ARTICLE 1191 RECIPROCAL OBLIGATIONS

Reciprocal obligations are those which are created or established at the same time, out of the same cause,
and which result in mutual relationships of creditor and debtor between the parties.

Tacit Resolutory Condition. — Because of the fact that in reciprocal obligations the obligation of one party is
the correlative of the obligation of the other, the Code in the first paragraph of Art. 1191 has established the
principle that if one of the parties fails to comply with what is incumbent upon him, there is a right on the part of
the other to rescind (or “resolve” in accordance with accepted translations of the Spanish Civil Code) the
obligation. This condition is implied as a general rule in all reciprocal obligations. Since it has the effect of
extinguishing rights which are already acquired or vested, it is resolutory in character.

Necessity of judicial action. — The right to rescind or resolve the obligation is a right which belongs to the
injured party alone. However, it is essential that it must be invoked judicially. This is evident from the provision
of the third paragraph of Art. 1191 which states that the court shall decree the rescission, unless there be a just
cause authorizing the fixing of a period.
 The party entitled to rescind must invoke judicial aid by fi ling the proper action for rescission.
Consequently, in a contract of sale, the fact that the vendee failed to pay the purchase price of the thing
sold does not mean that the vendor can just take possession of the thing which had already been
delivered to the vendee. He must invoke judicial aid by fi ling an action for rescission or resolution of the
contract if he so elects. As stated by the Supreme Court, it is the judgment of the court and not the
mere will of the vendor which produces the rescission of the sale.

 It must be noted, however, that where the contract itself contains a resolutory provision by virtue of
which the obligation maybe cancelled or extinguished by the injured party in case of breach, judicial
permission to cancel or rescind the contract is no longer necessary.

Nature of Breach
 The general rule is that rescission will not be permitted for a slight or casual breach of the contract, but
only for such breaches as are substantial and fundamental as to defeat the object of the parties in
making the agreement.
 Rescission will not be permitted for a slight casual breach of the contract.

Alternative remedies of injured party

 In case one of the parties 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. These remedies are alternative, not cumulative; in other words, the injured party cannot
seek both.
 It must, however, be observed that even after the injured party has chosen fulfillment and such
fulfillment should become impossible, he can still seek the rescission or resolution of the obligation.

Judicial discretion to decree rescission. — According to the third paragraph of Art. 1191, the court shall
decree the rescission claimed, unless there is a just cause authorizing the fi xing of a period. It is clear from
this provision that the right of the injured party in reciprocal obligations to rescind in case of failure of the other
to comply with what is incumbent upon him is not absolute in character. This is so because the court is given
the discretionary power to fi x a period within which the obligor in default may be permitted to comply with what
is incumbent upon him.

Lesion or economic injury – action to rescind is subsidiary – 1833 and 1834

The principal action for rescission for non-performance under Article 1191 must be distinguished from the
subsidiary action for rescission by reason of lesion or damage under Article 1381, et seq. The effect of
rescission is also provided in Article 1385. Unlike, however, Article 1385, Article 1191 is not predicated on
lesion or economic prejudice to one of the parties but on breach of faith by one of them that violates the
reciprocity between them.

1191 – Substantial violation – principal action – retaliatory in character – no need to exhaust other legal
remedy
1381 – Lesion or economic prejudice – subsidiary action – must exhaust other legal remedy first before going
to rescission

1191 bedrock As expressed in the old Latin aphorism: "Non servanti fidem, non est fides servanda." 

UP case – there is a stipulation in the contract that extra-judicial recsission is allowed

Nissan case – there is no stipulation in the contract that extra judicial rescission is allowed. However, it is
allowable since it is implied according to Article 1191, subject to the defaulter challenging it to the courts
 Magdalena case – reciprocal and bilateral obligation is used interchangeably in article 1191
These remedies are alternative and not cumulative, and the petitioner in this case, having to cancel the
contract, cannot avail himself of the other remedy of exacting performance. (Osorio & Tirona vs. Bennet &
Provincial Board of Cavite, 41 Phil., 301; Yap Unki vs. Chua Jamco, 14 Phil., 602.) As a consequence of the
resolution, the parties should be restored, as far as practicable, to their original situation (Po Pauco vs.
Siguenza, supra) which can be approximated only by ordering, as we do now, the return of the things which
were the object of the contract, with their fruits and of the price, with its interest (article 1295, Civil Code),
computed from the date of the institution of the action. (Verceluz vs. Edaño, 46 Phil. 801.)

