ATTY.

STEVEN MICHAEL GALA

OBLIGATIONS AND CONTRACTS

DIFFERENT KINDS OF OBLIGATIONS

Section 1 – Pure and Conditional Obligations

1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past
event unknown to the parties, is demandable at once.
Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the
effects of the happening of the event.

PURE OBLIGATION – an obligation which does not contain any condition or term upon which the fulfillment is made to
depend; immediately demandable by the creditors and the debtor cannot be excused from not complying with his
prestation.

CONDITIONAL OBLIGATION – an obligation which depends upon a future or uncertain event, or upon a past event
unknown to the contracting parties.
– an obligation subject to a condition.
a) Suspensive Obligation – its fulfillment gives rise to an obligation; the demandability of the obligation or the
effectivity of the contract can take place only after the condition has been fulfilled.
b) Resolutory Obligation – its happening extinguishes the obligation which is already existing;

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.

PERIOD – a future and certain event upon the arrival of which, the obligation subject to it either arises or is extinguished.

INDICATIONS OF A TERM OR PERIOD:

When the debtor binds himself to pay –
 when his means permit him to do so
 little by little
 as soon as possible
 from time to time
 as soon as I have the money
 in partial payment
 when in the position to pay

1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which constitutes the condition.

Suspensive Condition – the acquisition of rights by the creditor depends upon the happening of the event which constitutes
the condition; if such condition does not take place, it would be as of the conditional obligation had never existed.
(e.g. promise to give a car after graduating from law school as cum laude)

Resolutory Condition – the rights and obligations already existing are under threat of extinction upon the happening or
fulfillment of such condition.
(e.g. donation by reason of marriage – the celebration of marriage is a resolutory condition; if the marriage did not push
through, the donation may be revoked)

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.

 Applies only to suspensive conditions.

3 KINDS OF CONDITIONS UNDER THIS ARTICLE:

1. POTESTATIVE – a suspensive condition which depends upon the will of one of the contracting parties = if
at the sole will of the debtor, it is void; if at the creditor’s, still valid. this is to prevent the establishment
of illusory obligations.
2. CASUAL – the condition depends upon chance or the will of a third person;(e.g. cellphone warranty)
3. MIXED – the condition depends partly upon the will of the parties and partly upon chance or the will of a
third person; (example ni Atty. De Chavez: passing the bar)

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.
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

The condition not to do an impossible thing shall be considered as not having been agreed upon.

POSSIBLE CONDITION – if it is capable of realization or actualization according to nature, law, public policy or good
customs.

2 KINDS OF IMPOSSIBLE CONDITIONS:

1. Physically Impossible – cannot exist or cannot be done in its nature;
2. Legally Impossible – contrary to law, good customs, or public policy.

Only the affected obligation is void, if the obligation is divisible, and the part thereof not affected by the impossible
condition is valid.

Only the condition is void if there is already a pre-existing obligation and it does not depend upon the fulfillment of the
condition which is impossible.

1184. The condition that some event happen at a determinate time shall extinguish the obligation as soon as
the time expires or if it has become indubitable that the event will not take place.

Positive condition – refers to the fulfillment of an event or performance of an act

Negative condition – refers to the non-fulfillment or non-performance of an act.

POSITIVE SUSPENSIVE CONDITION

The obligation is extinguished:
1. As soon as the TIME EXPIRES without the event taking place;
2. As soon as it has become certain that the EVENT WILL NOT TAKE PLACE although the time specified has not yet
expired.

1185. The condition that some event will not happen at a determinate time shall render the obligation
effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot
occur.
If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been
contemplated, bearing in mind the nature of the obligation.

** This is a condition of non-happening of a future event.

The obligation shall become effective and binding:

a) From the moment the time indicated has elapsed without the event taking place;
b) From the moment it has become evident that the event cannot occur, although the time indicated has not yet
elapsed.

1184 -vs- 1185

1184 1185
(POSITIVE SUSPENSIVE) (NEGATIVE SUSPENSIVE)
Jose obliges himself to give the pregnant woman Maria P5000 Jose obliges himself to give the pregnant woman Maria
if she would give birth on or before December 30. P5000 if she would NOT give birth on December 30.
a. Jose is LIABLE if Maria gives birth on or before December a. Jose is NOT LIABLE if Maria gives birth on December 30.
30.
b. Jose is NOT LIABLE if Maria gives birth after December 30. b. Jose is LIABLE if Maria DID NOT give birth on December
30 – if Maria gives birth BEFORE or AFTER December 30.
c. If Maria would have a miscarriage before December 30, the c. If Maria would have a miscarriage before December 30,
obligation is EXTINGUISHED. the obligation is deemed FULFILLED.

