OBLIGATIONS AND CONTRACTS Every obligation which contains a resolutory condition

REVIEWER shall also be demandable, without prejudice to the

page 9 [dioryRabajante] effects of
USURY – contracting for or receiving interest in excess of the happening of the event.
the amount allowed by law for the loan or use of money, PURE OBLIGATION – an obligation which does not
goods, etc. contain any condition or term upon which the fulfillment is
USURY LAW – makes the usurers criminally liable if the made to depend;
interest charged on loans are more that the limit prescribed immediately demandable by the creditors and the debtor
by law. cannot be excused from not complying with his prestation.
• This law is repealed – Circular No. 905 of the Central CONDITIONAL OBLIGATION – an obligation which
Bank has expressly removed the interest ceilings prescribed depends upon a future or uncertain event, or upon a past
by the event unknown to the
USURY LAW. contracting parties.
1176. The receipt of the principal by the creditor – an obligation subject to a condition.
without reservation with respect to the interest, shall a) Suspensive Obligation – its fulfillment gives rise to an
give rise to obligation; the demandability of the obligation or the
the presumption that said interest has been paid. effectivity of the contract can take place only after the
The receipt of a later installment of a debt without condition has been fulfilled.
reservation as to prior installments, shall likewise raise b) Resolutory Obligation – its happening extinguishes the
the obligation which is already existing;
presumption that such installments have been paid. 1180. When the debtor binds himself to pay when his
• These are mere presumptions. means permit him to do so, the obligation shall be
• To be sure – write the interest and the dates covered by deemed toOBLIGATIONS AND CONTRACTS
such payment in the receipt. REVIEWER
1177. The creditors, after having pursued the property page 10 [dioryRabajante]
in possession of the debtor to satisfy their claims, may be one with a period, subject to the provisions of Article
exercise all the rights and bring all the actions of the 1197.
latter for the same purpose, save those which are PERIOD – a future and certain event upon the arrival of
inherent in which, the obligation subject to it either arises or is
his person; they may also impugn the acts which the extinguished.
debtor may have done to defraud them. INDICATIONS OF A TERM OR PERIOD:
REMEDIES AVAILABLE TO CREDITORS FOR THE When the debtor binds himself to pay –
SATISFACTION OF THEIR CLAIMS: • when his means permit him to do so
1. Exact fulfillment with right to damages • little by little
2. Exhaustion of the debtor’s properties still in his • as soon as possible
possession – writ of attachment (before judgment) or writ • from time to time
of execution • as soon as I have the money
(for final judgment not yet executed) • in partial payment
3. ACCION SUBROGATORIA – an action where the • when in the position to pay
creditor whose claims had not been fully satisfied, may go 1181. In conditional obligations, the acquisition of
after the rights, as well as the extinguishment or loss of those
debtors (3rd person) of the defendant debtor. already
4. ACCION PAULIANA – an action where the creditor acquired, shall depend upon the happening of the event
files an action in court for the RESCISSION of acts or which constitutes the condition.
contracts entered Suspensive Condition – the acquisition of rights by the
into by the debtor designed to defraud the former. creditor depends upon the happening of the event which
1178. Subject to the laws, all rights acquired in virtue of constitutes the
an obligation are transmissible, if there has been no condition; if such condition does not take place, it would be
stipulation to the contrary. as of the conditional obligation had never existed.
EXCEPTIONS: (e.g. promise to give a car after graduating from law school
a) Those not transmissible by their nature like purely as cum laude)
personal rights; Resolutory Condition – the rights and obligations already
b) Those not transmissible by provision of law; existing are under threat of extinction upon the happening
c) Those not transmissible by stipulation of parties. or fulfillment
CHAPTER 3 of such condition.
DIFFERENT KINDS OF OBLIGATIONS (e.g. donation by reason of marriage – the celebration of
Section 1 – Pure and Conditional Obligations marriage is a resolutory condition; if the marriage did not
1179. Every obligation whose performance does not push through,
depend upon a future or uncertain event, or upon a past the donation may be revoked)
event 1182. When the fulfillment of the condition depends
unknown to the parties, is demandable at once. upon the sole will of the debtor, the conditional
obligation shall
be void. If it depends upon chance or upon the will of a the moment the time indicated has elapsed, or if it has
third person, the obligation shall take effect in become evident that the event cannot occur.
conformity If no time has been fixed, the condition shall be deemed
with the provisions of this Code. fulfilled at such time as may have probably been
• Applies only to suspensive conditions. contemplated, bearing in mind the nature of the
3 KINDS OF CONDITIONS UNDER THIS ARTICLE: obligation.
1. POTESTATIVE – a suspensive condition which depends ** This is a condition of non-happening of a future event.
upon the will of one of the contracting parties = if at the The obligation shall become effective and binding:
sole will of the debtor, it is void; if at the creditor’s, still a) From the moment the time indicated has elapsed without
valid. this is to prevent the establishment of illusory the event taking place;
obligations. b) From the moment it has become evident that the event
2. CASUAL – the condition depends upon chance or the cannot occur, although the time indicated has not yet
will of a third person;(e.g. cellphone warranty) elapsed.