Mutual restitution - Article 1385. Rescission creates the obligation to return the things which were the object of
the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only
when he who demands rescission can return whatever he may be obliged to restore.

Neither shall rescission take place when the things which are the object of the contract are legally in the
possession of third persons who did not act in bad faith.

In this case, indemnity for damages may be demanded from the person causing the loss. (1295)

8 things learned

1. The right to resolved is inherent to reciprocal obligation: It exist without need of stipulation
2. Aggrieved party may at his option, either judiciary or extra judicially w?o need of court recourse
3. Option to resolve is available even if such right is not expressly agreed upon – implied
4. Option of extra judicial resolution is exercised the resolver may treat the obligation as resolved
5. Choose to resolve extra J, the other party has the right to go to court to challenge the extra J, privisonal
ang extra J, subject to J review
6. Should the court rule that the Extra J resolution is proper, there is a retroactive effect
7. Should on the other hand that the Extra J is improper, then the obligation is deemed to never resolved,
then the party
8. The return of things already delivered, offender refused to return them, the offended party should go to
court for the return

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

Section 2. — Obligations with a Period Art. 1193

Obligations with a period may be defined as those whose demandability or extinguishment is subject to the
expiration of a term or period.

Classification of Term or Period

Suspensive
When the obligation becomes demandable only upon the arrival of a day certain

Resolutory
When the obligation is demandable at once, although it is terminated upon the arrival of a day certain
Arrival of a day certain - A day certain is understood to be that which must necessarily come, although it may
not be known when.

Legal
Granted by law

Conventional/Voluntary – period stipulated by the party

Judicial – period fixed by the courts

Definite – known date or time

Indefinite known to happen but the exact happening is unknown

(1) As to requisites: While a term or period refers to an interval of time which is future and certain, a condition
refers to a fact or event which is future and uncertain.

(2) As to fulfillment: While a term or period is an interval of time which must necessarily come, although it may
not be known when, a condition is a future and uncertain fact or event which may or may not happen.
(3) As to influence on obligation: While a term or period merely exerts an influence upon the time of the
demandability or extinguishment of an obligation, a condition exerts an influence upon the very existence of the
obligation itself.

(4) As to retroactivity of effects: While a term or period does not have any retroactive effect unless there is an
agreement to the contrary, a condition has retroactive effects.

(5) As to effect of will of debtor: When a term or period is left exclusively to the will of the debtor, the existence
of the obligation is not affected, but when a condition is left exclusively to the will of the debtor, the very
existence of the obligation is affected.

Art. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the
benefit of both the creditor and debtor, unless from the tenor of the same or other circumstances it should
appear that the period has been established in favor of one or of the other.

GR: IF there is a period designated and agreed by the parties; presumed to be for the benefit of both

 Creditor cannot demand early; debtor cannot fulfill or perform early

XPN 1: if they consented to the demand or payment prematurely made

XPN: if it can be proved either from the tenor of the obligation or from other circumstances that the period or
term has been established in favor of one of the parties

IF favorable to debtor: Oppose any premature demand and perform in advance

IF favorable to creditor: may demand any time but debtor cannot compel him to accept before the expiration of
term or period

REASON for allowable rejection of the premature payment by the debtor to the creditor–
 The payment of interest may not be the only reason why a creditor may not be bound to receive
payment before maturity.
 There may be other reasons, to wit: “that the creditor may want to keep his money invested safely
instead of having it in his hands,” and “that the creditor by fixing a period, protects himself against
sudden decline in the purchasing power of the currency loaned especially at a time when there are
many factors that may influence the fluctuation of the currency.”

Effect of acceptance by creditor of partial payment

The acceptance of a partial payment by a creditor amounts to a waiver of the period agreed upon during which
payment should not be made. If no explanation is given why the creditor received such partial payment before
the maturity of the obligation, it may be presumed that his relinquishment was intentional, and his choice to
dispense with the term, voluntary. It is not a mere forbearance. (Lopez vs. Ochoa, 103 Phil. 950 [1958].)

