If principal thing is lost → debtor is not
liable → no matter what the cause
● If substitute is lost → liability depends
whether loss is through fault of debtor
○ Once the substitution has been
made, the obligor is liable for the
loss of the substitute on account of
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.

his delay, negligence or fraud Kinds of Obligation According to Number of Parties

There is only one The obligation is not ● Once substitution is made, obligation → (1) Individual obligation — 1 creditor & 1
principal prestation extinguished by the simple obligation debtor
nullity, loss or
Principal → void, or (2) Collective obligation — 2 or more debtors/
impossibility of one or
lost, or becomes 2 or more creditors
impossible, the some of the
(a) Joint
 (b) Solidary
● In both joint and solidary obligations, there
is a concurrence or plurality of debtors
and/or creditors in the same obligation.
● They differ, however, in extent the
obligation to which each debtor can be held
liable and/or the extent which each creditor
can demand.
IN JOINT OBLIGATIONS
ARTICLE 1208. If from the law, or the nature or
A
the wording of the obligations to which the
preceding article refers the contrary does not
appear, the credit or debt shall be presumed to
be divided into as many shares as there are
creditors or debtors, the credits or debts being
considered distinct from one another, subject to
the Rules of Court governing the multiplicity of
suits.
● Mancomunada or pro rata
● Each of the debtors is liable only for a
●
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proportionate part of the debt; and
Each of the creditors is entitled only to a
proportionate part of the credit.
○ Otherwise put, each creditor can
recover only his share of the
obligation, and each debtor can be
made to pay only his part.
EXAMPLE: The obligation is joint if A, B, and C say
"We promise to pay P300 to X.” A, B, and C are liable
only for P100 each.
IN SOLIDARY OBLIGATIONS
ARTICLE 1207. The concurrence of two or more a proportionate part of the entire obligation.
creditors or of two or more debtors in one and the credit from each
the same obligation does not imply that each one debtor.
of the former has a right to demand, or that each
one of the latter is bound to render, entire Presumption in favor of Exists only when the
compliance with the prestation. There is a joint obligations obligation expressly so
solidary liability only when the obligation states; when the law
Can be joint active, joint
expressly so states, or when the law or the provides, or when the
nature of the obligation requires solidarity. passive, or completely nature of the obligation
joint. so requires
● Joint or several or juntos o separadamente or
in solidum
● Each of the debtors is liable for the entire No mutual guaranty There is mutual guaranty
among debtors; no among the debtors; there
obligation, and
mutual representation is mutual representation
● Each of the creditors is entitled to demand
among the creditors among the creditors
the whole obligation.
○ Otherwise put, each creditor may
enforce the entire obligation, and [NOTE]: The presumption is that whenever you
each debtor may be obliged to pay have multiple debtors or multiple creditors, then
it in full the obligation is joint. And when an obligation is
joint, that means that you have as many debts as you
EXAMPLE: The obligation is solidary if A, B, and C have debtors because each one of your debtors will
say, "We jointly and severally promise to pay P300 to X',
in which case A (or B or C) can be made to pay the
entire P300. The obligation is also solidary if it says
"individually and jointly," or "together or separately”
or if it says, "I promise to pay" signed by two or
more persons.
JOINT OBLIGATIONS SOLIDARY OBLIGATIONS
only be liable for their respective portions of the
obligation. There is no mutual guaranty among
the debtors. There is no mutual representation
among the creditors. It is different for solidary
obligations. Each one of the debtors is liable for
the entire obligation & each one of the creditors
can demand performance of the entire obligation.
We can see that in a solidary obligation, there is
mutual guaranty among the debtors. Then, there
Each debtor is liable Each one of the debtors is is mutual representation among the creditors.
only for a proportionate liable for the entire
part of the debt and each obligation and each one [NOTE]: The default is if there is no indication of
one of the creditors is of the creditors can the sharing among the creditors or among the
entitled to demand only demand performance of debtors, we assume this to be equal.
In active subject, the P360 will be divided into three
among A, B, and C, making each one entitled to
P120.
Similarly, in our passive subject, we will divide the
P360, making each one liable for P120. That means
that the total liability of D to A, to B, and to C should
be P120.
The total entitlement of A from D, from E, and from
F should also be P120.
A
Q: How much can A demand from D?
A: Although A is entitled to a total of P120, he can
only get from D this portion of the liability to A in
the amount of P120. That portion is the ⅓ of 120.
Hence, what A can claim from D is P40. Same rule
applies to E and F.
Rule On Solidary Obligations
SI
(1) While anyone of the creditors may demand
payment of the entire obligation from any
of the debtors, demand by one creditor
restricts the option of the debtor to only
making payment to the demanding
creditor.
(2) Once payment is made, the creditor
receiving payment becomes obligated to
deliver the portions pertaining to his
co-creditors.
(a) The solidary obligation is
extinguished but a new obligation
arises on the part of the creditor
who received payment in favor of
his co-creditors.
[NOTE]: We are assuming here that they are
solidary on both sides. The solidary obligation is
extinguished but a new obligation arises. But this
would just be among the solidary debtors and the
obligation here centers on the right to be
reimbursed on the part of the paying solidary
co-debtor.
(3) 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
obligation.
(a) The creditor who may have
executed any of these acts, shall be
liable to the others for their
shares.
(4) The solidary debtor effecting payment or
any of the modes of extinguishing
obligations except remission will be
entitled to reimbursement from his
co-debtors.
(5) Remission extinguishes the obligation but
the debtor in whose favor the remission of
the entire obligation was made cannot
demand reimbursement from his
GR
Joint Obligations Is The General Rule
co-debtors.
(a) Same rule applies if payment is
made after prescription has set in
or the obligation becomes illegal.
(6) The debtor whose share was remitted
cannot refuse to reimburse the paying
debtor if remission came after payment of
the entire obligation.
(7) Solidary creditor cannot assign his rights
without the consent of the others.
(8) Solidary creditor may do whatever is
useful to the others but not what may be
harmful to them.
(9) The other co-debtors must reimburse the
paying solidary co-debtor with interest
from the time of payment except if
payment is made before due date.
(10) Solidarity is not lost even if the debtors are
not uniformly bound.
(11) The debtor upon whom demand is made is
allowed to make defenses which are
derived from the nature of the obligation
and of those which are personal to him, or
pertain to his own share.
(a) 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.
In case of concurrence of two or more
creditors or of two or more debtors in one
& the same obligation, the presumption is
that the obligation is joint so that each of
the debtors is liable only for a
proportionate part of the debt
a. The credit or debt shall be
presumed to be divided into as
many shares as there are

creditors or debtors, the credits
or debits being considered distinct
from one another, subject to the
Rules of Court governing the
multiplicity of suits
b. Thus, if the obligation or
judgment holding several
persons liable is silent as to the
nature of extent of their liability,
such liability is considered joint.
XPN There is a solidary liability only in any of
the following instances:
A
a. When the obligation expressly so
states
EXAMPLE: It is not required that the party
use the precise word "solidary"; it is
enough that the obligation state, for
example, that each of the debtors can be
compelled to pay the entire debt.
b. When the law requires solidarity
SI
EXAMPLE: Liability for quasi-delict (Art.
2194) and liability arising from crime (Art.
110, RPC). See also: Arts. 927, 1824, 1911,
1915, 2157 of the Civil Code.
c. When the nature of the obligation
requires solidarity
EXAMPLE: Liability for torts or other
wrongful acts (e.g., abuse of rights, libel,
infringement, etc.) is considered solidary,'
because a "moral wrong cannot be divided
into parts.” Thus, corporate directors and
officers are solidarity liable with the
corporation for the termination of
employees done with malice or bad faith.
Effects Of Joint Obligation
● In a joint obligation, the debt/credit is
legally divided into as many shares as
there are e creditors or debtors, the credits
or debts being considered distinct from one
another.
○ Thus, because the shares are
distinct from each other:
a. A joint creditor cannot act
in representation of the
others. Neither can a joint
debtor be compelled to
answer for the liability of
the others.
b. The effect of a demand or
interruption of prescription
is limited only to the
particular creditor or
debtor who made or
received the demand or
interruption.
c. The extinguishment of the
obligation of one of the
debtors does not affect the
shares of his co-debtors.
d. The nullity or vices of
obligation affecting one of
the debtors do not
necessarily extend to the
shares of his co-debtors.
e. The insolvency of one of
the debtors does not
increase the liability of his
co-debtors.
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.
● The indivisibility of performance does not
prevent the obligation from being
considered joint.
a. The indivisibility of an obligation
does not necessarily give rise to
solidarity. Nor does solidarity of
itself imply indivisibility.
ARTICLE 1210. The indivisibility of an obligation
does not necessarily give rise to solidarity. Nor
does solidarity of itself imply indivisibility.
b. The indivisible obligation is still
presumed joint. However, in such a
case of joint indivisible obligation:
i.
ii.
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.
(1) Since the prestation can only be
performed by all of the debtors,
they must all be sued. If one of the
debtors cannot perform, the
prestation becomes incapable of
 performance and is converted to
liability for damages. The debtors
are liable only for their
proportionate shares in the
damages.
(2) If one of the debtors should be
insolvent, the others shall not be
liable for his share.
Effects Of Solidary Obligation
Classification As To Subject
A
(1) ACTIVE SOLIDARITY
● Solidarity in the creditors
● Each creditor has the authority to claim &
enforce the rights of all, with the resulting
obligation of paying his co-creditors their
respective shares; there is mutual
representation or agency.
(A) Each of the solidarity creditors
may sue alone, and payment to the
SI
ARTICLE 1212.
suing creditor is sufficient to
discharge the entire obligation.
(B) Each of the solidary creditors may
do whatever may be useful to the
others, but not anything which may
be prejudicial to the latter
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.
(a) Thus, a solidary creditor
may interrupt
prescription or make a
demand (for the debtor to be
ARTICLE 1213. A solidary creditor cannot assign
in default and for interest to his rights without the consent of the others.
run), which is beneficial to
his co-creditors.
(2) PASSIVE SOLIDARITY
(b) However, that under Art.
● Solidarity in the debtors
1215, a solidary creditor
● Each of the debtors can be made to answer
may effect the novation,
for the others, with the resulting right to
compensation, confusion
recover from the other co­ debtors their
or remission of the debt,
respective shares; there is a mutual
which shall extinguish the
guaranty.
obligation. However, the
creditor who extinguished
(3) MIXED SOLIDARITY
the obligation shall be
● Solidarity in both the creditors or debtors
liable to the others for the
share in the obligation
Varied Solidarity
corresponding to them.
● Solidarity may exist although the creditors
and the debtors may not be bound in the
ARTICLE 1215. Novation, compensation, same manner and by the same periods and
confusion or remission of the debt, made by any
conditions.
of the solidary creditors or with any of the
solidary debtors, shall extinguish the obligation, ARTICLE 1211. Solidarity may exist although the
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.
creditors and the debtors may not be bound in
the same manner and by the same periods and
conditions.
EXAMPLE: X, Y, and Z are solidarily liable to J for
P30,000. X's liability matures in Year l, Y's in Year 2
and Z's in Year 3. Solidarity still exists in such a
scenario. In Year 1, J may sue X or Y or Z (because
(C) A solidary creditor cannot assign
they are solidarily liable), but only for Pl0,000 (the
his rights without the consent of the
portion which matures in Year I ). In Year 2, J may sue
others. This is because active
X or Y or Z (because they are solidarily liable), but only
solidarity is essentially a mutual
for P20,000 (the portion which matures by Year 2).
agency, which involves a relation of
confidence.
Extinguishment Of The Obligation
 the others for their
A) In general, payment of the debt to one of corresponding share in the
the solidary creditors, or made by one of credit.
the solidary debtors, is sufficient to (b) As among the debtors, the
extinguish the debt. debtor who caused the
extinguishment of the
ARTICLE 1214. The debtor may pay any one of
the solidary creditors; but if any demand, judicial obligation is entitled to
or extrajudicial, has been made by one of them, recover from his
payment should be made to him. co-debtors their shares in
whatever he may have paid
ARTICLE 1217. Payment made by one of the or given up to extinguish
solidary debtors extinguishes the obligation. If
the obligation.
with the principal debtor), an
extension of time granted by the
creditor to the principal debtor
(without consent of surety) will
extinguish the liability of the surety.
(Article 2079)
○ But mere delay by the creditor in
collecting from the debtor is not an
extension which will discharge the
surety (Article 2079)
Right of Debtor-Payor to Reimbursement

A
two or more solidary debtors offer to pay, the
creditor may choose which offer to accept. ● He who made the payment may claim from
EXAMPLE: If X, Y and Z are solidarily liable to N for his co-debtors only the share which
P30,000, whose debt is extinguished by corresponds to each, with the interest for
● The paying debtor is generally
compensation with X's credit against N for the same the payment already made.
entitled to reimbursement of the
amount, then N is entitled to recover P10,000 each ○ If the payment is made before the
shares of his co-debtors.
from Y and Z as their share in the obligation. debt is due, no interest for the
● The collecting creditor is generally
● In case the remission was made after the intervening period may be
responsible to give to his
debt had already been totally paid, apply demanded.
co-creditors their corresponding
Article 1219. ○ When one of the solidary debtors
SI shares.
B) 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
obligation.
● With such extinguishment, the
debtors are released from their
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.