1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
 This provision speaks of the DOCTRINE OF CONSTRUCTIVE FULFILLMENT
 Compare with Art. 1203

- REQUISITES:
1. The condition is SUSPENSIVE;
2. The obligor ACTUALLY PREVENTS the fulfillment of the condition;
3. He acts VOLUNTARILY.
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

 Malice or fraud is not required, as long as his purpose is to prevent the fulfillment of the condition.
 No person shall profit by his own wrong.

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.

 Applies only to fulfilled suspensive conditions.

 Retroactive statute
 The effects of the obligation is deemed to commence not from the fulfillment of the obligation but from the day of
its constitution (similar to the legitimation of a natural child)
 When the obligation is unilateral, the debtor shall appropriate the fruits and interests received because he does
not receive any equivalent or valuable consideration from the obligee.

 The article does not require the delivery of fruits or payment of interests accruing (accumulating) before the
fulfillment of the suspensive condition.

 Obligations to do or not to do – the retroactive effect shall be determined by the court using its sound discretion
without disregarding the intentions of the parties.

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.

Actions available to the creditor:

 Action for prohibition restraining the alienation of the thing pending the happening of the suspensive condition;
 Action to demand security if the debtor has become insolvent;
 Action to set aside alienations made by the debtor in fraud of creditors;
 Actions against adverse possessors to interrupt the running prescriptive period.
 To have his rights annotated in the registry.

Rights of the DEBTOR – entitled to recover what has been paid by mistake prior to the happening of the suspensive
condition.

1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation
to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing
during the pendency of the condition:

LOSS
(1) debtor without fault – obligation is extinguished
(2) debtor with fault – obligation to pay damages

DETERIORATION
(1) debtor without fault – impairment is to be borne by the creditor
(2) debtor with fault – creditor chooses: rescission of obligation, fulfillment, indemnity

IMPROVEMENT
(1) by nature or time – improvement: inure to the benefit of the creditor
(2) at the expense of the debtor – granted to the usufructuary

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.

 Refers to the fulfillment of a resolutory condition.

 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

 When the resolutory condition happened, the obligation is considered as if it did not exist.
 The parties are bound to return or restore whatever they have received from each other – “reciprocal restitution”
 Donation by reason of marriage – if the marriage does not happen, such donation should be returned to the
donor.
 Loss, deterioration and improvement – governed by 1189.
 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.

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.

* This remedy should be termed as “resolution,” not rescission (Paras).

* This provision is not applicable to contracts of partnership (governed by Arts. 1786 & 1788), and sales of real and
personal properties by installments (governed by Maceda and Recto laws)

RECIPROCAL – each is a debtor and creditor of the other

RESCISSION – resolution or cancellation of the contract

 Applies only to reciprocal obligations where two parties are mutually debtor and creditor of each other in the
same transaction. The cause must be identical ad the obligations must arise simultaneously.
 The party who can demand rescission should be the party who is ready, willing, and able to comply with his own
obligations while the other is not capable to perform his own.

REMEDIES:
1. Specific performance or fulfillment of obligation with damages;
2. Rescission of contract with damages.

Effect of rescission: the parties must surrender whatever they have received from the other, and the obligation to pay is
extinguished.

If there is an express stipulation of automatic rescission between parties – such resolution shall take place only after the
creditor has notified the debtor of his choice of rescission subject to judicial scrutiny.

1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be
equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract,
the same shall be deemed extinguished, and each shall bear his own damages.

FIRST INFRACTOR KNOWN

The liability of the first infractor should be equitably reduced. – equitably offset each other’s damages.

FIRST INFRACTOR CANNOT BE DETERMINED

The court shall declare the extinguishment of the obligation and each shall bear his own damages.

Section 2 – Obligations with a Period

1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day
comes.
Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.
A day certain is understood to be that which must necessarily come, although it may not be known when.
If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be
regulated by the rules of the preceding Section.

PERIOD / TERM – consists in a space or length of time upon the arrival of which, the demandability or the extinguishment
of an obligation is determined; it may be definite (exact date or time is known) or indefinite (arrival of date is unknown but
sure to come).
- Future + Certain event

GENERAL CLASSIFICATIONS:
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

a) EX DIE / SUSPENSIVE PERIOD – from a day certain give rise to the obligation; suspensive effect.
b) IN DIEM / RESOLUTORY PERIOD – arrival of a term certain terminated the obligation; resolutory effect.

