an extended period because Art. 1659 does not give the court such discretion.

4. Generally, the power to rescind must be invoked judicially; it cannot be exercised

solely on a party’s own judgement that the other has committed a breach of the
obligation.

a. However, the injured party may consider the contract as rescinded and act
accordingly, even without prior court action or before any judicial pronouncement of
breach. But his unilateral determination is provisional, since the other party may
challenge it by suing him in court. It is then the court which will finally determine if the
rescission should be set aside or affirmed.

b. Practically speaking, extrajudicial rescission is feasible if the injured party has not
yet performed; he can rescind and simply refuse to perform his own prestation. Thus, a
buyer can simply withhold payment if the seller is not ready to deliver. However, If the
injured party has already performed, such as a buyer who has already paid the
purchase price, he would have to seek judicial rescission so the compel the infractor to
make him hole (e.g., or the buyer to recover the price he has already paid).

c. Also, in the sale of immovables, a demand for rescission must be made either
judicially or by notarial act, even if it if stipulated that rescission shall take place upon
failure to pay on time. (Art.1592)

5. Rescission may be availed of by the injured party. A party may not seek rescission if
he was the one who prevented the other party from fulfillment of the obligation.

6. In exceptional cases, partial rescission may be ordered. Example: when a

construction is already 75% complete, rescission may be ordered as to the portion
which remains unfinished.
7. The right to rescind may be waived, expressly or impliedly. Example: unqualified
acceptance of late payments is an implied waiver of the right to rescind on the basis of
such late payments.
8. In case of rescission, mutual restitution is required. This means bringing the parties
back to their original status prior to the inception of the contract. They must return to
each other what they respectively reserved (less damages, if proper).

B. SPECIFIC PERFORMANCE

1. Specific performance is remedy which is alternative to rescission. The injured party

cannot have both. Thus, e.g., the lessor cannot rescind the contract and recover
possession of the leased property, and at the same time demand future rents.

2. The breach contemplated in Art. 1911 is the obligor’s failure to comply with an
obligation already extant. If the obligation I subject a suspensive condition which has not
been fulfilled, the obligation did not even arise or exist, and could not have been
breached. Thus, the other party cannot demand specific performance (or even
rescission under Art. 1911).

a. Thus, e.g., in a contract to sell a parcel of land, the obligation to covey title is
condition upon full payment of the contract price. Until then, ownership remains in the
seller. If the price is not paid, the obligation to convey title does not arise, and the buyer
cannot compel performance.

b. Also, in a contract to sell scrap iron upon the buyer’s opening of a letter of credit,
the seller cannot be compelled to sell if the buyer failed to open a letter of credit.

3. Where the plaintiff is the party who did not perform his undertaking under the
contract, he is not entitled to insist upon the performance of the contract by defendant,
or recover damages by reason of his own breach.

4. The right to demand specific performance is without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles 1385 and 1388 and
the Mortgage Law. (Art. 1191)
- Thus, the oblige may no longer demand specific performance if the thing to be given
has already been sold by the obligor to a third party in good faith.
C. DAMAGES

1. Damages shall be awarded in either case of specific performance or rescission of

the obligation.

- In case of rescission, the damages must be those consistent with abrogation of the
contract, and not those which effectively amount to specific performance. Thus, in
case a lease is rescinded, the lessor may demand rental arrears and damages done
to the leased property, but not future rents.

2. Interest may, in the discretion of the court, be allowed upon damages awarded for
breach of contract. (Art. 2210)

3. In case both parties have committed a breach of the obligation –

a. The liability of the first infractor shall be equitably tempered by the courts. (Art.
1192)

- The second infractor is not liable for damages at all; the damages which he would
have been liable are compensated by the mitigation of the first infractor’s liability.

- This is subject to the discretion of the court on what is equitable under the
circumstances.

b. 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. (Art.
1192)
 Chapter 4

Kinds of Obligations

I. PURE AND CONDITIONAL OBLIGATIONS

A. DISTINCTIONS BETWEEN PRE AND CONDITIONAL

1. Pure – obligation whose performance does not depend on a condition (i.e., a

future and uncertain event, or a past event unknown to the parties) or a period (i.e., a
future day which must necessarily come). (Arts. 1179. 1181, 1193)

a. A pure obligation is demandable at once. (Art. 1179)

- The necessity of an actual demand is not considered a condition, because nothing

can prevent a creditor from making a demand any time.

b. Examples: a loan which provides no condition or period for repayment, a

“demand note” which is payable upon demand.