3. MIXED – the condition depends partly upon the will of 1184 -vs- 1185
the parties and partly upon chance or the will of a third 1184
person; (example ni Atty. De Chavez: passing the bar) (POSITIVE SUSPENSIVE)
1183. Impossible conditions, those contrary to good 1185
customs or public policy and those prohibited by law (NEGATIVE SUSPENSIVE)
shall annul Jose obliges himself to give the pregnant woman Maria
the obligation which depends upon them. If the P5000
obligation is divisible, that part thereof which is not if she would give birth on or before December 30.
affected by the Jose obliges himself to give the pregnant woman Maria
impossible or unlawful condition shall be valid. P5000 if she would NOT give birth on December 30.
The condition not to do an impossible thing shall be a. Jose is LIABLE if Maria gives birth on or before
considered as not having been agreed upon. December
POSSIBLE CONDITION – if it is capable of realization or 30.
actualization according to nature, law, public policy or a. Jose is NOT LIABLE if Maria gives birth on December
good customs. 30.
2 KINDS OF IMPOSSIBLE CONDITIONS: b. Jose is NOT LIABLE if Maria gives birth after
1. Physically Impossible – cannot exist or cannot be done December 30. b. Jose is LIABLE if Maria DID NOT give
in its nature; birth on December
2. Legally Impossible – contrary to law, good customs, or 30 – if Maria gives birth BEFORE or AFTER December
public policy. 30.
Only the affected obligation is void, if the obligation is c. If Maria would have a miscarriage before December 30,
divisible, and the part thereof not affected by the the
impossible condition is obligation is EXTINGUISHED.
valid. c. If Maria would have a miscarriage before December 30,
Only the condition is void if there is already a pre-existing the obligation is deemed FULFILLED.
obligation and it does not depend upon the fulfillment of 1186. The condition shall be deemed fulfilled when the
the condition obligor voluntarily prevents its fulfillment.
which is impossible. − This provision speaks of the DOCTRINE OF
1184. The condition that some event happen at a CONSTRUCTIVE FULFILLMENT
determinate time shall extinguish the obligation as soon − Compare with Art. 1203
as theOBLIGATIONS AND CONTRACTS - REQUISITES:
REVIEWER 1. The condition is SUSPENSIVE;
page 11 [dioryRabajante] 2. The obligor ACTUALLY PREVENTS the fulfillment of
time expires or if it has become indubitable that the the condition;
event will not take place. 3. He acts VOLUNTARILY.
Positive condition – refers to the fulfillment of an event or • Malice or fraud is not required, as long as his purpose is
performance of an act to prevent the fulfillment of the condition.
Negative condition – refers to the non-fulfillment or non- • No person shall profit by his own wrong.
performance of an act. 1187. The effects of a conditional obligation to give,
POSITIVE SUSPENSIVE CONDITION once the condition has been fulfilled, shall retroact to
The obligation is extinguished: the day of
1. As soon as the TIME EXPIRES without the event taking the constitution of the obligation. Nevertheless, when
place; the obligation imposes reciprocal prestations upon the
2. As soon as it has become certain that the EVENT WILL parties,
NOT TAKE PLACE although the time specified has not the fruits and interests during the pendency of the
yet expired. condition shall be deemed to have been mutually
1185. The condition that some event will not happen at compensated. If
a determinate time shall render the obligation effective
from
the obligation is unilateral, the debtor shall appropriate (1) debtor without fault – impairment is to be borne by the
the fruits and interests received, unless from the nature creditor
and (2) debtor with fault – creditor chooses: rescission of
circumstances of the obligation it should be inferred obligation, fulfillment, indemnity
that the intention of the person constituting the same IMPROVEMENT
was (1) by nature or time – improvement: inure to the benefit of
different. the creditor
In obligations to do and not to do, the courts shall (2) at the expense of the debtor – granted to the
determine, in each case, the retroactive effect of the usufructuary
condition 1190. When the conditions have for their purpose the
that has been complied with. OBLIGATIONS AND extinguishment of an obligation to give, the parties,
CONTRACTS upon the
REVIEWER fulfillment of said conditions, shall return to each other
page 12 [dioryRabajante] what they have received.