Term – length of time sure to come

Condition – fact or event uncertain to come

Basis Period/Term Condition

1. TIME Always refers to FUTURE Can refer to past events unknown to the
parties
2. FULFILLMENT Sure to happen at an exact date or May or may not happen.
indefinite time but sure to come.
3. INFLUENCE Merely fixes the time for the May cause the arising or cessation of the
demandability or performance of obligation.
obligation.

1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules
in Article 1189 shall be observed.

1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or
believing that the obligation has become due and demandable, may be recovered, with the fruits and
interests.

 If he was not aware of the period or he believes that the obligation has become due and demandable –
he can recover what he paid or delivered including fruits and interests;
 If he was aware and he paid voluntarily – he cannot recover the delivery made; it is deemed a waiver of
the benefit of the term and the obligation is considered already matured.

 The presumption is that the debtor knew that the debt was not yet due. He has the burden of proving that he was
unaware of the period.

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.

 PRESUMPTION: Obligation with a period is for the benefit of both the creditor and debtor.
 EXCEPTION: when it appears that the period is for the benefit of one or the other

 The benefit of the term may be the subject of stipulation of the parties.
1. Term is for the benefit of the debtor alone – he cannot be compelled to pay prematurely, but he can if he
desires to do so.
- Example: A obliges himself to pay B within 5 years. A cannot be compelled to pay prematurely, but he can pay anytime
within 5 years (A will benefit because he can pay anytime he wants as long as it is within 5 years; B will not benefit from
the interests if A decides to pay early).
2. Term is for the benefit of the creditor – He may demand fulfillment even before the arrival of the term
but the debtor cannot require him to accept payment before the expiration of the stipulated period.
- Example: A borrows money from B and is obliged to make the payment on December 5. B may compel A to make the
payment before December 5, but A may not compel B to receive the payment before December 5 (B will benefit from the
interests that will accrue before December 5).

 The creditor may have reasons other than the maturity of interest, that’s why, unless the creditor consents, the
debtor has no right to accelerate the time of payment even if the premature tender includes an offer to pay the
principal and interest in full.

1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that
a period was intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon the will of the debtor.
In every case, the courts shall determine such period as may under the circumstances have been probably
contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.

JUDICIAL PERIOD – period designated by the court.

CONTRACTUAL PERIOD – period fixed by the parties in their contract.
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OBLIGATIONS AND CONTRACTS

Court will fix a period:

1. When no period is mentioned, but it is inferable from the nature and circumstances of the obligation that a period
was intended by the parties.
2. When the period is dependent upon the will of the debtor.

 If the obligation does not state and intend a period, the court is not authorized to fix a period.
 The court must fix the duration of the period to prevent the possibility that the obligation may never be fulfilled or
to cure a defect in a contract whereby it is made to depend solely upon the will of one of the parties.

Court cannot fix the period:

1. If there is a period agreed upon by the parties and it has already lapsed or expired.
2. From the very moment the parties give their acceptance and consent to the period fixed by the court, it
becomes a law governing their contract.

1198. The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or
security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when
through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
(5) When the debtor attempts to abscond.

The period is disregarded and the obligation becomes pure and immediately demandable: [IGIVA]

 [I] When debtor becomes insolvent;

 The insolvency need not be judicially declared. It is sufficient that debtor could not pay his debts due to
lack of money or funds.
 [G] When the debtor does not furnish guaranties or securities;
 [I] When guaranties or securities given have been impaired or have disappeared;
 If security was lost through debtor’s fault - impairment
 If security was lost through fortuitous event - disappearance
 [V] When debtor violates an undertaking;
If such undertaking is the reason for the creditor to agree with such period.
 [A] When debtor attempts to abscond (escape).
Mere attempt to abscond is sufficient. It is an indication of bad faith.

Section 3 – Alternative Obligations

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.

OBLIGATIONS WITH PLURAL PRESTATIONS:

1. CONJUNCTIVE/COMPOUND OBLIGATION - an obligation where the debtor has to perform ALL the several
prestations in the contract to extinguish the obligation.
2. ALTERNATIVE OBLIGATION – an obligation where the debtor is required to fulfill ONLY ONE of the several
prestations to extinguish the obligation.
3. FACULTATIVE OBLIGATION – an obligation where the debtor is bound to perform ONLY ONE prestation, with a
reserved right to choose another prestation as SUBSTITUTE for the principal.