● Novation, generally, a mere extension of

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

EXAMPLE: X, Y and Z are solidarily liable to pay

obligation to the creditors.
time for payment given to some of the P45,000. X pays the entire debt, which is thus
However:
solidary debtors does not constitute a extinguished. X can then recover P 15,000 from Y
(a) As among the creditors, the
novation which will extinguish the and P 15,000 from Z as their respective shares (1/3
creditor who may have
obligation or the solidarity of the obligation. each) in the debt. In case Z is insolvent his share
extinguished or collected
○ However, in case of suretyship shall be borne by X and Y: Y will therefore
the debt shall be liable to
(wherein the surety is solidarily liable reimburse P7,500 (in addition to his original share
of P15,000), while the other P7,500 will be a loss
shouldered by X.
[NOTE]: That if the payor is merely a surety, he is
not principally liable for the debt. Thus, he may
generally recover from the principal debtors the
entire payment he has made.
● The debtor-payor is not entitled to
reimbursement from his co-debtors if his
payment is made after. the obligation has
prescribed or become illegal.
A
ARTICLE 1218. Payment by a solidary debtor
shall not entitle him to reimbursement from his
co-debtors if such payment is made after the
obligation has prescribed or become illegal.
○ The debtor-payor is also not
entitled to reimbursement if he
pays a debt which had already been
extinguished (e.g., already paid or
remitted)
SI
○ In case of prescribed debt, the
debtor-payor cannot recover his
payment from the creditor under
the rules on natural obligations.
■ But in other cases where
the obligation to pay does
not exist, the debtor-payer
may recover his payment
from the creditor under the
rules on quasi-contracts.
Enforcement against Solidary Debtors
● The creditor may proceed against any one
of the solidary debtors or some or all of
them simultaneously.
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.
● The choice is left to the solidary creditor to
determine against whom he will enforce
collection
○ The creditor may sue any of the
solidary co­ debtors; he need not
implead all of them as they are not
indispensable parties.
○ The creditor may also choose to
collect only part of the debt from
some of the solidary debtors, and
the remaining part from the other
solidary debtors.
■ Such course of action does
not convert the solidary
obligation into a joint one.
○ 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.
Remission Of Debt
Remission of a Share after Payment
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.
● The debtor whose share was "remitted"
must still pay his share to reimburse the
debtor-payor.
● Strictly speaking, there can be no
"remission" of a debt which had already
been extinguished by payment
Remission of the Entire Debt
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.
● Because the debtor who obtained the
remission did not pay or lose anything.
Loss Or Impossibility Of Performance
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 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.
Without Fault or Delay
● If the thing has been lost or if the prestation
has become impossible without the fault of
the solidary debtors, the obligation shall be
A
extinguished.
With Fault or Delay
● If there was fault on part of any one of
them, all shall be responsible to the
creditor, for the price & the payment of
damages and interest.
○ But the faultless debtors may
recover against the guilty or
negligent debtor.
SI
○ The same rule applies if the thing is
lost or the 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, even if the loss or
impossibility was due to a
fortuitous event.
Defenses Of Solidary Debtors
● A solidary debtor may, in actions filed by
the creditor, avail himself of the following
defenses:
○ Defenses which are derived from
the nature of the obligation — these
are defenses which pertain to the
validity or enforceability of the
obligation → they are total defenses
→ the debtor cannot be held liable
at all
○ Defenses which are personal to
him or pertain to his own share;
■ Defenses which are
personal to the defendant­
debtor → such as minority,
insanity or vitiated
consent → are total
defenses.
■ Defenses which pertain to
the share of the
defendant-debtor (e.g., that
his share is not yet due or has.
already been extinguished)
are → partial defenses, i.e.,
○
the defendant cannot be held
liable for the
shares of his co-debtors
Defenses which personally belong
portion
corresponding to him, but he
can still be held liable for the
to the other debtors → or pertain to
their shares → these are partial
defenses, i.e., the defendant-debtor
cannot be held liable for the portions
corresponding to the debtor with the
defense.
EXAMPLE: X, Y, and Z are solidarily liable to J for
P30,000. X's liability matures in Year l, Y's in Year 2
and Z's in Year 3. Y was insane at the time the
obligation was contracted.
● If Y is sued, he can invoke his insanity and
be excused altogether → a defense personal
to him, and a total defense
● If X is sued in Year 2, he can only be held
liable for Pl0,000. As to the share of Y, X can
invoke Y's insanity → a defense personal to
Y, and a partial defense
● As to the share of, X can raise the defense
that it has not yet become due → a defense
pertaining to Z's share, and a partial
defense.
DIVISIBLE AND INDIVISIBLE OBLIGATIONS
(1) INDIVISIBLE OBLIGATION
● An obligation is indivisible when it cannot
be validly performed in parts, whatever
may be the nature of the thing which is the
object thereof.
(2) DIVISIBLE
● An obligation is divisible when it can be
validly performed in parts.
Divisibility Of Obligation Vs Thing
DIVISIBILITY OF DIVISIBILITY OF
OBLIGATION THING
Refers to the prestation, Refers to its
and not to the object capacity to be
thereof divided into parts
 ● The debtors who may have been ready to ● A penal clause is an accessory undertaking
Refers to its susceptibility without
of partial performance diminishing its fulfill their promises shall not contribute to of the debtor to assume greater
value the indemnity beyond the corresponding responsibility in case of breach.
disproportionately portion of the price of the thing or of the ● It has the dual FUNCTIONS of:
value of the service in which the obligation a) Providing for liquidated damages;
[NOTE]: An obligation may be considered consists. and
indivisible even when its object is divisible. For b) Strengthening the coercive force of
ARTICLE 1224. A joint indivisible obligation gives
example, the obligation to pay insurance premium rise to indemnity for damages from the time the obligation by the threat of
is generally considered indivisible, even if the sum anyone of the debtors does not comply with his greater responsibility in case of
of money to be paid is divisible. undertaking. The debtors who may have been breach
ready to fulfill their promises shall not contribute ● It also serves the function of:
ARTICLE 1223. The divisibility or indivisibility of to the indemnity beyond the corresponding c) To punish to obligor

A
the things that are the object of obligations in portion of the price of the thing or of the value of
which there is only one debtor and only one the service in which the obligation consists.
creditor does not alter or modify the provisions EXAMPLE: A lease contract may provide that in
of Chapter 2 of this Title. case of breach, the lessee would forfeit his rental
EXAMPLE: A, B, and C are jointly liable to deliver a deposit, or should pay the rentals corresponding to
● The divisibility or indivisibility of the things laptop computer valued at P30,000 to X. The the remaining period of the lease. A stipulation for
that are the object of obligations in which delivery can only be done by all of the debtors. If C attorney's fees is also considered a penal clause.
there is only one debtor and only one cannot deliver, the obligation to deliver the laptop
creditor does not alter or modify the nature gives rise to an obligation to indemnify X for Principal & Accessory Obligations
or effects of the obligation. P30,000. A and B, who were ready to perform, can (1) Principal — can stand by itself, does not
SI
Joint Indivisible Obligation
● A joint indivisible obligation is an obligation
of several debtors where each debtor is
liable only for his part but the obligation
cannot be validly performed in part.
○ Thus, it must be performed by all
of the debtors, and it can be
only be held liable for P l0,000 each.

OBLIGATIONS WITH A PENAL CLAUSE

ARTICLE 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
GR

XPN
depend its validity & existence upon
another obligation
(2) Accessory — attached to the principal
obligation

The penalty takes the place of indemnity

for damages and the payment of interest

Damages may still be recovered on top of

enforced only by proceeding the obligor refuses to pay the penalty or is guilty penalty:
against all of them. of fraud in the fulfillment of the obligation. a. When there is an express
● If any of the debtors does not comply with stipulation to that effect;
The penalty may be enforced only when it is
his undertaking, the joint indivisible b. When the obligor having failed to
demandable in accordance with the provisions of
obligation gives rise to indemnity for comply with the obligation also
this Code.
damages. refuses to pay the penalty, in
 which case the creditor is entitled
to interest by way of damages;
and
c. When the obligor is guilty of
fraud in fulfillment of the
obligation
Effect Of Nullity
ARTICLE 1230. The nullity of the penal clause
does not carry with it that of the principal
obligation.
A
The nullity of the principal obligation carries
with it that of the penal clause.
● The nullity of the penal clause does not
carry with it that of the principal
obligation.
○ But the nullity of the principal
obligation carries with it that of
the penal clause.
Effect
GR
SI ■ This is because the penal
clause is just an accessory
obligation.
In obligations with a penal clause, the
penalty shall substitute the indemnity
for damages and the payment of
interests in case of noncompliance.
● Proof of actual damages
suffered by the creditor is not
necessary in order that the
penalty may be demanded.
○ Thus, there is no
difference between
penalty and liquidated
damages in terms of
their legal results.
● The penalty may be enforced
only when it is demandable in
accordance with the provisions
of the Civil Code.
XPN Damages may still be demanded → in
addition to the penalty in the
following exceptional cases;
a) If there is stipulation for this;
b) If the obligor refuses to pay
the penalty; or
c) If the obligor is guilty of fraud
in the fulfillment of the
obligation
LIMITS (a) The debtor cannot exempt himself
from the performance of the
obligation by paying the penalty
● Except in case where this right
has been expressly reserved
for the debtor
(b) The creditor cannot demand the
fulfillment of the obligation and the
satisfaction of the penalty at the same
time.
● Except in case this right has
been clearly granted to the
creditor.
● 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.
ARTICLE 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 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.
ARTICLE 1228. Proof of actual damages suffered
by the creditor is not necessary in order that the
penalty may be demanded.
Reduction Of Penalty
ARTICLE 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.
(a) Partial or Irregular Compliance
● The judge shall equitably reduce
the penalty when the principal
obligation has been partly or
irregularly complied with by the
debtor.
(b) Iniquitous or Unconscionable Penalty
● Even if there has been no performance, the
penalty may also be reduced by the courts
if it is iniquitous or unconscionable.
 ○ The question of whether a penalty
is reasonable or iniquitous is
addressed to the sound discretion
of the courts.
● To be considered in fixing the amount of
penalty are factors such as:
a. The type, extent and purpose of the
penalty;
b. The nature of the obligation;
c. The mode of the breach and its
consequences;
d. The supervening realities; and
A
e. The standing and relationship of
the parties
EXTINGUISHMENT OF OBLIGATIONS
ARTICLE 1231. Obligations are extinguished:
(1) Payment or performance;
(2) Loss of the thing due;
(3) Condonation or remission of the debt;
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(4) Confusion or merger of the rights of
creditor and debtor;
(5) Compensation; and
(6) 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 Which Are
Governed Elsewhere In The Civil Code
(1) Annulment;
(2) Rescission;
(3) Fulfillment of resolutory condition; and
(4) Prescription
[NOTE]: For prescription, we have to point out that
it does not really extinguish the obligation, what it
affects really is the right of action. It puts an end to
the right of action.
Q: What happens to an obligation on account of
prescription if it does not extinguish?
A: It will be a natural obligation in which the
debtor may still perform. The only difference is that
now that the obligation has already prescribed, the
debtor can no longer be compelled but he may
still voluntarily perform the obligation because it
is still an obligation, albeit, a natural one and a
natural obligation is an obligation which is not
actionable in court.
Other Causes Not Mention By Article 1231
1) Death: extinguishes obligations which are
purely personal (e.g. support, criminal
liability & civil obligation arising from crime)
2) Arrival of resolutory period;
3) Mutual desistance: since
agreement can create a contract, mutual
desistance by parties can cause its
extinguishment;
4) Unilateral desistance: some contracts, such
mutual
as agency & partnership, may be
terminated by the will of 1 of the parties
PAYMENT OR PERFORMANCE
ARTICLE 1232. Payment means not only the
delivery of money but also the performance, in
any other manner, of an obligation.
Definition & Concept Of Payment
● It does not only mean the delivery of
money, but also the performance, in any
other manner, of an obligation.
[NOTE]: We usually associate payment with money.
When we hear the word payment, what comes to
our mind is that money is delivered. What force
delivering money is one way of performing an
obligation and only if an obligation is a demandable
sum of money.
Payment however is not limited to extinguishment
of obligation payable in money. That is why we have
to understand payment in a broader concept.
Basically, when we speak of payment, we refer to
the performance in any other manner of the
obligation because we are not limited to the
delivery of money for purposes of performance of
the obligation. There are certain characteristics of
payment that must be complied with for payment to
be valid or in such a form or made in such a manner
that the creditor cannot refuse to accept the
payment. This will become material when you are
effecting a consignation because the validity of the
consignation would generally depend on whether
or not you made a valid tender of payment and
making a valid tender of payment requires that
you must comply with the characteristics of
payment.
Requisites For The Payment To Extinguish The
Obligation
ARTICLE 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.
Identity
If the creditor does not approve, then the
● For identity, the VERY THING or service court will resolve the issue between them.
due must be performed.
Exceptions To Character Of Identity
If The Thing Due Is Generic In Character
a. Facultative Obligation
● Give something of the same kind or if the
b. Dacion En Pago
quality has been stipulated, of the same
quality.
Facultative Obligation
● Only one prestation is due but the debtor is
[NOTE]: It will be a problem if the quality was not
given a right to substitute another
stipulated upon, because the tendency is for the
prestation for the one that is due.
creditor to expect something of superior quality