2. Conditional – In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, depend upon the happening of a
condition. (Art. 1181)

a. A condition is a future and uncertain event, or a past event unknown to the

parties. (Art. 1179)
i. “Future and uncertain event”
- Despite the language of Art. 1179 which refers to “future or uncertain event,” a
condition must be both future and uncertain. If the element of uncertainty is lacking,
it becomes a period, which is a “day certain” or that which must necessarily come,
although it may not be known when (Art. 1193)

Thus, a condition is uncertain to happen, while a period is certain to come. Passing

the bar is a condition; while death of a particular person is period.

ii. “Past event unknown to the parties”

- A past event having happened already, is always certain. It is only the parties’
knowledge of that event which may be uncertain. Example: after bar exam results
were released but before they were published, a father says to his son, “I will give
you a car if you passed the bar exams.”

b. If the condition is suspensive, the obligation is not demandable until the

performance of the condition.

- When the consent of a party to a contract is a given subject to the fulfillment of a

suspensive condition, the contract is not perfected unless that condition is first
complied with.

c. If the condition is resolutory, the obligation is demandable at once, but without

prejudice to the effects of the happening of the event. (Art. 1179)

B. KINDS OF CONDITIONS
1. Suspensive and Resolutory

a. Suspensive condition (also known as condition precedent) – if the

acquisition of rights is dependent on the condition.
 b. Resolutory condition (also known as condition subsequent) – if the
extinguishment of rights already acquired is dependent on the condition.
2. Potestative, Casual or Mixed

a. Potestative Condition – if the fulfillment of the condition depends on the will of

one of the parties.

i. The conditional obligation (not just the condition) is void when the fulfillment of the
condition depends upon the sole will of the debtor. (Art. 1182)

(1) E.g., when the obligor says “I will pay you when I like it (or when I consider it
proper).” In this case, the obligation is illusory or not meant to be fulfilled.

- An offer to pay the value of the stock subscription after the offeror had harvested
fish is a condition dependent upon her sole will and, therefore, potestative in nature
and renders the obligation void.

(2) However, when the debtor bind himself to pay when his means permit him to
do so, the obligation shall be deemed to be one with a period. (Art. 1180) It is a
subject to the provision of Art. 1197, i.e., the creditor’s remedy is to file an action
to fix a period.

(3) This rule applies only when the condition is suspensive. When the potestative
condition is resolutory, the obligation is valid. Example: “I will allow you to use my
house until I wan to get it back.”

ii. The conditional obligation is valid if the fulfillment of the condition depends on the
sole will of he creditor.

- Example: “I will give you P500 if you want it,” or “I will give you my house if you
enter the priesthood.”
b. Casual Condition – If the fulfillment of the condition depends upon chance or the will
of third persons (not the will of any of the contracting parties).

i. The conditional obligation is valid (Art. 1182)

ii. Example: “I will give you my umbrella if it rains after our dinner,” or “I will give
you my car if your son learns how to drive.”

c. Mixed Condition – if the fulfillment of the condition depends upon the will of one of
the contracting parties and other circumstances, including the will of third persons.

i. The conditional obligation is valid. (Art. 1182)

ii. Examples: “I will pay you as soon as I receive the proceeds from the sale of
my property is Spain”, i.e., the debtor had already decided to sell his property,
which sale is dependent on external factors like the availability of a buyer.

- “I will give you this ring if you marry my son.”

3. Impossible and Unlawful Conditions

a. These conditions refers to:

i. Conditions which are physically impossible

- Example: condition that a man give birth;

ii. Conditions which are unlawful or juridically impossible, because contrary to

good customs or public policy or prohibited by law. (Art. 1183)

- Example: payment of money conditioned upon killing someone or seducing a third

person’s wife.

b. The impossible or unlawful conditions shall annul the obligation which depends upon
them. (Art. 1183)

- Note that this rule applies only to contracts or onerous obligations. In gratuitous
obligations (simple/remuneratory donations and testamentary provisions) with
impossible or unlawful condition, only the condition is void or deemed no imposed.
 (Arts. 727, 873) This is because in the latter, the true consideration is the liberality of
the donor or testator.

c. If the obligation is divisible, that part thereof which is not affected by the impossible
or unlawful condition shall be valid. (Art. 1183)

- Example: “I will pay you P1,000 if you give me your book, and an additional P500
if you can make it dance.” The first obligation is valid, but the second is not.

d. The condition is not to do an impossible thing shall be considered as not having

been agreed upon. (Art. 1183) The obligation remains valid and becomes a pure one.

- Example: “I will pay you P1,000 if you do not make this car swim.”

e. Art. 1183 refers to the impossibility of condition existing at the time of the creation of
the obligation; in such a case, the obligation is rendered void ab initio. It should not be
confused with extinguishment of the obligation due to impossibility of performance (Art.
1266), or because it has become certain that the condition will not be fulfilled (Art.1184).

C. CONSTRUCTIVE FULFILLMENT

1. 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.