1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor.
The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not
have been the object of the obligation.

Implied grant to the creditor is not allowed. If it does not appear on the agreement as to whom among them has the right
to choose, it is the debtor who can choose.

1201. The choice shall produce no effect except from the time it has been communicated.

 The choice shall not produce any legal effect until it has been duly communicated to the other party.
 It can be done in writing, verbally, impliedly, or any unequivocal means.
 Once the choice has been communicated to the other party:
1. The obligation is now LIMITED only to the PRESTATION CHOSEN, with all the natural consequences flowing
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OBLIGATIONS AND CONTRACTS

therefrom;
2. The choice is IRREVOCABLE.

 The performance of prestation without announcing the choice to the creditor is NOT BINDING.
 The consent of the other party is NOT REQUIRED in making the choice – that will in effect frustrate the clear
intention of the law and the nature of the alternative obligation.
 If there is delay in the making of choice – punish the one who is supposed to exercise the right of choice for the
delay he caused – court may order the debtor to make a choice, or creditor to make the choice within certain
period, or court makes the choice.

1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound,
only one is practicable.

 There being but one prestation available, this prestation becomes a simple obligation.

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.

(1) If the debtor could not make a choice due to the creditor’s act of making the prestations impossible,
debtor may RESCIND the contract with damages - rescission takes place at the initiative of the debtor.
(2) If the debtor is being prevented to choose only a particular prestation, and there are others available, he
is free to choose from them, after notifying the creditor of his decision.

1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all the
things which are alternatively the object of the obligation have been lost, or the compliance of the obligation
has become impossible.
The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the
service which last became impossible.
Damages other than the value of the last thing or service may also be awarded.

 If the impossibility of all the objects of the alternative obligation is caused by the debtor, the creditor is entitled to
damages.
 If such impossibility is caused by a fortuitous event, the obligation is extinguished and the debtor is released from
responsibility, unless the contrary is stipulated by the parties.
 The creditor cannot claim for damages if the debtor can still perform the remaining prestations.
 The damages that may be recovered is based on the last thing which disappeared or the service which became
impossible. This last one is converted into a simple obligation.

1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative
from the day when the selection has been communicated to the debtor.
Until then the responsibility of the debtor shall be governed by the following rules:

A. only one thing lost – fortuitous event – creditor chooses from the remainder – debtor delivers the choice to
creditor;
B. only one remains – debtor delivers the same to the creditor;
C. only one thing lost – fault of the debtor
1. creditor may choose any one of the remainders;
2. creditor may choose the price or value of the one which was lost;
3. may choose 1 or 2 plus damages
D. all things lost – fault of the debtor – creditor may choose the price of ANYONE of the things, with damages if
warranted.

The same rules shall be applied to obligations to do or not to do in case one, some or all of the prestations
should become impossible.

 This article applies only when the right of choice has been expressly granted to the creditor.

1206. When only one prestation has been agreed upon, but the obligor may render another in substitution,
the obligation is called facultative.
The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not
render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute
on account of his delay, negligence or fraud.

 If loss or deterioration happened before substitution is made, obligor is not liable; after substitution is
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OBLIGATIONS AND CONTRACTS

communicated, he is liable for loss (through delay, negligence or fraud)

Section 4 – Joint and Solidary Obligations

1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation
does not imply that each one of the former has a right to demand, or that each one of the latter is bound to
render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly
so states, or when the law or the nature of the obligation requires solidarity.

* In case of concurrence of two or more creditors or two or more debtors in one obligation, the presumption is that the
obligation is joint, and not solidary.

INDIVIDUAL OBLIGATION – one debtor and one creditor

COLLECTIVE OBLIGATION – two or more debtors and two or more creditors

1. JOINT – entire obligation is to be paid or performed proportionately by the debtors;

2. SOLIDARY – each one of the debtors are obliged to pay the entire obligation, each one of the creditors
has the right to demand from any of the debtors, the fulfillment of the entire obligation;
A. Passive Solidarity – solidarity on the part of the DEBTORS
B. Active Solidarity – solidarity on the part of the CREDITORS.
 SOLIDARITY SHOULD BE EXPRESSED – law, stipulation, nature of obligation.
 When the obligation is ambiguous, it must be considered as joint obligation.