A
a. IDENTITY of the prestation: the very
thing due must be delivered or released
b. INTEGRITY of the prestation: the
prestation must be fulfilled completely
c. PAYOR: payment must be made by the
proper person
d. PAYEE: payment must be made to the
proper person
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Characteristics
a. INTEGRITY means that payment must be
complete in order for it to be valid.
b. IDENTITY means that what must be
delivered is the thing due → if it is specific
and if it is a generic one, the creditor cannot
and the debtor would tend to deliver something of
Dacion En Pago
an inferior quality. Now, if you get to that point
● Would involve the substitution of a thing
then that means that there was no agreement at the
belonging to the debtor in lieu of the
time that the debtor try to make a delivery to the
money that is due to the creditor.
creditor because if you are dealing with a generic
● We have an obligation payable in money
object and there is acceptance at the time of
but instead of paying money, what the
delivery, we will have transformation. That will be
debtor does is that he delivers property
the moment when generic obligation becomes
that he owns to the creditor.
determinate because of the acceptance.
If we get to the point that there is already a
disagreement between the debtor and the creditor
regarding the party, then that’s the time you’ll go to
court and the court will sort it out for the parties.

GR Deliver of the same kind and if stipulated,

[NOTE]: For Dacion en Pago, you must remember
that this is but a form of novation. You are novating
what was originally an obligation payable in money
into a different kind of obligation.

GR The extinguishment would be only to the

demand a thing which is of superior quality
& the debtor cannot deliver a thing of
XPN
inferior quality
c. INDIVISIBILITY means that the payment
must not be delivered partially.
extent of the value of the object given.
of the same quality
XPN Stipulation to the contrary meaning if the
If the quality has not been stipulated, the
parties have agreed that the delivery of
debtor may choose to deliver whatever he
the thing in lieu of money would bring
wants, subject to the approval of the
about the extinguishment of the
creditor.
obligation.

Q: What happens if there if the obligation is not
payable in money? Can there be substitution of the
object of the obligation?
A: YES, and in that instance, there would be a
proper case for novation. We said earlier that
dacion en pago is but an example of novation.
Dacion En Pago V. Payment By Cessation
DACION EN PAGO PAYMENT BY
When Is There A Waiver
ARTICLE 1235. When the obligee accepts the
performance, knowing its incompleteness or
irregularity, and without expressing any protest
or objection, the obligation is deemed fully
complied with.
Requisites for Waiver
(1) When the creditor has knowledge of the
irregularity or incompleteness of the
obligation;
For example, if the thing has been delivered to the
creditor’s house and was left there since the creditor
was not home, or the thing was accepted by a
member of his household without inspecting the
same, then if the creditor later on complains after
he is able to examine the same, it cannot be said
that the incompleteness or irregularity has
already been waived since the creditor did not
have the opportunity—until that time—when he
was finally able to open the package and examine
the same to determine whether or not there was

A
CESSATION (2) He however does not interpose any
completeness of performance.
There is transfer of There is transfer of objection to the same then that would be
ownership of the thing possession of the considered as waiver on his part.
As such, even if there is acceptance, it will not
from the debtor to the thing from the debtor automatically translate to a waiver unless the
creditor. to the creditor.
Incompleteness Or Irregularity opportunity to examine what was delivered is
Does not require Requires plurality of ● When we speak of incompleteness, this shown to have been present.
plurality of creditors. creditors. may refer to quantity or volume.
Substantial Performance
Debtor is not required to Debtor must be EXAMPLE: 500 sacks was supposed to be delivered

Covers
SI
be insolvent.

a specific
property of the debtor

May totally extinguish

the obligation.
insolvent.

Involves the totality

of the properties of
the debtor.

Extinguish only up to
the net proceeds of
the sale of the thing.
and what was delivered was only 250 then is it
incomplete.

But let us say that the entire order was delivered but
the contents are not what was agreed upon, then
there is irregularity. It pertains to the quality or the
manner of the performance and both instances
would be violative of the characteristic of integrity
ARTICLE 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.

Requisites for Article 1234

1) The debtor must have tried to comply

of payment. with the obligation in good faith; and
Exceptions To Character Of Integrity
2) Any deviation from the tenor of the
● Substantial performance by the debtor; and
[NOTE]: If you are ascribing to the creditor the obligation must be slight, since the
● Waiver or estoppel on the part of the
accusation that he failed to object or protest, then provision contemplates substantial
creditor.
you have to give or afford him the opportunity to do performance.
so.

● The deviation from the obligation must be
slight, and the omission or defect must be
technical and unimportant, and must not
pervade the whole or be so material that
the object which the parties intended to
accomplish in a particular manner is not
attained.
● The non-performance of a material part of
a contract will prevent the performance
from amounting to substantial compliance.
A
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
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waiting for the liquidation of the latter.
Indivisibility
● Indivisibility means the creditor cannot be
compelled to accept partial performance
and the debtor cannot be required to make
partial payments.
Delineating Integrity & Indivisibility
● There would seem to be an overlap
between integrity & indivisibility.
● Integrity also speaks of completeness of
the performance, while indivisibility
speaks of prohibiting partial performance.
○ It may thus be said that they
apparently amount to the same
thing.
○ A violation of the characteristic of
integrity would seem to be a
violation of the characteristic of
indivisibility given that both deal
with incomplete performance.
● In other words, in cases of incomplete
performance, a question arises as to which
characteristic or requirement was
violated—whether integrity or indivisibility.
EXAMPLE: If 1 ordered 5 sacks of rice, and what
was delivered was only 3 1/2 sacks of rice – is this a
violation of integrity or indivisibility of payment?
In the above-mentioned example, if there is a note
from the debtor which reads “Pasensya na po,
ibabalik ko na lang po ‘yung isa’t kalahating sako sa
susunod na linggo” then this tells us that insofar as
the debtor is concerned, he is also aware that he has
not yet completed the performance of the
obligation and he is in fact asking for more time.
Therefore, it is clear that this would be a case of a →
violation of indivisibility of payment because even
the debtor is aware and recognizes that he is not
done yet.
However, if in the same example, there was no note
from the debtor, but instead the creditor is being
made to sign an acknowledgement receipt, then
this means that insofar as the debtor is concerned,
he is done—and he does not intend to deliver any
more sacks of rice to you, even though under the
terms of your agreement, he has not delivered the
stipulated amount of sacks.
Thus, in this case, there is no intention to deliver
the missing sacks of rice and as far as the debtor is
concerned, he is done with the performance of the
obligation. What was violated thus is → the
characteristic of integrity of payment.
In the second instance, if the creditor accepts the
payment without objection or protest, then the
obligation is extinguished.
However, in the 1st instance, if the creditor accepts
the partial performance as well as the debtor’s
excuse, then the obligation is not extinguished
because the creditor would still be entitled to the
remaining undelivered sacks of rice.
Exceptions To Indivisibility
In these exceptions, the debtor is allowed to
perform the obligation in parts:
1) Express stipulation;
2) When the debt is in part liquidated and in
part unliquidated;
3) In solidary obligations where debtors are
not bound by the same terms and
conditions;
4) In case of compensation of unequal
amounts;
5) In case there are several guarantors for
the same obligation and they or one of
them demands the benefit of division;