• Applies only to fulfilled suspensive conditions. In case of the loss, deterioration or improvement of the
• Retroactive statute thing, the provisions which, with respect to the debtor,
• The effects of the obligation is deemed to commence not are
from the fulfillment of the obligation but from the day of its laid down in the preceding article shall be applied to the
constitution (similar to the legitimation of a natural child) party who is bound to return.
• When the obligation is unilateral, the debtor shall As for the obligations to do and not to do, the provisions
appropriate the fruits and interests received because he does of the second paragraph of Article 1187 shall be
not observed
receive any equivalent or valuable consideration from the as regards the effect of the extinguishment of the
obligee. obligation.
• The article does not require the delivery of fruits or • Refers to the fulfillment of a resolutory condition.
payment of interests accruing (accumulating) before the • When the resolutory condition happened, the obligation is
fulfillment of considered as if it did not exist.
the suspensive condition. • The parties are bound to return or restore whatever they
• Obligations to do or not to do – the retroactive effect shall have received from each other – “reciprocal restitution”
be determined by the court using its sound discretion • Donation by reason of marriage – if the marriage does not
without happen, such donation should be returned to the donor.
disregarding the intentions of the parties. • Loss, deterioration and improvement – governed by 1189.
1188. The creditor may, before the fulfillment of the • In obligations to do and not to do, the courts shall
condition, bring the appropriate actions for the determine, in each case, the retroactive effect of the
preservation of condition that
his right. has been complied with.
The debtor may recover what during the same time he 1191. The power to rescind obligations is implied in
has paid by mistake in case of a suspensive condition. reciprocal ones, in case one of the obligors should not
Actions available to the creditor: complyOBLIGATIONS AND CONTRACTS
l Action for prohibition restraining the alienation of the REVIEWER
thing pending the happening of the suspensive condition; page 13 [dioryRabajante]
l Action to demand security if the debtor has become with what is incumbent upon him.
insolvent; The injured party may choose between the fulfillment
l Action to set aside alienations made by the debtor in fraud and the rescission of the obligation, with the payment of
of creditors; damages in either case. He may also seek rescission,
l Actions against adverse possessors to interrupt the even after he has chosen fulfillment, if the latter should
running prescriptive period. become impossible.
l To have his rights annotated in the registry. The court shall decree the rescission claimed, unless
Rights of the DEBTOR – entitled to recover what has been there be just cause authorizing the fixing of a period.
paid by mistake prior to the happening of the suspensive This is understood to be without prejudice to the rights
condition. of third persons who have acquired the thing, in
1189. When the conditions have been imposed with the accordance
intention of suspending the efficacy of an obligation to with Articles 1385 and 1388 and the Mortgage Law.
give, * This remedy should be termed as “resolution,” not
the following rules shall be observed in case of the rescission (Paras).
improvement, loss or deterioration of the thing during * This provision is not applicable to contracts of
the partnership (governed by Arts. 1786 & 1788), and sales of
pendency of the condition: real and personal
LOSS properties by installments (governed by Maceda and Recto
(1) debtor without fault – obligation is extinguished laws)
(2) debtor with fault – obligation to pay damages RECIPROCAL – each is a debtor and creditor of the other
DETERIORATION RESCISSION – resolution or cancellation of the contract
• Applies only to reciprocal obligations where two parties Term – length of time sure to come
are mutually debtor and creditor of each other in the same Condition – fact or event uncertain to come
transaction. The cause must be identical ad the obligations Basis Period/Term Condition
must arise simultaneously. 1. TIME Always refers to FUTURE Can refer to past
• The party who can demand rescission should be the party events unknown to the
who is ready, willing, and able to comply with his own parties
obligations while the other is not capable to perform his 2. FULFILLMENT Sure to happen at an exact date or
own. indefinite time but sure to come.
REMEDIES: May or may not happen.