CONSEQUENCES OF SOLIDARITY:
1. Passive Solidarity – full payment made by anyone of the solidary debtors extinguishes the obligation. The one
who paid can claim reimbursement from his co-debtors as regards their corresponding shares in the obligation.
A, B, & C are solidary debtors of D in the sum of P900.
D can demand payment of the entire obligation when it becomes due, from any one of the debtors or from all of them at
the same time.
If C paid the whole P900 to D, he may claim reimbursement from A and B.

2. Active Solidarity – full payment to any of the creditors extinguishes the obligation. The creditor who received the
entire amount will be liable to pay the corresponding shares of his co-creditors in accordance with their internal
agreement.
Garfield owes the sum of P40,000 to Mickey, Minnie, Donald, and Pluto, who are solidary creditors. Garfield can pay
anyone of them. If Mickey received the P40,000, he is liable to pay the corresponding shares of his co-creditors.

MIXED SOLIDARITY

a. Solidary Debtors, Joint Creditors

 P9,000.00 – total debt
Debtors (Solidary) Creditors (Joint)
Aida pays P4,500.00 John = P 4,500.00
Lorna pays P4,500.00 Marsha P 4,500.00
Fe

b. Joint Debtors, Solidary Creditors

 P 9,000.00 – total debt
Debtors (Joint) Creditors (Solidary)
Aida (P 3,000.00) John (can claim from debtors)
Lorna (P 3,000.00) Marsha (-same-)
Fe (P 3,000.00)

1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers the
contrary does not appear, the credit or debt shall be presumed to be divided into as many shares as there are
creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of
Court governing the multiplicity of suits.

 This provision speaks of JOINT DIVISIBLE OBLIGATION.

 When there is a concurrence of several creditors or of several debtors in one and in the same obligation, there is
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

a presumption that the obligation is joint.

 Each of the creditors shall be entitled to demand only the payment of his proportionate share of the credit.
 Each of the debtors may be compelled to pay only his proportionate share of the debt.
 The credits or debts shall be considered distinct from one another.

CONSEQUENCES OF JOINT OBLIGATION:

1. Each debtor – liable for a proportionate part of the entire debt;
Thales, Socrates, Plato, & Aristotle owe P100 to Bruce Lee
= 4 debtors and 1 creditor
Each of them owes Bruce Lee P25
Bruce Lee cannot collect the entire P100 from any one of them.
2. Each creditor – entitled to a proportionate part of the credit;
Piggy owes P100 to Froggy and Fishy
= 1 debtor and 2 creditors
Froggy can only collect 50 from Piggy,
Same with Fishy
3. Demand made by one creditor upon one debtor produces the effects of default only as between them, but not
with respect to the others;
Bubbles demanded payment from Buttercup; Buttercup was in default. This does not mean that the others are in default
too because Bubbles did not demand from them.
4. The interruption of prescription caused by the demand made by one creditor upon one debtor will not benefit the
co-creditors;
Wittgenstein extended the period in which Tarski should have paid his debt to him. This does not mean that the same
extension applies to Tarski's debt to Davidson.
5. The insolvency of one debtor will not increase the liability of his co-debtors, nor will it allow a creditor to demand
anything from the co-creditors.
If Husserl and Merleau-Ponty are debtors of Sartre for P1,000,000.00 and Husserl becomes insolvent, the liability of
Merleau-Ponty will only be P500,000.00 representing his proportional share of ½ in the whole obligation.

1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts,
and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be
insolvent, the others shall not be liable for his share.

JOINT INDIVISIBLE OBLIGATION – an obligation where solidarity is not provided and the prestation or object is not
susceptible of division; its fulfillment requires the concurrence of all debtors, while doing each one’s parts.

Batman and Robin jointly obliged themselves to deliver a brand new Toyota Fortuner worth P1,500,000.00 to Superman.
The object, a vehicle, is indivisible. They must deliver the thing jointly. In case of breach, the obligation is converted into
monetary obligation for indemnity for damages. Batman and Robin will be liable only for P 750,000.00 each.

 The act of one is not binding (others must concur)

1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself
imply indivisibility.

 Solidarity is expressed in the stipulations of the party, law governing the obligation, or the nature of the
obligation.

INDIVISIBLE OBLIGATION – an obligation where the prestation or object to be delivered cannot be performed by parts
without altering its essence or substance.