XPN: Solidarity has been expressly stipulated or
is inherent in the nature of the obligation.
6) When the work is to be done by parts;
7) When the debtor dies and he has several
heirs and the obligation is divisible;
8) In joint obligations where each debtor is
bound to pay only his proportionate
share.
Q: Assume that the debtor dies and he has several
A
heirs. How does this amount to an exception to the
characteristic of indivisibility?
A: If the person dies, the obligations which he
leaves behind will be the joint liability of the heirs
to the extent of the value of the inheritance (Article
774, NCC) Thus, the heirs are liable only for a
proportionate share of the obligation.
Significance Of Capacity
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[NOTE]: The heirs will be joint debtors. Being joint
debtors, they are only liable for their respective
portions of the obligation.
Capacity Of Persons Making Or Receiving Payment
ARTICLE 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
A. As To The Payor
not be valid, without prejudice to the provisions
of article 1427 under the Title on “Natural
Obligations.”
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 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)
Art. 1242. Payment made in good faith to any
person in possession of the credit shall release
the debtor.
● In obligations to do or not to do, capacity
would not be material because after
performance or forbearance, the obligation
is extinguished.
● In obligations to give, payment should be
made by the person who has the free
disposal of the thing.
○ 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 on natural
obligations.
B. As To The Payee
● Payment to a person who is incapacitated to
administer his property shall be valid if:
(1) He has kept the thing delivered, or
(2) Insofar as the payment has been
beneficial to him.
Payment Made to a Third Person
● 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 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.
Q: What is the rule when it comes to contracts
entered into by incapacitated persons? How would
you compare the effect of incapacity to enter into a
contract with the effect of incapacity on the
payment?
A: As earlier established, when the obligation
consists of the delivery of the thing, the incapacity
of the payor would make the payment invalid
because the payor would not be able to effect a
transfer of the title due to his incapacity.
Similarly, if the payee is incapacitated, the
payment would only be valid if:
1) He (payee) retains the same; or
2) He is otherwise benefited by the payment.
Thus, in both instances (i.e., incapacity of the payor
or the payee) the default rule would be that the
payment would be invalid.
Q: Does the same default outcome (i.e., invalidity)
exist as to the status of the contract entered into by
incapacitated parties?
A
A: The results are not the same with respect to the
validity of the contract entered into by an
incapacitated party. If one of the parties to a
contract are incapacitated, the contract is merely
voidable, which is valid until annulled.
If both parties are incapacitated, the contract is
unenforceable.
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[NOTE]: Therefore, it is possible to have a voidable
contract on account of the minority or incapacity of
a party, which is valid until annulled, and then,
should there be any payment made by that
incapacitated party consisting of the delivery of the
thing due, or if any payment is made to that
incapacitated party consisting of the delivery of
something to him, then the default rule is that it
would be an invalid payment.
In this sense, the contrast can be appreciated such
that there is a voidable contract (i.e., valid until
annulled) and yet possibly, this would result in an
invalid payment—depending on who is making the
payment or who is receiving the payment between
the two parties, one of whom happens to be
incapacitated.
Incapacity Of A Party To Enter A Contract Vs. Effect
Of Incapacity On The Payment
● Payment is different from the contract
itself.
● Payment is the extinguishment of a
contract.
○ We have well established that when
it comes to payment and the
obligation consists of the delivery of
a thing, the incapacity of the payor
will make the payment invalid.
○ Similarly, if you are dealing with an
incapacitated payee, the payment
will only be valid if he retains the
same or if he is otherwise
benefited by the payment.
Q: Do we have the same results when it comes to the
validity of the contract entered into by an
incapacitated party?
A: In payment, essentially, the rule is the payments
will be invalid if the payor is incapacitated & you
are dealing with payment consisting of the
delivery of something because he cannot transfer
title due to his incapacity. The status of the
payment is invalid.
If, however, the payee is incapacitated, any
payment to him would also be invalid, unless he
keeps the thing that was paid to him, or he is
benefited.
For both instances, the default rule is that payment
will be invalid.
Q: Do we have the same default outcome when it
comes to the status of the contract that may have
been entered into by incapacitated parties?
A: NO. The effect in the contract entered into by
incapacitated parties would render the contract
voidable.
Q: In an obligation, who can make payment?
A:
1) Debtor
2) Person interested in the performance of the
obligation;
3) A person, although uninterested in the
performance of the obligation, who the
parties have stipulated to be allowed to
make payment.
ARTICLE 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 been beneficial to the debtor.
[NOTE]: If you go further down the provisions, you
will also discover that the creditor may also accept
payment from just about any third person who
does not fall under the list. How should we
interpret this list, if for example, the creditor may
expand the persons whom he may accept payments
from?
In reality, when we ask the question “who can make
payment?” what we are really asking is “who can
compel the creditor to accept the payment?”because
the power lies with the creditor.
A
If the creditor accepts payment, the obligation will
be extinguished, regardless of the intention or
disposition of the debtor, because when it comes to
payments received by the creditor from any other
person, we do not even look at the consent of the
debtor. It does not matter to the validity of the
payment.
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These 3 on the list can compel the creditor to accept
their payment.
Q: When we say that a person interested in the
performance of the obligation may make payment,
what kind of interest are we speaking of?
A: Material or Economic interest.
[NOTE]: It is not acceptable that the interest be
familial or emotional.
EXAMPLE: You are a mother and you learned that
your child owes money, and you do not want to ruin
the reputation of the family, so the mother wants to
pay. However, the creditor does not want to accept
payment from you because he wants that the person
who will suffer the burden would be the debtor
itself.
Q: Can the mother insist that her payment be
accepted?
A: No, because she may be interested in the
performance of the obligation for the sake of saving
the family’s reputation, or protecting her child, but
that is not the interest contemplated in the law
which would cloth her with the power to compel
the creditor to accept her payment, because we are
talking about economic or monetary interest.
Q: Who can be an example of a person interested in
the performance of an obligation? Who can compel
the creditor to accept payment?
A: A 3rd party mortgagor. Your property is
mortgaged to secure the obligation of the debtor. As
the owner of the mortgaged property, you are not a
party to the contract between the creditor and the
debtor. It is your property which is subject to the
levy created by the mortgage. You do not have
personal liability. But, if the debtor is not able to
pay, your property will be foreclosed, taken away
from you, and sold to the highest bidder at a public
auction. You can still recover it because there will
be a failure of redemption, and so on and so forth,
but it would be a hassle, because you will still
proceed after another, and a lot of paper works need
to be done as well. Hence, it is more convenient for
you if you would just pay the creditor.
Q: Can you compel him to accept payment?
A: YES because a mortgage on your property makes
you a person interested in the performance of the
obligation.
Effect of Payment by a Third Person
Q: What would be the effect, however, if any of this
absence of her debtor’s consent to the payment or his
objection to payment?
A:
(1) If the third person pays with the
knowledge and consent of the debtor →
there would be subrogation of the third
person in the creditor’s right, both as to
the credit itself, as well as the accessory
rights, such as mortgages and guaranties.
(2) If the third person pays without the
knowledge or consent of the creditor → the
third person can recover from the debtor
only to the extent that the debtor has been
benefited.
PLACES OF PAYMENT
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
payment shall be made wherever the thing might

be 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.
A
Place Where Obligation Shall be Paid
(a) Payment shall be made in the place
designated in the obligation.
(b) If there is no express stipulation on the
place, the following rules apply:
● If the undertaking is to deliver a
determinate thing, the payment
shall be made wherever the thing
might be at the moment the
obligation was constituted.
● In any other case, the place of
SI 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.
Proper Person To Whom Payment Should Be Made
ARTICLE 1240. Payment shall be made to the
person in whose favor the obligation has been
constituted, or his successor in interest, or any
person authorized to receive it.
Q: To whom must payment be made? Q: What are the instances when we do not need to
A: prove that such benefit redounded to the creditor?
1) Person in whose favor the obligation has
been constituted (original creditor); A: (SEE ENUMERATION ABOVE IN ARTICLE 1241)
2) Successor-in-interest of the original
creditor; or
ARTICLE 1242. Payment made in good faith to
3) Persons authorized to receive payment,
any person in possession of the credit shall
whether authorized by the creditor or any
release the debtor.
person authorized by law
[NOTE]: The law also says that payment may be [NOTE]: Another instance when payment may be
made to a 3rd person who may not fall under the list made to a third person is when the payment is
above-mentioned. made in good faith to a person who is in possession
of the credit.
But in cases payment is made to a 3rd person, there
should be a showing that there is benefit EXAMPLE UNDER 1242: When an instrument is
redounding to the creditor. payable to bearer and the holder is not entitled to
the payment because there was no negotiation nor
assignment in his favor but the payment was made
ARTICLE 1241. Payment to a person who is
by the debtor in good faith because the latter was
incapacitated to administer his property shall be
not aware of the defect or flaw in the holder’s right
valid if he has kept the thing delivered, or insofar
to demand payment, then it falls under Article 1242
as the payment has been beneficial to him.
& such payment releases the debtor from the
obligation.
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 third person acquires
the creditor's rights;
(2) If the creditor ratifies the payment to the third
[NOTE]: If a person is in possession of a check or a
promissory note payable to bearer then he is
deemed to be in possession of the credit.
Q: If an obligation to give involves the payment of a
sum of money, how should this be discharged?
A:
person;
1) The payment should be made in the
currency stipulated; otherwise, the
(3) If by the creditor's conduct, the debtor has
creditor may validly refuse the tender of
been led to believe that the third person had
payment.
authority to receive the payment.
2) In the absence of such stipulation, or if it is
not possible to deliver the currency
stipulated, then the payment should be in
 the currency which is legal tender in the
Philippines; otherwise, the creditor may
validly refuse the tender of payment.
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 bills of exchange or other mercantile
documents shall produce the effect of payment
A
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 the abeyance.
Q: Can you also pay using checks or other negotiable
instruments?
SI
A: NO. Checks & other negotiable instruments are
not considered legal tender in the Philippines
unless they have been encashed.
Q: Can the creditor choose to accept such payment
consisting of the delivery of the check and other like
instruments?
A: YES. If the creditor chooses to accept, but the
acceptance of the check would not produce the
effect of payment. It will only produce the effect of
payment when it is:
1) encashed; or
2) when through the acts of the creditor the
check has been impaired
Q: When can a check be impaired through the fault
of the creditor?
A: In cases of stale checks, when the creditor
receives the check from the debtor but does not
deposit the same or encash the check 6 months
from the date of its encashment. When the checks
go stale, the payment is deemed effected due to
the neglect by the creditor.
SPECIAL FORMS OF PAYMENT
Q: What are the special forms of payment?
A: There are 3 special forms:
1) Application of Payment;
2) Cession; and
3) Tender of payment & consignation
APPLICATION OF PAYMENTS
● One designates which obligation is to be
paid because the payment is not enough to
cover all obligations.
● Further, the obligations should be in favor
of the same creditor and of the same kind.
ARTICLE 1252. He who has 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 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.
● The rules on application of payments
apply to a person owing several debts of
the same kind of a single creditor.
● They are not applicable to a person whose
obligation as a mere surety is both
contingent and singular; his liability is
confined to such obligation, and he is
entitled to have all payments made applied
exclusively to said obligation and to no
other.
EXAMPLE: In obligations payable in money, and the
amount payable by the debtor is not sufficient to
cover all of it. Hence, you merely apply it as much
as the obligations that are due.
However, should the debtor not specify which
obligations are being paid first, then the law has
provided us with the set of rules to follow.
Rules That Would Be Observed In Case Debtor Does
Not Specify Which Obligations Are Being Paid First
1) To apply it to the obligations that have
become due.
The law says that unless the parties so
stipulate, or when the application of
payment is made by the party for whose
benefit the term has been constituted,
application shall not be made as to debts
which are not yet due
2) For those payments that are made to
obligations earning interest, apply the
payment to the interest first before the
principal.
If the debt produces interest, payment of
the principal shall not be deemed to have
 been made until the interests have been
covered.
3) Should it not be possible to determine
the order of payment in accordance with
the preceding rules, then apply it first to
the more onerous obligations.
Requisites of Application of Payments
(1) There must be 1 debtor & 1 creditor;
(2) There must be 2 or more debts;
(3) The debts must be of the same kind;
A
(4) The debts to which payment made by the
debtor has been applied must be due;
(5) The payment made must not be
sufficient to cover all the debts
GR Debtor’s right. The debtor who has various
debts of the same kind in favor of one and
In Default Of The Foregoing Rules
the same creditor may declare at the time of
making the payment, to which of them the
payment must be applied.
XPN
SI
In other words, the right to specify which
among his various obligations to the same
creditor is to be satisfied first rests with the
debtor.
(1) If the parties stipulate otherwise
(2) Application shall not be made as to debts
which are not yet due
Unless the application is made by the party
for whose benefit the term has been
constituted
(3) 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.
The debtor is deemed to have waived his
right to apply payments and acquiesced to
the creditor's application.
(4) If the debt produces interest, payment of
the principal shall not be deemed to have
been made until the interests have been
covered.
Thus, if the creditor agrees to apply a
payment to the principal, it may be
assumed that the interest had already been
paid or waived.
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.
● When the payment cannot be applied in
accordance with the preceding roles, or if
application can not be inferred from
other circumstances (e.g., if neither the
debtor nor the creditor makes the
application), apply the following roles:
(1) The debt which is most onerous to the
debtor, among those due, shall be
deemed to have been satisfied. In
general:
➔ A debt incurred as a principal
is more onerous than a debt as
a mere surety or guarantor.
➔ An interest-bearing debt is
more onerous than one without
interest.
➔ The older debt is more onerous
than a more recent one (unless
the more recent debt bears
interest, while the older one
does not).
➔ A secured debt is more onerous
than an unsecured debt.
(2) If the debts due are of the same nature
and burden, the payment shall be
applied to all of them proportionately
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 and his
creditors shall be governed by special laws.
● The debtor may cede or assign his property
to his creditors in payment of his debts.
○ This cession is voluntary on the
part of the debtor.
■ It is also subject to the
acceptance by the
creditors.
○ The creditors do not become
owners of the property assigned
(unlike in dation in payment).
 ■ The creditors merely
Does not require Requires plurality of
become authorized to
plurality of creditors creditors (2) When he is incapacitated to receive the
convert the property into
payment at the time it is due;
cash, which will be used to Debtor is not required to Debtor must be insolvent
pay their credits. be insolvent (3) When, without just cause, he refuses to give a
○ Payment by cession contemplates
receipt;
the existence of two or more Covers a specific Involves the totality of
creditors, and involves the property of the debtor the properties of the (4) When two or more persons claim the same
assignment of all the debtor's debtor right to collect;
property.
May totally extinguish Extinguish only up to the (5) When the title of the obligation has been lost.
Q: Is payment by cession the same with dacion en
the obligation. net proceeds of the sale
pago?
of the thing. ARTICLE 1258. Consignation shall be made by

A
A:
In dacion en pago,
Effect of Payment by Cession
(a) the debtor is not insolvent.
(b) The properties are given in lieu of payment
of money.
(c) the properties are given in lieu of payment
of money.
(d) there is transfer of ownership.
In payment by cession,
SI
(1) The debtor must be insolvent
(2) The properties are ceded to the creditors
(3) The creditors do not acquire title over the
property but only the right to dispose of it
and apply the proceeds of the sale to the
obligation owed to them.
● 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
Tender of Payment
effect of the cession, are made
between the debtor and his
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.
● Tender of payment is the manifestation by

Dacion En Pago vs Payment By Cessation

creditors shall be governed by
laws.

