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C. Kinds of Obligations

1. Pure

a. CONCEPT

1) Demandable at once

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.  (Article 1179, Civil Code.)

2) Including obligations with resolutory conditions

Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. (Paragraph 2, Article 1179, Ibid.)

2. Conditional

a. CONCEPT

1) Event-based

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. (Article 1181, Ibid.)

2) Kinds of conditions

a) Suspensive conditions

b) Resolutory conditions

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. (Ibid.)

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. (Paragraph 2, Article 1193, Ibid.)

3) Uncertainty of coming of a day certain

If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules on Conditional Obligations. (Paragraph 4, Article 1193, Ibid.)

4) Prevention by obligor

The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. (Article 1186, Ibid.)

5) Creditor’s right to court relief

The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right. (Article 1188, Ibid.)

6) Recovery by debtor who paid by mistake

The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. (Paragraph 2, Article 1188, Ibid.)

b. VALID CONDITIONS

1) Depends upon chance

2) Depends upon the will of a third person

When the fulfillment of the condition… depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. (Article 1182, Ibid.)

3) That an event happen at a determinate time

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. (Article 1184, Ibid.)

4) That an event not happen at a determinate time

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.(Article 1185, Ibid.)

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. (Paragraph 2, Article 1185, Ibid.)

c. VOID CONDITIONS

1) Potestative condition

a) Depends upon sole will of either party

Any stipulation regarding the validity or compliance of the contract that is potestative or is left solely to the will of one of the parties is invalid. (Security Bank Corporation v. Sps. Mercado, G.R. No. 192934, 27 June 2018)

(1) Depends upon sole will of the debtor

When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. (Article 1182, Ibid.)

2) Impossible conditions

3) Contrary to good customs

4) Contrary to public policy

5) Prohibited by law

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.(Article 1183, Ibid.)

The condition not to do an impossible thing shall be considered as not having been agreed upon.(Paragraph 2, Article 1183, Ibid.)

c. OBLIGATIONS TO GIVE

1) Once condition is fulfilled

a) Retroacts to the day of constitution of the obligation

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. (Article 1187, Ibid.)

b) If obligations are reciprocal, fruits and interests mutually compensated

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. (Ibid.)

c) If obligations are unilateral, debtor appropriates fruits and interests – with exceptions

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. (Ibid.)

2) When conditions are to suspend efficacy

a) Rules in case of improvement, loss, or deterioration of thing

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

1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;

2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered;

3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;

5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;

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

3) When conditions are for extinguishment

a) Return to each other what they received

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.(Article 1190, Ibid.)

b) Loss, deterioration, or improvement of thing

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.  (Paragraph 2, Article 1190, Ibid.)

d. OBLIGATIONS TO DO OR NOT TO DO

1) Once condition is fulfilled

a) Retroactivity to be determined by courts

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. (Paragraph 2, Article 1187, Ibid.)

2) When conditions are for extinguishment

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. (Paragraph 3, Article 1190, Ibid.)

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. (Paragraph 2, Article 1187, Ibid.)

e. RECIPROCAL OBLIGATIONS

1) Implied power to rescind

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. (Article 1191, Ibid.)

2) Rights of injured party

a) Fulfillment of obligation

b) Rescission of obligation

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. (Paragraph 2, Article 1191, Ibid.)

3) Court decree

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. (Paragraph 3, Article 1191, Ibid.)

4) No prejudice to vested rights

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. (Paragraph 4, Article 1191, Ibid.)

f. IN PARI DELICTO

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. (Article 1192, Ibid.)

3. Obligation with a period or a term

a. CONCEPT

1) Day certain

Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. (Article 1193, Ibid.)

A day certain is understood to be that which must necessarily come, although it may not be known when. (Paragraph 3, Article 1193, Ibid.)

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. (Paragraph 4, Article 1193, Ibid.)

2) Resolutory period

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. (Paragraph 2, Article 1193, Ibid.)

3) To pay when means permit

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. (Article 1180, Ibid.)

4) Loss, deterioration, improvement of thing

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

a) Rules in case of improvement, loss, or deterioration of thing

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

1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;

2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered;

3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;

5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;

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

5) Recovery of fruits and interests

a) If obligor is unaware of period

b) If obligor believed obligation became due and demandable

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. (Article 1195, Ibid.)

6) Presumed for the benefit of both creditor and the debtor

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. (Article 1196, Ibid.)

7) When debtor loses right to the period

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. (Article 1198, Ibid.)

8) When courts may fix period

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. (Article 1197, Ibid.)

The courts shall also fix the duration of the period when it depends upon the will of the debtor. (Paragraph 2, Article 1197, Ibid.)

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. (Paragraph 3, Article 1197, Ibid.)

4. Alternative or facultative

a. ALTERNATIVE OBLIGATION

1) Concept and nature

A person alternatively bound by different prestations shall completely perform one of them. (Article 1199, Ibid.)

2) No partial performance of each prestation

The creditor cannot be compelled to receive part of one and part of the other undertaking. (Paragraph 2, Article 1199, Ibid.)

3) Communication, required for effectivity

The choice shall produce no effect except from the time it has been communicated.(Article 1201, Ibid.)

4) Right of choice to debtor – unless otherwise stipulated

The right of choice belongs to the debtor, unless it has been expressly granted to the creditor.(Article 1200, Ibid.)

a) Rules if creditor has right of choice

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.(Article 1205, Ibid.)