Basis Indivisibility Solidarity

1. Nature Refers to the prestation of the contract Refers to the tie existing between parties
of the obligation (who is liable)
2. Number of Does not require plurality of parties Requires plurality of parties
subjects / parties
3. Effect of breach Obligation is converted into monetary The liability, even if converted into
of obligation obligation for indemnity for damages – indemnity for damages, remains solidary.
each debtor is liable only for his part in
the indemnity.

1211. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

by the same periods and conditions.

 The solidarity of the debtors is not affected even if different terms and conditions are made applicable to them.
 Enforcement of the terms and conditions may be made at different times. The obligations which have matured
can be enforced while those still undue will have to be awaited. Enforcement can be made against any one of the
solidary debtors although it can happen that a particular obligation chargeable to a particular debtor is not yet
due. He will be answerable for all the prestations which fall due although chargeable to the other co-debtors.

Sad Face, Happy, and Fanny got a loan of P150 from Smiley. They signed a promissory note solidarily binding themselves
to pay Smiley under the following terms:
Sad Face will pay P50 with 3% on December 30, 2006
Happy will pay P50 with 4% on December 30, 2007
Fanny will pay P50 with 5% on December 30, 2008
On December 31, 2006, Smiley can collect his P50 with 3% from any one of the debtors, but not the whole P150 because
it is not yet entirely due. The maturity of the other amounts should still be awaited. If maturity comes, Smiley can collect
from any of the debtors, because they are expressly solidary in liabilities, and not affected by the secondary stipulations.

1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything which
may be prejudicial to the latter.

 Every solidary creditor is benefited by the useful acts of any one of them.
 If a solidary creditor performs an act which is not fair to his co-creditors, the act may have valid legal effects or
the obligation of the debtor due to them may be extinguished, but the performing creditor shall be liable to his
co-creditors.

 Question: May solidary creditors perform an act that is beneficial to others?

1213. A solidary creditor cannot assign his rights without the consent of the others.

Assign – transfer of right

 The assignee does not become a solidary creditor, and any payment made upon him by the debtor does not
extinguish the obligation. He is considered a STRANGER, and his acts are not binding to the solidarity.

 DOCTRINE OF MUTUAL AGENCY - In solidary obligations, the act of one is act of the others.
 Exceptions to the doctrine:
1. Art. 1212 – a creditor may not perform an act prejudicial to other creditors
2. Art. 1213 – a creditor cannot transfer his right without consent

1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has
been made by one of them, payment should be made to him.

 The debtor can pay any one of the solidary creditors. Such payment when accepted by any of the solidary
creditors will extinguish the obligation.
 To avoid confusion on the payment of the obligation, the debtor is required to ay only to the demanding creditor
and that payment is sufficient to effect the extinguishment of the obligation.
 In case two or more demands made by the other creditors, the first demand must be given priority.

1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or
with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of Article
1219.
The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to
the others for the share in the obligation corresponding to them.

NOVATION – obligations are modified by:

1. Changing their object or principal conditions;
2. Substituting the person of the debtor; and
3. Subrogating (placing) a third person in the rights of the creditor. [Art. 1291]

COMPENSATION – takes place when two persons, in their own right, become creditors and debtors of each other
 the amount of one is covered by the amount of the other
Erap borrowed P100 from Fernando.
Fernando borrowed P75 from Erap.
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

Erap’s obligation to Fernando is now P25 only, because the original obligation was offset by Fernando’s supposed-to-be
obligation to Erap.

CONFUSION – takes place when the characters of creditor and debtor are merged in the same person.
Tito pays his debt to Vic with a check payable to “cash”.
Vic paid his debt to Joey with the same check.
Joey paid his debt to Tito, with the same check Tito issued to Vic.
Tito becomes paid by his own check. He becomes the debtor and the creditor of himself at the same time.

REMISSION – the gratuitous abandonment by the creditor of his right; acceptance of the obligor is necessary.

 These 4 modes of extinguishing obligations are acts prejudicial to the other solidary co-creditors because these
have the effect of extinguishing the debt or obligation which is due to all of them.
 The only recourse of the co-creditors is to let the one who executed any of those acts be liable for the shares
corresponding to all his co-creditors (in their internal agreement).

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.

 When there is passive solidarity, the creditor can proceed against:

 Any of the solidary debtors;
 Some of the solidary debtors;
 All of the solidary debtors, simultaneously.

Extrajudicial demands - first demand shall not prevent subsequent demands on the other co-debtors, if co-debtor first to
have been required to fulfill obligation did not act on it.