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
the debtor of his desire to comply with
or to pay the obligation.
○ 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.
● Tender of payment must be made in legal
DACION EN PAGO PAYMENT BY thing or sum due. tender to be valid.
CESSATION ○ However, payment in check may
Consignation alone shall produce the same effect be considered valid, if no prompt
There is transfer of There is transfer of in the following cases: objection to said form of payment
ownership of the thing possession of the thing is made.
from the debtor to the from the debtor to the (1) When the creditor is absent or unknown, or ■ A letter merely expressing
creditor. creditor. does not appear at the place of payment; intent to pay, but not
 accompanied by payment,
is not equivalent to tender
of payment.
Consignation
● Consignation is the act of depositing the
thing due with the court or judicial
authorities whenever the creditor cannot
accept or refuses to accept payment.
○ If the tender of payment (which has
been refused) ​is not followed by
consignation, the debtor is not
discharged from the obligation.
Q: How do you make a consignation?
A: Make a tender of payment.
If you proceeded right away to the consignation,
then your petition for consignation will be
dismissed by the court. One of the things you need
to prove is that you made a valid tender of
payment. Tender of payment is a must.
There are, however, instances when there is no
need to effect a tender of payment, and instead
Q: When does it happen that we do not know who
the creditor is?
A: Lotto winner.
After making a tender of payment, or should there
is no need to make a tender of payment, you can
proceed to consignation.
Q: Do you need to give notice to the creditor?
A: YES. In order that the consignation of the thing

A
Tender Of Payment Must Be Distinguished From
Consignation
● Tender is the antecedent of consignation,
that is, an act preparatory to the
consignation, which is the principal act
with results in the discharge of the
obligation.
● Tender of payment may be extrajudicial,
while consignation is necessarily judicial.
proceed right away to consignation.
Consignation Without Proper Tender
GR Consignation must be preceded by tender
of payment to discharge the obligation.
XPN However, in the following cases specified
by Article 1256, consignation alone shall
discharge the obligation:
a) When the creditor is absent or
unknown, or does not appear
due may release the obligor, it must first be
announced to the persons interested in the
fulfillment of the obligation.
Q: Why do you have to announce to the creditor
that you intend to effect a consignation?
A: To give the creditor the chance to accept the
tender of payment made by the debtor. It will be in
his interest to avoid litigation or having this offer to
pay reach the court because all of the expenses that

to
SI
TENDER

The characteristics
of payment must be
present here, and if
the creditor refuses
accept
payment,
consignation
the
then
may
CONSIGNATION

An act of depositing to the

court the object of the
obligation, and then the
court will determine whether
the obligation
extinguished.
will be
at the place of payment;
b) When he is incapacitated to
receive the payment at the time
it is due;
c) When, without just cause, he
refuses to give a receipt;
d) When two or more persons
claim the same right to collect;
e) When the title of the obligation
may be incurred by the debtor would be charged to
him. That’s why he is given that opportunity. If he
still refuses, then the debtor may now file the
petition.