1197 Judicial Term or Period – when a court fixes the duration

When can a court fix the duration?

a. if the obligation does not fix a period, but from its nature and the circumstances it can be inferred
that a period was intended by the parties
b. if the duration of the period depends upon the will of the debtor (in relation to article 1180)
 Absence of such term or period fixed by the courts, there can be no breach of the obligation and
any demand before the said fixing by the courts will be premature (somehow same in judicial
demand concept)
c. Article 1191 par. 3 – breach of reciprocal obligation, courts can refuse to rescind if there is just
cause for the fixing of the term or period

Once fixed by the courts, the period can no longer be judicially changed (Final)
 This is so because from the very moment the parties gave their consent to the period fixed by the court,
said period acquires the nature of a covenant; in other words, it becomes a law governing their
contract; consequently, the courts can have no power to change or modify the same.
 By executing a final and fixed duration, the court merely fixed the intended will of the parties as
contemplated in article 1197 “but from its nature and the circumstances it can be inferred that a period
was intended”

G.R. No. L-22558  May 31, 1967 GREGORIO ARANETA, INC., vs. THE PHILIPPINE SUGAR ESTATES
DEVELOPMENT CO., LTD., 
We agree with the petitioner that the decision of the Court of Appeals, affirming that of the Court of First
Instance is legally untenable. The fixing of a period by the courts under Article 1197 of the Civil Code of the
Philippines is sought to be justified on the basis that petitioner (defendant below) placed the absence of a
period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates
Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with its
obligation to construct and complete the streets." Neither of the courts below seems to have noticed that, on
the hypothesis stated, what the answer put in issue was not whether the court should fix the time of
performance, but whether or not the parties agreed that the petitioner should have reasonable time to perform
its part of the bargain. If the contract so provided, then there was a period fixed, a "reasonable time;" and all
that the court should have done was to determine if that reasonable time had already elapsed when suit was
filed if it had passed, then the court should declare that petitioner had breached the contract, as averred in the
complaint, and fix the resulting damages. On the other hand, if the reasonable time had not yet elapsed, the
court perforce was bound to dismiss the action for being premature. But in no case can it be logically held that
under the plea above quoted, the intervention of the court to fix the period for performance was warranted, for
Article 1197 is precisely predicated on the absence of any period fixed by the parties.

Even on the assumption that the court should have found that no reasonable time or no period at all had been
fixed (and the trial court's amended decision nowhere declared any such fact) still, the complaint not having
sought that the Court should set a period, the court could not proceed to do so unless the complaint in
as first amended; for the original decision is clear that the complaint proceeded on the theory that the period
for performance had already elapsed, that the contract had been breached and defendant was already
answerable in damages.

Granting, however, that it lay within the Court's power to fix the period of performance, still the amended
decision is defective in that no basis is stated to support the conclusion that the period should be set at two
years after finality of the judgment. The list paragraph of Article 1197 is clear that the period can not be set
arbitrarily. The law expressly prescribes that —

the Court shall determine such period as may under the circumstances been probably contemplated by
the parties.

All that the trial court's amended decision (Rec. on Appeal, p. 124) says in this respect is that "the proven facts
precisely warrant the fixing of such a period," a statement manifestly insufficient to explain how the two period
given to petitioner herein was arrived at.

It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court must first
determine that "the obligation does not fix a period" (or that the period is made to depend upon the will of
the debtor)," but from the nature and the circumstances it can be inferred that a period was intended" (Art.
1197, pars. 1 and 2). This preliminary point settled, the Court must then proceed to the second step, and
decide what period was "probably contemplated by the parties" (Do., par. 3). So that, ultimately, the
Court can not fix a period merely because in its opinion it is or should be reasonable, but must set the
time that the parties are shown to have intended. As the record stands, the trial Court appears to have
pulled the two-year period set in its decision out of thin air, since no circumstances are mentioned to
support it. Plainly, this is not warranted by the Civil Code.

G.R. No. L-7859 February 12, 1913

VICTORIA SEOANE, administratrix of The Intestate Estate of Eduardo Fargas, Plaintiff-Appellee,

vs. CATALINA FRANCO, administratrix of The Intestate Estate of Manuel Franco, Defendant-Appellant.

Will of the debtor

1198 Instances when the Debtor loses benefit of the period

GR: the obligation is not demandable before the lapse of the period.
XPN: the fact that the debtor might not be able to comply with his obligation.
a) Insolvency of the Debtor
 Not required to be judicially declared (enough that the debtor is in a state of financial difficulty or
he is unable to pay debts in the ordinary course of business)
 Must exist/occur after the constitution of the obligation
 XPN: if he gave security or guaranty, he keeps the benefit
b) Failure to furnish guaranty or security as promised held to the preceding number
c) Impairment (need not to be totally destroyed) or Loss (disappeared or became illusory) of Security
d) Violates the undertaking
e) Debtor attempts to abscond (to hide, to avoid secretly) - Observe that a mere attempt or intent to
abscond is sufficient