1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary
debtors offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the
interest for the payment already made. If the payment is made before the debt is due, no interest for the
intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying
the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.

Payment – consists in the delivery of the thing or the rendition (rendering) of the service whish is the object of the
obligation.

Interest – compensation for the use of borrowed money

Partial payment – the solidary debtor who made the partial payment is entitles to be reimbursed only for such amount of
money which he had paid and which exceeds his own share in the obligation.

If one of the debtors is insolvent and could not pay his share in the obligation, all solidary debtors including the paying
debtor shall share proportionately in the settlement of the corresponding share of the insolvent debtor. [In short, his co-
debtors will save his ass.]

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.

No reimbursement if:

1. Obligation PRESCRIBES
 The creditor did not make any demand for more than 10 years.
2. Obligation becomes ILLEGAL
 Law has been passed, making such prestation illegal.

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.

 Atty De Chavez: Ito ay provision sa tanga... (siyempre, 'pag nagbayad na, wala nang obligation, wala na ding ire-
remit...)
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

 Any belated (delayed) remission by the creditor of the share of any of the debtor has no effect on the internal
relationship of the co-debtors.

Payment before remission: A, B, and C solidarily owe D P1,500.00. B paid the entire obligation. After which, D remitted the
share of C. B can collect P500.00 each from A and C even if the share of C in the obligation had been remitted.

Remission before payment: A, B, and C solidarily owe D P1,500.00. D remitted the share of C. Thereafter, B paid the
entire obligation. B can collect P500.00 from A but not from C. However, B may ask D to give back P500, which is the
supposed-to-be share of C.

 After the prior payment of the entire obligation, there is nothing to remit because the obligation had been
extinguished.

1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to
reimbursement from his co-debtors.

 There is nothing to be reimbursed because he did not spend any money, the remission being a gratuitous act.

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.

Loss of the thing or impossibility of prestation –

1. NO FAULT – solidary debtors – obligation is extinguished
2. FAULT of any one of them – all are liable because of their mutual agency
3. FORTUITOUS EVENT – delay on the part of the debtors – all will be liable

 If the thing due was not lost, but there is merely a delay, fraud or negligence on the part of one of the solidary
debtors, all (including the innocent) debtors will share in the payment of the PRINCIPAL prestation. The damages
and interest imposed will be borne by the guilty debtor.
 Obligation to deliver is converted into an obligation to pay indemnity when there us loss or impossibility of
performance.

1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived
from the nature of the obligation and of those which are personal to him, or pertain to his own share. With
respect to those which personally belong to the others, he may avail himself thereof only as regards that part
of the debt for which the latter are responsible.

DEFENSES OF A SOLIDARY DEBTOR:

1. Defense arising from the nature of the obligation – such as payment, prescription, remission, statute of frauds,
presence of vices of consent, etc.
2. Defenses which are personal to him or which pertains to his own share alone – such as minority, insanity and
others purely personal to him.
3. Defenses personal to the other solidary creditors but only as regards that part of the debt for which the other
creditors are liable.

Section 5 – Divisible and Indivisible Obligations

1223. The divisibility or indivisibility of the things that are the object of obligations in which there is only one
debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title.

DIVISIBILITY – refers to the susceptibility of an obligation to be performed partially.

 Obligation to deliver 100 sacks of rice or a particular type
INDIVISIBILITY – refers to the non-susceptibility of an obligation to partial performance.
 Obligation to deliver a particular computer set

If a thing could be divided into parts and as divided, its value is impaired disproportionately, that thing is INDIVISIBLE.
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

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.

* Relate this provision to Articles 1165, 1208 and 1209.

JOINT INDIVISIBLE OBLIGATION – the object is indivisible but the liability of the parties is joint.

 The unfulfilled undertaking (duty) is converted into a monetary obligation which is not divisible.
 The guilty debtor is liable for damages.

1225. For the purposes of the preceding articles, obligations to give definite things and those which are not
susceptible of partial performance shall be deemed to be indivisible.
When the obligation has for its object the execution of a certain number of days of work, the accomplishment
of work by metrical units, or analogous things which by their nature are susceptible of partial performance, it
shall be divisible.
However, even though the object or service may be physically divisible, an obligation is indivisible if so
provided by law or intended by the parties.
In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in
each particular case.