1. Specific performance or fulfillment of obligation with 3. INFLUENCE Merely fixes the time for the
damages; demandability or performance of
2. Rescission of contract with damages. obligation.
Effect of rescission: the parties must surrender whatever May cause the arising or cessation of
they have received from the other, and the obligation to pay the obligation.
is 1194. In case of loss, deterioration or improvement of
extinguished. the thing before the arrival of the day certain, the rules
If there is an express stipulation of automatic rescission in
between parties – such resolution shall take place only after Article 1189 shall be observed.
the creditor 1195. Anything paid or delivered before the arrival of
has notified the debtor of his choice of rescission subject to the period, the obligor being unaware of the period or
judicial scrutiny. believing that the obligation has become due and
1192. In case both parties have committed a breach of demandable, may be recovered, with the fruits and
the obligation, the liability of the first infractor shall be interests.
equitably tempered by the courts. If it cannot be § If he was not aware of the period or he believes that the
determined which of the parties first violated the obligation has become due and demandable – he can
contract, the recover what he paid or delivered including fruits and
same shall be deemed extinguished, and each shall bear interests;
his own damages. § If he was aware and he paid voluntarily – he cannot
FIRST INFRACTOR KNOWN recover the delivery made; it is deemed a waiver of the
The liability of the first infractor should be equitably benefit of the term and the obligation is considered already
reduced. – equitably offset each other’s damages. matured.
FIRST INFRACTOR CANNOT BE DETERMINED • The presumption is that the debtor knew that the debt was
The court shall declare the extinguishment of the obligation not yet due. He has the burden of proving that he was
and each shall bear his own damages. unaware of the period.
Section 2 – Obligations with a Period 1196. Whenever in an obligation a period is designated,
1193. Obligations for whose fulfillment a day certain it is presumed to have been established for the benefit of
has been fixed, shall be demandable only when that day both the creditor and the debtor, unless from the tenor
comes. of the same or other circumstances it should appear
Obligations with a resolutory period take effect at once, that the
but terminate upon arrival of the day certain. period has been established in favor of one or of the
A day certain is understood to be that which must other.
necessarily come, although it may not be known when. • PRESUMPTION: Obligation with a period is for the
If the uncertainty consists in whether the day will come benefit of both the creditor and debtor.
or not, the obligation is conditional, and it shall be • EXCEPTION: when it appears that the period is for the
regulated benefit of one or the other
by the rules of the preceding Section. • The benefit of the term may be the subject of stipulation
PERIOD / TERM – consists in a space or length of time of the parties.
upon the arrival of which, the demandability or the 1. Term is for the benefit of the debtor alone – he cannot be
extinguishment of an compelled to pay prematurely, but he can if he
obligation is determined; it may be definite (exact date or desires to do so.
time is known) or indefinite (arrival of date is unknown but - Example: A obliges himself to pay B within 5 years. A
sure to cannot be compelled to pay prematurely, but he can pay
come). anytime within 5
- Future + Certain event years (A will benefit because he can pay anytime he wants
GENERAL CLASSIFICATIONS: as long as it is within 5 years; B will not benefit from the
a) EX DIE / SUSPENSIVE PERIOD – from a day certain interests if A
give rise to the obligation; suspensive effect. decides to pay early).
b) IN DIEM / RESOLUTORY PERIOD – arrival of a term 2. Term is for the benefit of the creditor – He may demand
certain terminated the obligation; resolutory effect. fulfillment even before the arrival of the term but the
OBLIGATIONS AND CONTRACTS debtor cannot require him to accept payment before the
REVIEWER expiration of the stipulated period.
page 14 [dioryRabajante]
- Example: A borrows money from B and is obliged to (4) When the debtor violates any undertaking, in
make the payment on December 5. B may compel A to consideration of which the creditor agreed to the
make the payment period;
before December 5, but A may not compel B to receive the (5) When the debtor attempts to abscond.
payment before December 5 (B will benefit from the The period is disregarded and the obligation becomes pure
interests that will and immediately demandable: [IGIVA]
accrue before December 5). • [I] When debtor becomes insolvent;
• The creditor may have reasons other than the maturity of • The insolvency need not be judicially declared. It is
interest, that’s why, unless the creditor consents, the debtor sufficient that debtor could not pay his debts due to lack of
has no right to accelerate the time of payment even if the money or funds.
premature tender includes an offer to pay the principal and • [G] When the debtor does not furnish guaranties or
interest in full. securities;
1197. If the obligation does not fix a period, but from its • [I] When guaranties or securities given have been
nature and the circumstances it can be inferred that a impaired or have disappeared;
period was intended, the courts may fix the duration • If security was lost through debtor’s fault - impairment
thereof. • If security was lost through fortuitous event -
The courts shall also fix the duration of the period when disappearance
it depends upon the will of the debtor. • [V] When debtor violates an undertaking;
In every case, the courts shall determine such period as If such undertaking is the reason for the creditor to agree
may under the circumstances have been probably with such period.
contemplated by the parties. Once fixed by the courts, • [A] When debtor attempts to abscond (escape).
the period cannot be changed by them. Mere attempt to abscond is sufficient. It is an indication of
JUDICIAL PERIOD – period designated by the court. bad faith.