- Example: payment of money on the condition that X must pass the bar exams by
2015 – the obligation is extinguished if 2015 expires without X passing the bar, or if
X dies before then.

2. The condition that some event will not happen at a determinate time shall be
render the obligation effective from the moment the time indicated has elapsed, or if it
has become evident that the event cannot occur. (Art. 1185)
- Example: payment of money to X and Y on the condition that they will not marry
each other until they are both 25 years old – the obligation becomes effective if they
both reach their 25th birthday without marrying each other, or if Y dies before here
25th birthday.
- 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.
(Art. 1185)

3. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment. (Art. 1186)

a. Example: the manager under a management contract who is unjustly prevented

by the other to perform his management duties is still entitled to his management fees.

b. The obligor’s prevention must be unjustifiable for it to constitute constructive

fulfillment. If there is legal or contractual basis for the prevention, there is no
constructive fulfillment.

- Examples: if the owner of the house stops work on his house because the
contractor violated certain city ordinances, or if the obligor cancels a contract upon a
an stipulation that he has a right to do so.

c. By analogy, if the condition is resolutory and the obligor voluntarily causes its
fulfillment, the condition is not considered fulfilled.

D. EFFECTS

1. Before Fulfillment of Suspensive Condition. Before the suspensive condition is

fulfilled, the following rules govern:

a. The creditor may bring the appropriate actions for the preservation of his right. (Art.
1188)
- Examples: (i) creditor may sue to enjoin the debtor from doing things that would
cause the loss or deterioration of the object of the obligation, or (ii) to enjoin debtor
from concealing his property or (iii) to compel execution of public instrument; (iv)
creditor may also cause the registration of deeds of sale mortgage.

b. If the debtor has paid by mistake, he may recover the same. (Art. 1188)

c. In case of obligation to give (a determine thing), the following rules shall be observed
in case of the improvement, loss or deterioration of the thing during the pendency of the
condition:

i. If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(Art. 1189)

ii. If the thing is lost through the fault of the debtor, he shall be obliged to pay
damages; (Art. 1189)

(a) when it perishes (e.g., house is burned down), or

(b) when it goes out of commerce (e.g., land is expropriated by the government), or

(c) when it disappears in such a way that its existence is unknown or it cannot be
recovered (e.g., jewelry is stolen).

iii. When the thing deteriorates without the fault of the debtor, the impairment is to be
borne by the creditor; (Art. 1189)

- This means that the creditor must accept the thing in its deteriorated condition.
iv. If it deteriorates through the fault of the debtor, the creditor may choose between (1)
the rescission of the obligation and (2) its fulfillment, with indemnity for damages in
either case; (Art. 1189)
v. If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor; (Art. 1189)

- Appreciation in value of land is generally a consequence of nature and time.

vi. If it is improved at the expense of the debtor, he shall have no other right than that
granted to the usufructuary. (Art. 1189)

- In this case, the debtor may remove the improvements, but only if it will not cause
damage to the thing. (Art. 579) The debtor may also set off the improvements
against the damage or deterioration he may have caused. (Art. 580)

2. Upon Fulfillment of Suspensive Condition

a. 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. (Art. 1187)

i. Thus, the creditor’s right will generally prevail over acts or dispositions made by the
debtor during the pendency of the condition.

ii. However, the debtor is generally not obliged to give the fruits or interest received
during the pendency of the condition.

(1) If the obligation is reciprocal, the fruits and interests during the pendency of the
condition shall be deemed to have been mutually compensated. (Art. 1187)

(2) If the obligation is unilateral, the debtor shall appropriate the fruits and interest
received. (Art. 1187)
- Exception, if there is a contrary intention, whether express or implied from the
nature and circumstances of the obligation. (Art. 1187)

b. 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. (Art. 1187)

3. Upon Fulfillment or Resolutory Condition

a. In obligations to give – upon the fulfillment of resolutory condition, the obligation is

extinguished and the parties shall return to each other what they have received. (Art.
1190)

- In case of loss, deterioration or improvement of the thing, the provisions of Art. 1189
(supra) shall be applied to the party who is bound to return.

b. In obligations to do and not to do – upon the fulfillment of the resolutory condition,

the courts shall determine, in each case, the effect of the extinguishment of the
obligation. (Art 1190, in rel. to Art. 1187)

II. OBLIGATIONS WITH A PERIOD

A. IN GENERAL

1. Period or Term. Obligations with a period or term are those which become
demandable or which terminate upon the arrival of a “day certain”. A day certain is that
which must necessarily come, although it may be not be known when. (Art. 1193)

a. Examples: January 1, 2025 is a day certain because it must necessarily come.

The death of a certain, X, is also a day certain, because it must necessarily come,
although it is known when.
 b. 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 Art. 1193. Examples: the sale