ARTICLE 1257. In order that the consignation of

the thing due may release the obligor, it must first
be announced to the persons interested in the
be proper. fulfillment of the obligation.
has been lost.
Act preparatory to Principal act which results in The consignation shall be ineffectual if it is not
the consignation the discharge of the made strictly in consonance with the provisions
When Two Or More Persons Claim The Same Right
obligation which regulate payment.
To Collect
May be extrajudicial Necessarily judicial ● The creditor died, and he was left with
ARTICLE 1259. The expenses of consignation,
several heirs.
 when properly made, shall be charged against the
creditor.
Requisites for Consignation to be Effective
a) There was a debt due;
● Consignation is not necessary
where the payor seeks to exercise
a right, instead of performing an
obligation. Tender of payment is
sufficient for such exercise of
right.
A
b) The consignation of the obligation had
been made because the creditor to
whom tender of payment was made
refused to accept it without just cause,
or because of any of the grounds in Art.
1256 which dispenses with the need for
tender of payment;
● If the creditor justly refused to
accept the. payment because it
was not in legal tender,
consignation is not proper.
SI
c) Previous notice of the consignation had
been given to the person interested in
the performance of the obligation;
● This is to give the creditor an
opportunity to reconsider his
unjustified refusal and to accept
payment thereby avoiding
consignation and the subsequent
litigation.
d) The amount due was placed at the
disposal of the court; and
e) After the consignation had been made,
the person interested was notified
thereof.
● Two notices are required: prior
to and after the consignation.
The reason for the second notice
is to enable the creditor to
withdraw the goods or money
deposited, to avoid risk of
deterioration, depreciation or
loss.
Strict Compliance
● The foregoing requisites and mandatory
and must be strictly complied with.
Ineffectual Consignation
● The consignation shall be ineffectual
(a) if there is failure in any of the
foregoing requisites; or
(b) if the consignation is not made
strictly in consonance with the
provisions which regulate payment.
Applicability
● The foregoing requisites do not strictly
apply to debts pursuant to a judgment. In
such a case, if the judgment creditor
refuses to accept the payment of the
amount due on the judgment, the court
may direct the money to be paid in court
and when this is done, order satisfaction
of the judgment to be entered.
Requirements for Valid Tender
(1) Tender of payment must comply with the
rules of payment, or with the terms
required by the contract in making such
tender;
(2) It must be unconditional and for the
whole amount;
(3) It must be actually made
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.
Effect Of Consignation
Cancellation or Discharge of the Obligation
● Once the consignation has been duly
made, the debtor may ask the judge to
order the cancellation of the obligation.
Expenses
● The expenses of consignation, when
properly made, shall be charged against
the creditor.
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.
Withdrawal
● 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.
○ At this point, the debtor is still the
owner of the property deposited
and may thus withdraw it.
■ It has been held, however,
that when all the requisites
for consignation are
complied with, the
property deposited
becomes for the account of
the creditor, who must bear
the risk of loss, even before
A
the actual approval of the
court or acceptance by the
creditor.
○ After the creditor has already
accepted the consignation, or after
the court has already declared that
consignation is proper, the debtor
may withdraw the thing or sum
deposited only if the creditor
consents.
○ If the creditor should consent or
SI authorize the withdrawal -
(a) The creditor shall lose
every preference which he
may have over the thing.
(b) The co-debtors, guarantors
LOSS OF THE THING DUE
and sureties shall be
released.
Concept Of Loss
● Broadly speaking, loss refers to the
impossibility of performance of the
prestation.
○ The impossibility which
extinguishes obligation refers to
that which occurred after the
creation of the obligation.
○ If the impossibility existed at the
time of the creation of the
obligation, it is void ab initio.
Partial Loss
● If the Loss is partial, the courts shall
determine whether, under the
circumstances, the partial loss is so
important as to extinguish the obligation.
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.
Loss Through Fortuitous Event
● The extinguishment of an obligation which
has become impossible to perform follows
from the principle that no person shall be
liable for fortuitous events, or those which
could not be foreseen, or which, though
foreseen, were inevitable.
Q: What is the effect of loss on an obligation?
A:
For obligations to give a specific thing: Loss
extinguishes the obligation provided the debtor
was not at fault and before he has incurred delay.
For obligations to give a generic thing: Loss does not
extinguish the obligation because genus never
perishes.
In Obligations To Give Determinate Thing
Q: What are the instances/exceptions where the
debtor may still be made liable for loss of the thing
due even though he may not be at fault?
A:
(1) When the debtor is in delay;
(2) When there is a law providing so;
(3) Stipulation;
(4) When the obligation requires the
assumption of risk;
(5) When the obligation arises from the
commission of a criminal offense;
Unless the loss takes place after the debtor offers to
deliver the thing due to the creditor and the creditor
refuses to accept the thing without any just cause.
Q: Do we look into the extent of the loss for us to
determine whether or not the obligation has been
extinguished?
A: YES. It must be a total loss to bring about the
extinguishment of the obligation.
If it is a partial loss, then the court will have to
determine, under the circumstances, the partial
loss would be a total loss and bring about the
extinguishment of the obligation.
Q: Supposing it has been established that the debtor
is not at fault, but it is also determined that the loss
is due or is attributable to the fault of a 3rd person,
what will happen?
A: If the thing is lost due to the fault of a third
person, the obligation of the debtor would be
extinguished, but the creditor would have a right of
action against the third person who has been
determined to be at fault.
Q: We said that loss would extinguish an obligation
to give if the prestation involves the delivery of a
determinate thing. What happens if what we have is
an obligation to give a generic object?
A: The obligation would not be extinguished.
ARTICLE 1263. In an obligation to deliver a
generic thing, the loss or destruction of anything
of the same kind does not extinguish the
obligation.
A
Delimited Generic Obligations
● These obligations consist of things the
sources of which are limited by stipulations
of the parties.
● The object is generic, but it comes from a
specific source.
Q: What would happen if there is loss in a delimited
generic obligation?
A: The loss of the source would render the
SI
obligation extinguished.
[NOTE]: When it comes to delimited generic
obligations, if the loss includes the things covered
by the genus as delimited, then the obligation would
be extinguished. It does not have to be the source
which is lost. It is enough that the things belonging
to the genus as limited are lost for the obligation to
be extinguished.
EXAMPLE: If what was agreed upon was for A to
deliver to B the crops produced by her land this
summer, but these crops were lost due to a fire. That
could be enough to extinguish A’s obligation to B.
Even though the prestation is generic, it was
nonetheless limited, not just to the source, but as to
the time of their existence: crops this summer.
Q: Does the law create any presumption when it
comes to fault on the part of the debtor?
A: Yes.
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, flood, storm
or other natural calamity.
Creditor’s Remedy
ARTICLE 1269. The obligation having been
extinguished by the loss of the thing, the creditor
shall have all the rights of action which the
debtor may have against third persons by reason
of the loss.
● Under this provision, the creditor may seek
recourse to the insurance indemnity for the
thing lost.
Effect In Reciprocal Obligations
● In reciprocal obligations, the release of
the debtor due to loss or impossibility
also releases the creditor from the
counter­ prestation, because each
obligation depends on the other.
In Obligations To Do
Q: Does loss also affect an obligation to do?
A: There is also the concept of loss in case of
obligations to do; only, when it comes to obligations
to do, we speak of impossibility of performance.
We do not speak of loss because the prestation
cannot be affected by loss, but it can be affected by
impossibility.
Impossibility
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.
1) Physical impossibility arises when the
prestation, by its nature, cannot be
accomplished or performed.
● Impossibility refers to the nature of
the thing to be done, and not to the
inability of the obligor to do it. If
others can perform the prestation,
it is not impossible.
2) Legal impossibility arises when the
prestation becomes illegal or prohibited
by law.
Q: In the context of extinguishing the obligation,
when should the impossibility of performance take
place?
A: An obligation to do is extinguished if the
prestation becomes impossible at the time of
performance of the obligation.
[NOTE]: It must be as an incident of performance. It
cannot be at the time of the constitution of the
obligation.
Q: What happens if the impossibility takes place at
the constitution of the obligation?
A: There is no valid obligation to speak of because
there would not be a valid prestation, which is a
requisite of a valid obligation. If the prestation is
physically or legally impossible at the time of the
constitution of the obligation, then the obligation
would be a nullity as well.
Rebus Sic Stantibus Or Extreme Difficulty Due To
Unforeseen Events
A
ARTICLE 1267. When the 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.
● Art. 1267 is said to be based on the principle
of rebus sic stantibus, under which the
parties are considered to have stipulated in
the light of certain prevailing conditions,
and once these conditions cease to exist,
the contract also ceases to exist.
SI
○ However, Article 1267 is not an
absolute application of the
principle of rebus sic stantibus,
which would endanger the security
of contractual relations.
○ The parties to the contract must be
presumed to have assumed the
risks
developments.
of unfavorable
○ It is therefore only in absolutely
exceptional changes of
circumstances that equity demands
assistance for the debtor.
[NOTE]: An abrupt change in the political climate of
the county after the EDSA Revolution & the debtor's
"poor financial condition" do not warrant application CONDONATION OR REMISSION OF THE DEBT
of Art. 1267.
ARTICLE 1270. Condonation or remission is
If performance has become impossible altogether, essentially gratuitous, and requires the
Article 1266 should be applied. acceptance by the obligor. It may be made
expressly or impliedly.
Q: When do we apply this provision?
One and the other kind shall be subject to the
A: In certain exceptional circumstances. rules which govern inofficious donations.
Express condonation shall, furthermore, comply
Q: How do we gauge what is exceptional? What is with the forms of donation.
our baseline? If we’re speaking of difficulty that is
manifestly beyond what the parties contemplated, ● The donor could not donate beyond the
where are we starting off from? free portion of his property otherwise the
donation would be inofficious for
A: The parties to the contract must be presumed to infringing on the legitimes of the
have assumed the risk of unfavorable compulsory heirs.
developments. We start from 0, and Article 1267 ● Condonation or remission is an act of
should not be applied in cases where there are only liberality whereby the creditor, without
minimal difficulties. receiving any equivalent, renounces the
enforcement of the obligation, which is
Q: Why do you say that we only apply this to accordingly extinguished in its entirety
obligation to do? or in that part remitted.
A: This is only applied to obligations to do since it is
obligations to do that speaks of service; and the
subject of the provision of Article 1267 of the Civil
Code pertains to service which may become
difficult because of the manifest difficulty of what
has been contemplated by the parties.
[NOTE]: It has been settled by the Supreme Court
Q: Condonation basically is what?
A: It is a donation. This is a waiver that is executed
by the creditor in favor of the debtor. The Civil
Code provides that the condonation or remission is
essentially gratuitous, and it requires the
acceptance of the obligor. Thus, this form is
treated as a form of donation.
that Article 1267 would apply to obligations to do
Characteristic:
because the provision speaks of service. We do not
● Condonation or remission is essentially
apply this to obligations to give, such as the
gratuitous, and requires the acceptance by
obligation of the lessee to pay the lessor because
the obligor.
payment is an obligation to give.
● It is an essential characteristic of
remission that it be gratuitous, that there
is no equivalent received for the benefit
 given; once such equivalent exists, the
nature of the act changes.
➔ It may become dation in payment
when the creditor receives a thing
different from that stipulated; or
➔ It may become a novation, when
the object or principal conditions of
the obligation should be changed;
or
➔ It may become a compromise,
when the matter renounced is in
litigation or dispute and in
exchange of some concession
A
which the creditor receives
Governing Rules
● Condonation is essentially a donation of
the credit to the debtor, and is thus
subject to the rule on donations with
respectto acceptance, amount, and
revocation:
○ Condonation must be accepted by
the debtor.
○ If the debtor refuses to accept the
SI condonation, but the creditor still
does not enforce the debt, the debt
may eventually be extinguished
by prescription.
● The condonation is subject to the rule on
inofficious donations, i.e., the amount
condoned cannot be more than what the
creditor may give by will.
Effect On Accessory Obligation
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.
● The renunciation of the principal debt Implied Condonation
shall extinguish the accessory ● The Civil Code provides two instances
obligations. where condonation is implied:
○ But the waiver of the accessory (1) The delivery of private document
obligation shall leave the evidencing a credit, made
principal obligation in force. voluntarily by the creditor to the
○ Thus, the accessory obligation of debtor, implies the renunciation of
pledge may be waived without the action which the former had
affecting the principal debt against the latter.
previously secured by the pledge. ■ Whenever the private
document in which the
ARTICLE 1274. It is presumed that the accessory
debt appears is found in
obligation of pledge has been remitted when the
the possession of the
thing pledged, after its delivery to the creditor, is
debtor, it shall be
found in the possession of the debtor, or of a
presumed that the creditor
third person who owns the thing.
delivered it voluntarily,
unless the contrary is
Express Condonation provided.
■ The waiver may be
ARTICLE 1271. The delivery of a private
nullified if inofficious, but
document evidencing a credit, made voluntarily
the debtor and his heirs
by the creditor to the debtor, implies the
may uphold it if they can
renunciation of the action which the former had
prove that the delivery of
against the latter.
the document was made in
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.
ARTICLE 1272. Whenever the private document
in which the debt appears is found in the
virtue of payment of the
debt.
(2) An implied condonation may also
result from the presumption 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
possession of the debtor, it shall be presumed
that the creditor delivered it voluntarily, unless who owns the thing.
the contrary is proved. ■ However, being a mere
presumption, it may be
● Express condonation shall comply with the overcome by proof that no
forms of donation. condonation was intended.
● If the condonation is made mortis causa,
the forms of a will must be followed.
Instances Of Implied Condonation
● 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.
[NOTE]: The heirs of the donor may still question
the inofficiousness of the donation.
However, the debtor and his heirs may prove that
the delivery was made in virtue of payment of the
debt.
A
Accessory Obligation
● If the creditor only returned the security
given, it will not extinguish the obligation.
What will be extinguished is the accessory
contract.
CONFUSION OR MERGER OF RIGHTS
Concept Of Confusion Or Merger Of Rights
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ARTICLE 1275. The obligation is extinguished
from the time the characters of creditor and
debtor are merged in the same person.
● Confusion or merger usually takes place
when the debtor acquires the credit.
EXAMPLE: X borrowed P10,000 from his father,
who subsequently died and left X as his sole heir.
X thus succeeded to his father's credit of Pl0,000
against X. Thus, as far as the Pl 0,000 credit is
concerned, the characters of creditor and debtor
have become merged in the person of X.
Confusion or merger may also take place when the
creditor acquires an encumbered property.
EXAMPLE: when the mortgagee acquires the
mortgaged property, the mortgage obligation is
extinguished (but not necessarily the principal
obligation secured by the mortgage).
Q: When do we have confusion or merger?
A: There is confusion or merger of rights as long
as the crucial element is present, which is there
must be a meeting in one person of the character
of a debtor and creditor.
Q: This leads to the extinguishment of the
obligation because? I am interested in why
confusion or merger will lead to the
extinguishment of the obligation. What would be
the very simple principle that would serve as a
reason for the extinguishment?
A: In obligations, one cannot be the creditor &
debtor at the same time.
NOTE: You cannot both be the creditor and
debtor. You cannot be your own debtor. You
cannot be your own creditor. That is why the
obligation will be extinguished.
Effect And Extent
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.
● Confusion or merger which takes place in
the person of the principal debtor or
creditor benefits the guarantors.
○ But merger which takes place in
the person of any of the
guarantors does not extinguish
the obligation.
EXAMPLE: X is indebted to Y, which debt is
guaranteed by J. If X's debt to Y is extinguished
due to merger, J's obligation as guarantor (which is
merely accessory) is also extinguished. But if J
acquires Y's credit thereby extinguishing J's
obligation as guarantor, this does not affect X's
obligation. J can still collect from x.
● Confusion does not extinguish a joint
obligation except as regards the share
corresponding to the creditor or debtor in
whom the two characters concur.
● If the obligation is solidary, it may be
extinguished by the confusion or merger
between any of the creditors with any of
the debtors.
Q: What about joint obligations?
A:
ARTICLE 1277. Confusion does not extinguish a
joint obligation except as regards the share
corresponding to the creditor or debtor in whom
the two characters concur.
[NOTE]: There can be extinguishment insofar as the
portion pertaining to the joint debtor who has
become a creditor in the same transaction but only
to the extent that their personalities will be
coinciding.
ILLUSTRATION: For example, A and B are the
debtors. They issued a promissory note payable to C
and D or bearer. C and D then endorsed it back to B
who is also a debtor. Considering that the
promissory note is payable to bearer, there is
already a merger of rights between the creditor and
debtor in the person of B. In this case, the
obligation is considered partly extinguished insofar
as the portion pertaining to B. However, the
obligation still subsists insofar as the liability of A is
concerned. So A is still required to comply with the
obligation.
Q: What happens if the obligation is solidary in
character?
A: The obligation shall be considered as
extinguished.
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ILLUSTRATION: For instance, A, B and C were the
ones who issued the promissory note. They
delivered to D being the payee. The promissory note
is payable to the bearer. In the course of the
negotiation, the same promissory note found its
way back to A. So A is now both the creditor and
debtor. Since there is a solidary obligation, the
obligation is extinguished. BUT it must be noted
that there is a necessity for reimbursement, such
that B and C must pay A their share in the
obligation.
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[NOTE]: In this example, we only have one creditor,
D. We did not have an added complication of having
D and another person and having the promissory
note payable to bearer as well.
COMPENSATION
ARTICLE 1278. Compensation shall take place
when two persons, in their own right, are
creditors and debtors of each other.
● Compensation (or offsetting) is a mode of
extinguishing (to the concurrent amount) the
obligations of persons who, in their own
right and as principals, are reciprocally ○ If one of the parties to a suit over
debtors and creditors of each other. an obligation has a claim for
damages against the other, the
Kinds Of Compensation former may set it off by proving
his right to said damages and the
A. According to Extent amount thereof. (Art. 1283)
ARTICLE 1281. Compensation may be total or
Legal Compensation
partial. When the two debts are of the same
amount, there is a total compensation.
Concept Of Legal Compensation
● TOTAL: when the two debts are of the same ● Legal compensation takes place by
amount, in which case both debts are operation of law (ipso Jure) when all the
totally extinguished. requisites are present.
● PARTIAL: when the two debts are not of ○ It occurs even without the
the same amount, in which case the debts awareness of the parties, or even
are extinguished only to the concurrent against their will or without their
amount. consent. Its effects arise at the
B. According to Cause moment when all the requisites
concur.
● LEGAL: takes place by operation of law
when all the requisites.are present. (infra)
Requisites Of Legal Compensation
● CONVENTIONAL: takes place when the
parties agree to compensate their mutual ARTICLE 1279. In order that compensation may
obligations even in the absence of some be proper, it is necessary:
requisites.
○ In certain cases, compensation
may be claimed by only one of the
parties, by waiving his right to
object to it. This is called
facultative compensation.
EXAMPLE: if X's debt to Y is ·pure, while Y's debt
to X is with a term for Y's benefit and has not yet
(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;
become due, Y may object to the compensation,
but Y may also choose to waive the term and claim (3) That the two debts be due;
compensation.
(4) That they be liquidated and demandable;
● JUDICIAL - compensation decreed by a
court in a case where the defendant has (5) That over neither of them there be any
counterclaims against the plaintiff. retention or controversy, commenced by third
 persons and communicated in due time to the
debtor.
[NOTE]: There is another requisite: The
compensation must not be prohibited by law,
because there are obligations which cannot be
subject to compensation.
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
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amount, even though the creditors and debtors
are not aware of the compensation.
Requisites for Proper Legal Compensation
1) That each one of the obligors be bound
principally, and that he be at the same
time a principal creditor of the other;
● The parties must be mutually debtors
and creditors in their own right and as
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principals.
○ Thus, X corporation's debt to Y
cannot be offset with Y's debt to
a stockholder of X, because the
corporation is distinct from its
stockholder.
○ Also, the debt of partnership
ABC to X cannot be offset with
X's debt to B (a partner in A
share of stock is not a credit
against the corporation, and
stockholders, as such, are not
creditors of the corporation.
Thus, a corporation's credit
against its stockholder cannot
be offset with the latter's share
of stock. Taxes cannot be
compensated with the taxpayer's
claim against the Government,
because taxes are not "debts"
and · the Government and the
taxpayer cannot be considered
creditor and debtor to each
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;
● Compensation is also possible for
fungible things (not necessarily
consumable) because, by their very
nature, fungible things may be
substituted for each other.'78 .
3) That the two debts be due;
4) That they be liquidated and demandable;
● "Liquidated" means that the existence
and amount of the debt are
determined, as opposed
"unliquidated" claims (such as damages)
which are still disputed and whose
amount is not yet determined.
Compensation cannot extend to
unliquidated, disputed claims existing
to
from breach of contract.
● "Demandable" means that the debt is
legally enforceable, i.e., it is a civil (and
not natural obligation), it has not yet
prescribed, it is not subject to a
suspensive period or condition which
has not yet.happened, and it is not
unenforceable.
[NOTE]: However, when one or both debts are
rescissib/e or voidable, they may be
compensated against each other before they are
judicially rescinded or avoided. (Art. 1284) They
are considered valid until annulled or
rescinded.
● Legal compensation is possible 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.
5) That over neither of them there be any
retention or controversy, commenced
by third persons and communicated
in due time to the debtor.
EXAMPLE: When a credit is garnished by court
(execution or attachment).
Who May Invoke
Q: Would there be an exemption to this rule?
A: The guarantors may also set up compensation as
regards what the creditor may owe the principal
debtor.
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.
 ● Generally, compensation may be invoked
or claimed by the principal debtor (who is
also at the same time a principal creditor).
○ However, the guarantor may also
set up compensation as regards
what the creditor may owe the
principal debtor.
○ That is, the guarantor may invoke
any available compensation
between the principals, and thus
benefit from the extinguishment of
the principal obligation which
results from such compensation.
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GR Compensation may be invoked or claimed
by the principal debtor (who is also at the
same time a principal creditor).
XPN The guarantor may also set up
compensation as regards what the creditor
may owe the principal debtor.
[NOTE]: We are allowing the guarantor to do this
because this is a defense available to the debtor and
A:
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whatever reduces the obligation of the debtor also
reduces the exposure of the guarantor.
Q: What obligations may not be subject to
compensation?
(1) Obligation
commodatum;
arose from deposit or
(2) Obligation arising from support due by
gratuitous title;
(3) Once of the debts consists in civil liability
arising from a penal offense; and
(4) Taxes against the government.
ARTICLE 1287. Compensation shall not be
He may say “Okay, I would no longer insist to wait for
proper when one of the debts arises from a
the period or would no longer insist that the condition
depositum or from the obligations of a depositary
be fulfilled so that we can treat both obligations as
or of a bailee in commodatum.
pure and therefore, due and demandable.” They
can now effect the compensation.
Neither can compensation be set up against a
creditor who has a claim for support due by
Requisites Of Conventional Compensation
gratuitous title, without prejudice to the
provisions of paragraph 2 of Article 301. Conventional compensation is possible only
when the parties are mutual creditors and
debtors of each other.
ARTICLE 1288. Neither shall there be
compensation if one of the debts consists in civil Aside from this, the requirements of
liability arising from a penal offense. conventional compensation are:
a. That each of the parties can dispose of
Q: The law says that compensation will not be the credit he seeks to compensate, and
proper when one of the debts arises from a b. That they agree to the mutual
depositum. Does this refer to bank deposits? extinguishment of their credits.
A: No, because the nature of bank deposits is not
Limitations On Conventional Compensation
based on the contract of deposit but on simple
loan.
The following debts cannot be compensated-
Conventional Compensation
● Conventional (or voluntary) compensation
is compensation by agreement; it takes
place when the parties agree to
compensate their mutual obligations even
in the absence of some requisites.
○ Thus, the parties may agree upon
the compensation of debts which
are not yet due.
1) Debts arising from a contract of depositum;
2) Debts arising from a contract of
commodatum;
● Both depositurn and commodatum
are based on the trust and
confidence of the depositor or
bailor that the thing deposited or
lent will be returned.
● The prohibition is against the
[NOTE]: It may be that one of the obligations is not depositary and the borrower, in
yet due and demandable. It may also be that the favor of the depositor and bailor.
obligation is subject to a period or subject to a The depositor and bailor may
condition, but the person supposedly benefitted by choose to waive the benefit and set
the period or condition may ought to waive it. up compensation (facultative).
● Note that bank deposits (whether
fixed, savings or current deposits)
 are considered simple loans (Art.
1980), and are therefore subject to
compensation or · set-off against
the depositor's obligations to the
bank.
Claims Or Support Due By Gratuitous Title
● Allowing compensation may defeat the
purpose of support, which is to maintain
the person to be supported and answer
his needs. It may also defeat the
exemption of support from attachment
and execution.
● Support in arrears may be subject to
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because the need for the same has already
passed.
● Debts consisting of civil liability arising
from a penal offense.
○ The prohibition is against the
offender, in favor of the offended
party. The offended party may
choose to waive the benefit and
set up compensation (facultative).
● Obligation to pay taxes to the government.
Taxes are not "debts", and are not subject
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to compensation as a matter of public
policy.
Judicial Compensation
Q: When do we have Judicial Compensation?
A:
ARTICLE 1283. If one of the parties to a suit over
an obligation has a claim for damages against the
other, the former may set it off by proving his
right to said damages and the amount thereof.
EXAMPLE: When a complaint or an action for
collection of sum of money is filed against the
defendant and the defendant set up a counterclaim
because the plaintiff has a standing loan against the
defendant.
REMEMBER: Legal compensation will take place
automatically as a matter of law. The parties may
not even be aware that it has already taken place
because once all the requisites are present, legal
compensation takes place.
In assignment of credit, the notice to the debtor is
important because the receipt of the notice would
cut off entitlement to claim compensation. There
would be a demarcation line.
Assignment Of Credit
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 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.
Debtor’s Rights When Creditor Assigned His Credit
To A Third Party
● In case the creditor assigned his credit to a
third party, who then attempts to enforce
it, the debtor has the following rights:
a) If compensation has already taken place
before the assignment — the obligation is
deemed extinguished by operation of law,
and the debtor is thus discharged of
liability by invoking the compensation.
EXCEPTION: if the debtor consented to the
assignment, this is considered a waiver of the
compensation.
b) If compensation has not yet taken place
before the assignment (because, e.g., the
debts are not yet mature or liquidated) —
● If the debtor consented — he
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 debtor was informed of the
assignment, but did not consent
thereto - he may set up the
compensation of debts before the
assignment, but not of subsequent
ones.
● If the debtor was not informed of
the assignment - he may set up the
compensation of all credits prior to
the assignment and also later ones
until he had knowledge of the
assignment.
NOTE: The reason for the foregoing rules is to
protect a party from being fraudulently deprived of
the benefits of compensation.