OBLIGATIONS AND CONTRACTS Section 3 – Alternative Obligations
REVIEWER 1199. A person alternatively bound by different
page 15 [dioryRabajante] prestations shall completely perform one of them.
CONTRACTUAL PERIOD – period fixed by the parties in The creditor cannot be compelled to receive part of one
their contract. and part of the other undertaking.
Court will fix a period: OBLIGATIONS WITH PLURAL PRESTATIONS:
1. When no period is mentioned, but it is inferable from the 1. CONJUNCTIVE/COMPOUND OBLIGATION - an
nature and circumstances of the obligation that a period obligation where the debtor has to perform ALL the several
was prestations in
intended by the parties. the contract to extinguish the obligation.
2. When the period is dependent upon the will of the 2. ALTERNATIVE OBLIGATION – an obligation where
debtor. the debtor is required to fulfill ONLY ONE of the several
• If the obligation does not state and intend a period, the prestations to
court is not authorized to fix a period. extinguish the obligation.
• The court must fix the duration of the period to prevent 3. FACULTATIVE OBLIGATION – an obligation where
the possibility that the obligation may never be fulfilled or the debtor is bound to perform ONLY ONE prestation, with
to cure a reserved
a defect in a contract whereby it is made to depend solely right to choose another prestation as SUBSTITUTE for the
upon the will of one of the parties. principal.
Court cannot fix the period: 1200. The right of choice belongs to the debtor, unless it
1. If there is a period agreed upon by the parties and it has has been expressly granted to the creditor.
already lapsed or expired. The debtor shall have no right to choose those
2. From the very moment the parties give their acceptance prestations which are impossible, unlawful or which
and consent to the period fixed by the court, it could not have
becomes a law governing their contract. been the object of the obligation.
1198. The debtor shall lose every right to make use of Implied grant to the creditor is not allowed. If it does not
the period: appear on the agreement as to whom among them has the
(1) When after the obligation has been contracted, he right to
becomes insolvent, unless he gives a guaranty or choose, it is the debtor who can choose. OBLIGATIONS
security for AND CONTRACTS
the debt; REVIEWER
(2) When he does not furnish to the creditor the page 16 [dioryRabajante]
guaranties or securities which he has promised; 1201. The choice shall produce no effect except from the
(3) When by his own acts he has impaired said time it has been communicated.
guaranties or securities after their establishment, and § The choice shall not produce any legal effect until it has
when through been duly communicated to the other party.
a fortuitous event they disappear, unless he immediately § It can be done in writing, verbally, impliedly, or any
gives new ones equally satisfactory; unequivocal means.
§ Once the choice has been communicated to the other impossible. This last one is converted into a simple
party: obligation.
1. The obligation is now LIMITED only to the 1205. When the choice has been expressly given to the
PRESTATION CHOSEN, with all the natural creditor, the obligation shall cease to be alternative
consequences flowing therefrom; from the
2. The choice is IRREVOCABLE. day when the selection has been communicated to the
• The performance of prestation without announcing the debtor.
choice to the creditor is NOT BINDING. Until then the responsibility of the debtor shall be
• The consent of the other party is NOT REQUIRED in governed by the following rules:
making the choice – that will in effect frustrate the clear A. only one thing lost – fortuitous event – creditor chooses
intention of from the remainder – debtor delivers the choice to creditor;
the law and the nature of the alternative obligation. B. only one remains – debtor delivers the same to the
• If there is delay in the making of choice – punish the one creditor;
who is supposed to exercise the right of choice for the C. only one thing lost – fault of the debtor
delay he 1. creditor may choose any one of the remainders;
caused – court may order the debtor to make a choice, or 2. creditor may choose the price or value of the one which
creditor to make the choice within certain period, or court was lost;
makes the choice. 3. may choose 1 or 2 plus damages
1202. The debtor shall lose the right of choice when D. all things lost – fault of the debtor – creditor may choose
among the prestations whereby he is alternatively the price of ANYONE of the things, with damages if
bound, only warranted.
one is practicable. The same rules shall be applied to obligations to do or
l There being but one prestation available, this prestation not to do in case one, some or all of the prestations
becomes a simple obligation. should
1203. If through the creditor's acts the debtor cannot become impossible.
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.
l If the impossibility of all the objects of the alternative
obligation is caused by the debtor, the creditor is entitled to
damages.
l 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.
l The creditor cannot claim for damages if the debtor can
still perform the remaining prestations.
l The damages that may be recovered is based on the last
thing which disappeared or the service which became