Until then the responsibility of the debtor shall be governed by the following rules:

(1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that which the creditor should choose from among the remainder, or that which remains if only one subsists;

(2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the former, has disappeared, with a right to damages;

(3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any one of them, also with indemnity for damages. (Paragraph 2, Article 1205, Ibid.)

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. (Paragraph 3, Article 1205, Ibid.)

5) Limitations on choice

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. (Paragraph 2, Article 1200, Ibid.)

6) Loss of right

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

a) Creditor’s fault

If through the creditor’s acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages.(Article 1203, Ibid.)

b) Debtor’s fault

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.(Article 1204, Ibid.)

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. (Paragarph 2, Article 1204, Ibid.)

Damages other than the value of the last thing or service may also be awarded. (Paragraph 3, Article 1204, Ibid.)

b. FACULTATIVE OBLIGATION

1) Concept and nature

When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative.(Article 1206, Ibid.)

2) Loss or deterioration of substitute

GENERAL RULE: The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him liable. (Paragraph 2, Article 1206, Ibid.)

EXCEPTION: 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. (Ibid.)

5. Joint and solidary obligations

a. CONCEPT

1) Solidary obligation/liability

a) When the obligation expressly so states

b) When the law provides

c) When the nature of the obligation requires solidarity

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. (Article 1207, Ibid.)

2) Presumption of divisibility of credit/debt

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. (Article 1208, Ibid.)

3) Impossibility of division

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. (Article 1209, Ibid.)

4) No correlation: indivisibility of obligation, solidary liability

The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. (Article 1210, Ibid.)

5) Different periods and conditions

Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. (Article 1211, Ibid.)

b. SOLIDARY CREDITORS

1) Useful act of one benefit the others

2) Prejudicial act of one does not affect the others

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. (Article 1212, Ibid.)

3) Assignment of credit requires consent of others

A solidary creditor cannot assign his rights without the consent of the others. (Article 1213, Ibid.)

4) Payment by debtor to creditors

GENERAL RULE: The debtor may pay any one of the solidary creditors. (Article 1214, Ibid.)

EXCEPTION: … but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him. (Ibid.)

5) Novation, compensation, confusion or remission of debt

a) Extinguishes obligation

b) Creditor liable for share for other creditors

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.(Article 1215, Ibid.)

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. (Paragraph 2, Article 1215, Ibid.)

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.(Article 1219, Ibid.)

6) Creditor may proceed against any/all of solidary debtors

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.(Article 1216, Ibid.)

c. SOLIDARY DEBTORS

1) Payment

a) By one solidary

Payment made by one of the solidary debtors extinguishes the obligation. (Article 1217, Ibid.)

b) Payment by two or more solidary debtors

If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. (Ibid.)

2) Reimbursement

a) Payor-debtor’s right to reimbursement

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. (Paragraph 2, Article 1217, Ibid.)

b) No right to reimbursement if obligation prescribed or become illegal

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. (Article 1218, Ibid.)

3) Insolvency of one solidary debtor

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. (Paragraph 3, Article 1217, Ibid.)

4) Condoned solidary debtor remains liable to co-debtors

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. (Article 1219, Ibid.)

5) Remission of whole obligation

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

6) Loss of thing, impossibility of prestation

a) If no fault of any debtors, obligation extinguished

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. (Article 1221, Ibid.)

b) If there is fault on any debtors

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. (Paragraph 2, Article 1221, Ibid.)

c) If through fortuitous event

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. (Paragraph 3, Article 1221, Ibid.)

7) Defenses against creditor-action

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. (Article 1222, Ibid.)

6. Obligations with a penal clause

a. CONCEPT

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. (Article 1226, Ibid.)

The penalty may be enforced only when it is demandable in accordance with the provisions of the Civil Code. (Paragraph 2, Article 1226, Ibid.)

b. PAYMENT OF PENALTY

1) Does not exempt debtor from performance – except if otherwise stipulated

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. (Article 1227, Ibid.)

2) Creditor cannot demand fulfillment of obligation and satisfaction of debt – except if otherwise stipulated

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.(Ibid.)

3) If performance becomes impossible

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. (Ibid.)

c. PROOF OF ACTUAL DAMAGES, NOT REQUIRED

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

d. NULLITY OF PENAL CLAUSE; NO EFFECT ON PRINCIPAL OBLIGATION

The nullity of the penal clause does not carry with it that of the principal obligation. (Article 1230, Ibid.)

e. NULLITY OF PRINCIPAL OBLIGATION, NULLIFIES PENAL CLAUSE

The nullity of the principal obligation carries with it that of the penal clause. (Paragraph 2, Article 1230, Ibid.)

f. EQUITABLE REDUCTION OF PENALTY BY THE COURTS

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. (Article 1229, Ibid.)

7. DIVISIBLE AND INDIVISIBLE OBLIGATIONS Added

a. CONCEPT

Obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. (Paragraph 1, Article 1225, Ibid.)

b. INDEMNITY FOR DAMAGES IN JOINT INDIVISIBLE OBLIGATIONS

1) For non-complying debtors

A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. (Article 1224, Ibid.)

2) For ready to comply debtors: limited to corresponding portion of price/value

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. (Ibid.)

c. CERTAIN NUMBER OF DAYS

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. (Paragraph 2, Article 1225, Ibid.)

d. IF STIPULATED TO BE AN INDIVISIBLE OBLIGATION

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. (Paragraph 3, Article 1225, Ibid.)

e. IN OBLIGATION NOT TO DO

In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each particular case. (Paragraph 4, Article 1225, Ibid.)

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