Rules On Assignment Of Credit
GR The debtor who consented to the
assignment can no longer invoke any
compensation in his favor.
XPN (1) If at the time that the debtor gave
his consent, he reserved his right
to compensation.
(2) If the cession was communicated
to him and he did not give his
consent to the assignment, the
debtor may still setup
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compensation that took place
previous to the cession, but not of
subsequent ones.
(3) If the debtor was not given any
notice and the compensation took
place without his knowledge, the
debtor may setup compensation
of all credits prior to the same and
also later ones, until he had
knowledge of the assignment.
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Thus, the important period to look at is
when consent is given. In its absence,
when the debtor acquired knowledge.
Plurality Of Debts
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.
● Thus, the debt which is most onerous to
the debtor, among those due, shall be
deemed to have been offset. If the debts
due are of the same nature and burden, the
offsetting shall be applied to all of them
proportionately.
Effect Of Compensation
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.
NOVATION
ARTICLE 1291. Obligations may be modified by:
(1) Changing their object or principal
conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights
of the creditor.
● Novation is a mode of extinguishing an
obligation by changing its object or
principal conditions, by substituting a
new debtor in place of the old one, or by
subrogating a third person to the rights of
the creditor.
Requisites before
Extinguished
an Obligation may
(1) that it be so declared in unequivocal
be
terms, or
(2) that the old and the new obligations be
on every point incompatible with each
other.
● Novation, properly speaking, is
extinctive, i.e., an old obligation is
terminated by the creation of a new one that
takes the place of the former. A novation
that is merely modicatory does not cause the
extinguishment of the obligation, i.e. the old
obligation subsists to the extent that it
remains compatible with the amendatory
agreement.
● Novation has dual function:
(a) to extinguish an existing
obligation, and
(b) to substitute a new one in its place
● Extinctive novation does not necessarily
imply that the new agreement should be
complete by itself; certain terms and
conditions may be carried, expressly or by
implication, over to the new obligation.
Classification
A. According to Manner
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.
●
EXPRESS - when the parties declare in
unequivocal terms that the new obligation
novates or extinguishes the old one.
IMPLIED - the novation is inferred from
the fact that the old and the new
obligations are on every point
incompatible with each other.
○ The test of incompatibility is
whether the two obligations can
stand together, each one having an
independent existence; if they
cannot and are irreconcilable, the
 subsequent obligation would cannot coexist, then this means that the latter will
extinguish the first. (or in this case, the latter obligation) was meant to Q: How should the exception provided by Art. 1298
replace the prior will (or the prior obligation). be interpreted?
Q: How do we know that there is an
extinguishment of the old obligation through the On the other hand, if they can coexist, then this A: Authorities believe that this should be limited to
enactment of the new obligation? means that these are two separate obligations that voidable prior obligations, those which are valid
must both be honored by the debtor. until annulled.
A: In order that an obligation may be extinguished
by another which substitute the same, it is B. According to Cause Q: Would this satisfy the requirement of a prior
imperative: valid obligation?
● OBJECTIVE - novation caused by change in
(a) That it be so declared in unequivocal the object or principal conditions A: Yes. When an obligation is voidable, then it is
terms, or ● SUBJECTIVE - novation caused by change valid. If it is never annulled, then it will remain

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(b) That the old and the new obligations be on in the person of the debtor or the creditor valid. It is susceptible of ratification.
every point incompatible with each other.
Requisites For Novation EXCEPTION: in expromision, wherein the debtor
[NOTE]: Nothing beats an express provision to that For novation to take place, the following requisites does not consent, wherein the debtor does not
effect (i.e., to the effect that the old obligation is must concur: consent.
extinguished by the new obligation). This is because
the express provision erases all doubt as to what 1) There must be a previous/ prior valid ● If the original obligation has prescribed,
the intention of the parties are. obligation. the novation is valid. A debt is a natural
● If the original obligation was void, obligation and suffices as a consideration
Remember that if there are two successive the novation is also void. for the new obligation. Besides, the
obligations, it could be interpreted such that the prescription may be claimed only by the
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parties have two obligations between them—
Obligation A and Obligation B. If by executing
Obligation B, the parties add a provision that
Obligation B is being executed to replace and
extinguish Obligation A, then there would be no
problem and there is a clear case of novation.

However, if the parties are silent or if the second

obligation is silent, then there would be the need
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.

EXCEPTION: when annulment may be claimed

only by the debtor or when ratification validates
debtor, and he impliedly waives it by
agreeing to the new obligation.

2) The parties concerned must agree to a new

contract.
● There must be an intention to
novate or animus novandi.
● This requirement presupposes that
the parties have the capacity to
to look at the nature of the two obligations—and acts which are voidable. (Art. 1298) agree to the new contract.
whether the two obligations
can coexist. ● If the original obligation was voidable, the 3) The old contract must be extinguished.
novation is valid, because the debtor's
This concept is similar to the concept of an implied consent is deemed a ratification of the ARTICLE 1299. If the original obligation was
revocation—as compared to an express original obligation or an implied waiver of subject to a suspensive or resolutory condition,
revocation—of a last will and testament. If they its defect. (see Art. 1298)