The following are considered INDIVISIBLE obligations:

1. Obligation to give definite things
2. Obligations which are not susceptible of partial performance
3. Even though the object or service may be physically divisible, it is indivisible if:
a. the law so provides
b. when the parties intended it to be indivisible

The following obligations are deemed DIVISIBLE:

1. When the object of the obligation is the execution of a certain number of days of work
2. When the object of the obligation is the accomplishment of work measured in units
3. When the object of the obligation is susceptible of partial compliance
4. When the object of the obligation is such that the debtor is required to pay in installments

 If the contract is divisible, and a part of it is illegal, the illegal part is void, and the rest shall be valid and
enforceable.
 If the contract is indivisible, and a part of it is illegal, the entire contract is void.
 Partial performance of an indivisible obligation is tantamount to non-performance.

Section 6 – Obligations with a Penal Clause

1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the
payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless,
damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the
obligation.
The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.

* An obligation with a penal clause may be defined as one to which an accessory undertaking is attached for the purpose
of insuring its performance by virtue of which the obligor is bound to pay a stipulated indemnity or perform a stipulated
prestation in case of breach.

 Purposes:
1. Funcion coercitiva o de garantia – to insure the performance of the obligation
2. Funcion liquidatoria – to liquidate the amount of damages to be awarded to the injured party in case of
breach of the principal obligation; and
3. Funcion estrictamente penal – in certain exceptional cases, to punish the obligor in case of breach of the
principal obligation.

 This is an accessory obligation attached to the principal obligation, which imposes an additional liability in case of
breach of the principal obligation.
 It pushes the debtor to perform his obligation faithfully and without delay – within the period agreed upon, or
else, he suffers a fixed civil penalty without need of proving the damages of the other party.
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

The penalty imposable is a substitute for the indemnity for:

a. damages
b. payment of interest in case of breach of obligation
-unless the contrary is stipulated!

EXCEPTIONS – additional damages may be recovered from the following acts:

 If the debtor refuses to pay the penalty
 If the debtor is guilty of fraud in the fulfillment of the obligation
 If there is express stipulation that the other damages or interests are demandable to the penalty in the
penal clause

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.

 A debtor cannot evade from payment of his principal obligation by choosing to pay the penalty stipulated, except
when the debtor is EXPRESSLY granted with the right to substitute the penalty for the principal obligation. – an
obligation with penalty clause cannot be turned to facultative obligation unless expressly stipulated in the
contract.
 The creditor cannot demand the stipulated fulfillment of the principal obligation and the penalty at the same time,
except
a. when the creditor was clearly given the right to enforce both the principal obligation and penalty;
b. when the creditor has demanded fulfillment of the obligation but cannot be fulfilled due to the
1. debtor’s fault – creditor may demand for penalty
2. creditor’s fault – he cannot claim the penalty
3. fortuitous event – principal obligation and penalty are extinguished

1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be
demanded.

 As long as the agreement or contract is breached.

 The mere non-fulfillment of the principal obligation entitles the creditor to the penalty stipulated.
 The purpose of the penalty clause is precisely to avoid proving damages.

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.

JUDICIAL REDUCTION OF PENALTY

 Principal obligation – partly complied with by the debtor (but not in indivisible obligation, because it is tantamount
to non-compliance)
 Principal obligation – complied not in accordance with the tenor of the agreement (refers to irregular
performance)
 Penalty – iniquitous or unconscionable

 Judge’s power to reduce penalties are limited to private contracts.

INIQUITOUS OR UNCONSCIONABLE – when it is revolting to the conscience or common sense; grossly disproportionate to
the damages suffered.

PENALTY NOT ENFORCEABLE:

1. Impossible performance of principal obligation due to fortuitous events
2. Creditor prevented the debtor from fulfilling the obligation
3. Penalty is contrary to good morals or good customs
4. Both parties are guilty of breach of contract
5. Breach of contract by the creditor
6. None of the parties committed any willful or culpable violation of the agreement

1230. The nullity of the penal clause does not carry with it that of the principal obligation.
The nullity of the principal obligation carries with it that of the penal clause.
 ATTY. STEVEN MICHAEL GALA
OBLIGATIONS AND CONTRACTS

Because the penal clause is only an accessory to the principal obligation, it cannot exist alone.
If the penal clause is void, the principal obligation remains enforceable.

The nullity of penal clause does not mean the nullity of the principal.
For example:
In case of non-payment of P10,000, P1,000 per day as penalty shall be imposed. It is a void contract but it is not an
excuse that you don't have to pay the principal which is P10,000.