the new obligation shall be under the same
condition, unless it is otherwise stipulated.
● 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.
[NOTE]: When coming up with a new obligation to
replace an old obligation for purposes of
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extinguishing the same, it is possible that the old
obligation would be subject to conditions, periods,
or may be pure.
Q: When coming up with a new obligation, must it
be exactly the same as the old obligation in the sense
that if the old obligation is pure/conditional/subject
to a period, the new obligation must also be
pure/conditional/subject to a period?
A: Not necessarily. The law does not really require
obligations.
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that there should be replication of the kind of the
nature and character of the old obligation. However,
for the sake of practicality, the parties may want to
align the conditions or periods between the two
After all, the new obligation will depend on the
existence or the validity of the prior obligation. This
would be particularly true with regard to those
obligations subject to a suspensive condition or
suspensive period. This is so because the
suspensive condition is not fulfilled, then the old
obligation never comes into existence – in which
case, there would be a lag between the old
obligation and the new obligation because if the
new obligation is pure and not subject to any
condition, then it is immediately due and
demandable.
Q: However, how would the new (pure) obligation
take effect if the prior (conditional) obligation has
not come into existence yet?
A: There would be a new obligation, which is pure,
but cannot be given effect yet because the prior
obligation which is subject to a suspensive
condition has a condition that is yet to be fulfilled.
The old obligation has not yet come into existence.
Therefore, for practical reasons, if the old
obligation is subject to a suspensive or resolutory
condition, the new obligation shall be subject to the
very same suspensive or resolutory condition. This
is so that the obligations would have simultaneous
existence and extinguishment. Of course, the
parties are allowed to decide otherwise if they
would want to.
However, should they decide to stipulate as such,
the new obligation would be on standby and would
still be awaiting the fulfillment of the suspensive
condition affecting the old obligation.
4) There must be a valid new contract.
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.
● 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.
● If the new contract has not yet been
executed, the previous obligation is
not novated and remains
subsisting.
● If the new contract is voidable, it is
valid until annulled (Art. 1390), so
the novation becomes effective. But
once the new contract is annulled,
it is deemed void, so the novation
becomes ineffective as well.
● If the new contract is
unenforceable (because it is not in
writing, ·per the Statute of Frauds),
novation cannot be proven.
[NOTE]: Apart from a previous valid obligation,
there must be a new obligation that the parties
enter into. The new obligation must likewise be
valid.
Q: Would it be fatal if the new obligation is void?
A: Not necessarily. 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. (Art. 1297, NCC)
[NOTE]: According to Art. 1297, if the new
obligation is void, it simply means that there was no
novation. The original obligation will subsist unless
the parties intended that the former obligation
should be extinguished in any event in which case
it will be so extinguished.
Novation Is Not Presumed
● Novation is never presumed, and the
animus novandi, whether totally or partially,
must appear by express agreement of the
 parties, or by their acts that are clear and
unmistakable.
Effect On Accessory Obligation
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.
● When the principal obligation is
extinguished in consequence of a novation,
accessory obligations are also extinguished.
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● This is because the accessory obligations
(e.g., mortgage and pledge) were given to
secure a particular obligation and the
solvency of a particular debtor; thus, a
change in the obligation or debtor destroys
the basis of the consent to give the
accessory obligations.
EXCEPTION: accessory obligations may subsist
only insofar as they may benefit third persons who
did not give their consent. (Art. 1296) However,
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these obligations for the benefit of third persons
are in reality distinct obligations.
Objective Novation
Essential Change Vs. Accidental Change
● Objective novation is caused by change in
the object or in the principal conditions
of the obligation.
○ Changes in the juridical relation
(from commodatum to lease of
things, or from negotiorum gestio to
agency, or from a mortgage to
antichresis, or from a sale to a loan)
may also be subsumed under this
category.
● In other words, there must be essential
change
○ Changes that breed incompatibility
must be essential in nature and not
merely accidental.
○ Even if there is no express
novation, such essential change
would cause an implied novation
by creating an incompatibility
between the old and the new
obligations.
● On the other hand, accidental changes or
changes which are merely incidental to
the main obligation, or refer merely to
secondary agreements do not cause
extinctive novation.
● The novation is merely modificatory, in
which case the new agreement will not
have the effect of extinguishing the first
but would merely supplement it or
supplant some but not all of its provisions.
Determination Of The Nature Of Change
● It is thus important to determine if the
change refers to the object or the principal
conditions (essential change), or merely to
incidental conditions (accidental
change). The determination is factual in
nature, and relative to the circumstances
of the case, the intention of the parties,
the economic importance of the
modification, and other similar factors.
Examples Of Essential Changes
A. Change in the price.
B. Reduction of the period or duration of an
easement of right of way.
C. Change from a contract to sell (written) to a
contract of lease (even if merely verbal).
D. Change from a sale of real estate to a
conditional sale of real estate.
● In a contract of sale, the title to the
property passes to the vendee upon
the delivery of the thing sold; in a
contract to sell, ownership is, by
agreement, reserved in the vendor
and is not to pass to the vendee
until full payment of the purchase
price;
E. Change from trust receipt agreement to a
simple loan.
F. Change from a mortgage to antichresis.
G. Change from a sale to a loan.
Examples Of Incidental Changes
A. Execution of a mortgage to secure the
payment of a loan - the contract of loan is
not novated by the mortgage, which is
merely an accessory contract.
B. Changes in the terms of payment of an
obligation to pay, such as:
a. Extension of the period - the
period affects only the
performance of the obligation and
does not create a new one.
b. Restructuring of the payment
scheme (e.g., from repayment in
one year to repayment in twenty
quarterly installments, or
providing for a new schedule of
payments and additional security)
c. Change or reduction in the
interest rate.
● It has been held that an obligation to pay
money is not novated by an instrument
 that expressly recognizes or ratifies the
old, changes only tile terms of payment,
and adds other obligations not
incompatible with the old ones, or where
the new contract merely supplements the
old one.
d. In a construction contract,
changes for the redesign of the
structure and corresponding
reduction in the contract price
(particularly where the contract
states that changes may be made in
the works without invalidating the
A
contract)
Subjective Novation/ Substitution
● Subjective novation is novation by
changing the person of the debtor or the
person of the creditor.
○ Change in the Debtor;
○ Change in the Creditor
ARTICLE 1293. Novation which consists in
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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.
Change In Debtor (Passive)
Expromision
● Done in 2 ways
(1) Expromision;
(2) Delegacion
Necessity Of Consent
● The consent of the creditor to the change in
the debtor is always required.
○ The consent may be express or
implied, and may be given at any
time while the agreement with
the debtor subsists.
○ For novation to take place, the
creditor must consent (expressly
or impliedly) to the release of the
old debtor.
■ The mere fact that the
creditor receives a substitution of the debtor only if with the
guaranty or accepts
payments from a third
person does not
constitute a novation and
does not extinguish the
obligation of the original
debtor.
○ Without the creditor's consent to
release the old debtor, there is no
novation; the third person who
has assumed the obligation of the
debtor merely becomes a (2) he may not have known about it, in
co-debtor or a surety.
● The consent of the new debtor is also
●
always required.
The consent of the old debtor is not always
required.
○ Thus, substitution of the debtor
may be classified into two kinds,
depending on whether the old
debtor has given consent:
- The initiative for the change does not
come from (and may even be made
without the knowledge or against the will
of) the debtor, since it consists of a third
person's assumption of the obligation.
- As such, it requires the consent of the
third person and the creditor.
Delegacion
- The debtor offers, and the creditor
accepts, a third person who consents to
the substitution and assumes the
obligation; thus, the consent of these
three persons are necessary.
[NOTE]: We will be effecting a novation through
substitution, the old debtor is free from the
obligation. If there is no such agreement, we
simply have an additional debtor.
Distinction Between The Two
● The distinction between expromision and
delegacion is simple: when it comes to
expromision, the debtor has nothing to do
with the substitution.
(1) He may know about it and he could
not have said anything;
which case he could not have said
anything; or he may have known
about it, but he objected to it.
(3) In all these instances, he had
nothing to do with the selection of
the person replacing him.
Q: What can be the motivation of that person if he
will suddenly substitute the debtor?
A: We do not know, because there can be a variety
of reasons as to why someone would replace
another person in an obligation. It can be personal,
commercial, strategic, etc.
The important thing is that with this substitution,
the old debtor is freed, and there will be proper
novation, which extinguishes the original obligation
involving the old debtor.
If it is delegacion, from the term itself, it hints of
delegating. The debtor himself chose the person
who will be replacing him.
EXCEPTIONS:
Q: Is it important to know when the substitution is
through expromision or delegacion?
A: Yes. It may happen that the person substituted
for the debtor may become insolvent or may not be
able to pay the obligation.
- The new debtor's insolvency shall
revive the action of the latter against
original obligor, but (unlike
expromision) it is subjection to
following exceptions -
(1) when said insolvency was already existing
and of public knowledge, when the debtor
delegated his debt, or
(2) when said insolvency was already existing
and known to the debtor, when he
delegated his debt. (Art. 1295)
not do with the selection of the new debtor, it is clear
the that he shall have no liability at all.
in
the Right Of The New Debtor
● Payment by the new debtor gives him the
rights mentioned in Articles 1236 and
1237. Thus:
1) EXPROMISION (without the knowledge or against
the will of the old debtor)
● The new debtor may recover from the old
debtor only insofar as the payment has

A
Q: What would be the liability of the debtor should
the new debtor turn out insolvent or unable to pay
off the obligation?
A:
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
obligations shall not give rise to any liability on
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 the delegated his debt.
GR There will be no liability on the part of the
been beneficial to the old debtor. (Art.
1236)
● The new debtor, upon payment, cannot be
subrogated to the rights of the creditor.
2) DELEGACION (with the knowledge and consent of
the old debtor)
● The new debtor may demand from the old
debtor what he has paid.

- The
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the part of the original debtor.

Effect Of Insolvency Of New Debtor

1) EXPROMISION (substitution is without the

knowledge or against the will of the old debtor)
new debtor's insolvency or
non-fulfillment of the obligations shall not
give rise to any liability on the part of the
XPN
old debtor should the new debtor become
insolvent or should not be able to fulfill
the obligation.

If the insolvency of the new debtor was

already existing and of public knowledge,
or known to the debtor at the time that he
delegated his debt.
●

●
● The new debtor, upon payment, is legally
subrogated to the rights of the creditor.

Change In The Creditor Or Subrogation (Active)

Subrogation is the transfer of all the rights

original debtor (i.e., the old obligation
shall not be revived). (Art. 1294)
2) DELEGACION (substitution is proposed by the
original debtor and accepted by the creditor)
of the creditor to a third person, who
substitutes him in all his rights.
It transfers to the persons subrogate the
credit with all the rights thereto
RATIONALE: In delegacion, where the old debtor
appertaining, either against the debtor or
has something to do with the selection of the new
against third person, be they guarantors
debtor, his liability will only be by way of exception,
or possessors of mortgages, subject to
in case of insolvency or failure to fulfill the
stipulation in a conventional subrogation.
obligation on the part of the debtor. When it comes
to expromision, where the old debtor has nothing to
 ● Subrogation of a 3rd person in the rights
of the creditor is either legal or
conventional.
Q: What are the different types of subrogation?
A:
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.
A
[NOTE]: It is very important to know that in legal
subrogation, this is never presumed and must be
provided for in the law. We have instances of legal
subrogation in Article 1302.
Q: What are the instances where legal subrogation
is presumed?
A:
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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.
Conventional Subrogation
● Is subrogation which takes place by
agreement; it requires the consent of the
original parties and of the third person.
● Conventional subrogation must be clearly
established in order that it may take
effect.
(1) RE 1: When a creditor pays another creditor
who is preferred even without the debtor’s
knowledge
Q: Under this instance, who will be subrogated?
A: The paying creditor.
Q: In whose rights would he be subrogated?
A: The rights of the preferred creditor. If you pay
another creditor, his rights would be subrogated
to you.
(3) RE 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.
Q: Give an example of this third instance.
A: This occurs when a guarantor pays the
obligation of the debtor since he has material or
economic interest over the said obligation.
Q: Is a co-debtor considered as a party interested
in the obligation?
A: If the obligation is JOINT, then he can be an
interested person. Thus, if there is a co-debtor to a
joint obligation and he pays the entire obligation,
then there would be subrogation because with the
extinguishment of the old obligation, he now
becomes the creditor of the other debtors.
This is however subject to the rules on payments
made by a third person without the consent of or
against the will of the original debtor.
Distinguished From Assignment Of Credit
● Conventional subrogation is not identical
to assignment of credit, thus:
(1) CONVENTIONAL SUBROGATION
(a) the debtor's consent is necessary;
(b) extinguishes an obligation and gives rise
to a new one;
(c) the nullity of an old obligation may be
cured by subrogation, such that the new
obligation will be perfectly valid;
ARTICLE 1303. Subrogation transfers to the
persons subrogated the credit with all the rights
thereto appertaining, either against the debtor or
against third person, be they guarantors or
possessors of mortgages, subject to stipulation in
a conventional subrogation.
(2) ASSIGNMENT OF CREDIT
(a) the debtor's consent is not required;
○ Nonetheless, the debtor must
have knowledge (either by formal
notice or some other means) of
the assignment so that he may
pay the debt to the proper party
(the assignee).
○ The debtor who, before knowing
of the assignment, pays his
 creditor :shall be released from
the obligation.
(b) assignment refers to the same right which
passes from one person to another;
(c) the nullity of an obligation is not
remedied by the assignment of the
creditor's right to another
(d) LEGAL SUBROGATION — is subrogation
which takes place by operation of law
because of certain acts. The parties'
consent or agreement is not necessary,
and it may take place even without the
debtor's knowledge.
subrogated by virtue thereof to all
the rights which the creditor had
against the debtor.
(iii) The insurer who pays a claim for
indemnity is legally subrogated to
the rights of the person
indemnified. The insurer may
then seek to recover from the
person who is liable for the loss.
Effect Of Partial Payment

A
● Legal subrogation is not
ARTICLE 1304. A creditor, to whom partial
presumed, except in cases
payment has been made, may exercise his right
expressly mentioned in the Civil
for the remainder, and he shall be preferred to
Code.
the person who has been subrogated in his place
● There is legal subrogation in the
in virtue of the partial payment of the same
following cases:
credit.
(e) When a creditor pays another creditor
who is preferred, even without the
debtor's knowledge;

EXAMPLE: if an unsecured creditor pays off a

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secured creditor, or if a creditor with junior
security pays off a creditor with senior security.
(a) When a third person, not interested in the
obligation, pays with the express or tacit
approval of the debtor;
(b) 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.
(i) Examples of interested persons:
co­ debtors, sureties, guaranties,
mortgagors and pledgors.

(ii) By express provision of Art. 2067,

the guarantor who pays is