MODULE ON
OBLIGATIONS AND CONTRACTS
BOOK IV OF THE CIVIL CODE OF THE
PHILIPPPINES
Introduction
This module on Obligations and Contracts is divided into two (2) parts. Part I is about the Law
on Obligations while Part II will focus on Law on Contracts.
Law on Obligations and Contracts
The law on obligations and contracts refers to the provisions under the civil code and other
pertinent rules which deal with the nature, sources, kinds, extinguishment of obligations as well as
the rights, liabilities and duties arising from agreement between the parties to a contract.
Objectives
At the end of the lesson, the students should be able to: Learn the general provisions on
obligation, its sources, nature, effects, kinds and how they are extinguish. The students will also learn
the requisites, forms and interpretation of contracts, including defective and quasi-contracts, as well
as natural obligations and estoppel. The student will be able to apply the law in real life scenarios as
they will be aided by exhaustive discussions, illustrations and examples of the provisions of the law
as well as case digests of relevant decisions of the court to determine how the provisions of the law
was interpreted by the court.
PART I: LAW ON OBLIGATIONS (Article 1156 to Article 1304 NCC)
CHAPTER I: GENERAL PROVISIONS (Article 1156 to 1162)
OBLIGATION
An obligation is a juridical necessity to give, to do or not to do. (Art. 1156 NCC)
JURIDICAL NECESSITY
The demandable claim should be complied with. If the specific demandable claim is not complied with
there will be legal consequence.
ESSENTIAL ELEMENTS OF OBLIGATION
1. active subject (creditor/obligee) - one who demands the fulfillment of an obligation
2. passive subject (debtor/obligor) - one who has the duty to fulfill an obligation.
3. Object or Prestation - the conduct to be performed by the passive subject (debtor/obligor) for
the active subject (creditor/obligee) e.g. to give, to do or not to do.
KINDS OF OBLIGATION
A. From the viewpoint of sanction
a) Civil Obligation – an unfulfilled obligation, when due and demandable, may be enforced in
court through action.
b) Natural Obligation – a special kind of obligation which cannot be enforced in court but which
authorizes the retention of the voluntary payment or performance made by the debtor.
c) Moral Obligation – the sanction is conscience or morality, or the law of the church.
B. From the viewpoint of subject matter
a) Real Obligation– the obligation to give
b) Personal Obligation– the obligation to do or not to do.
C. From the affirmativeness and negativeness of the obligation
a) Positive or Affirmative Obligation – the obligation to give or to do
b) Negative Obligation– the obligation not to do (which naturally includes not to give)
D. From the viewpoint of persons obliged
a) Unilateral– where only one of the parties is bound.
b) Bilateral– where both parties are bound, may be:
 Reciprocal
 non-reciprocal – where performance by one is non-dependent upon performance
by the other
SOURCES OF OBLIGATIONS
1. Law
Law refers to a rule, usually made by a government, that is used to order the way in which a
society behaves. (Cambridge dictionary) An Obligation arise when the law so provides. The
obligation cannot be presumed in order to be demandable it should be expressly or clearly be
provided for in the law itself.

Example: Pay tax under R.A. 8424 National Internal Revenue Code (NIRC) as amended
by R.A. 10963.
2. Contracts
A contract is a meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service. (Art. 1305, NCC) The parties to a
contract may not unilaterally evade his obligation, unless: a) The contract authorizes it; b) The
other party assents to it.
3. Quasi-contract
This refers to an obligation of one party to another imposed by law which is separate and
independent from the agreement between the parties. This arises from a lawful, voluntary and
unilateral acts which are enforceable to the end that no one shall be unjustly enriched or benefited
at the expense of another.
Two (2) Kinds of Quasi-contracts
a. Negotiorum Gestio or unauthorized management
o This takes place when a person (officious manager) voluntarily takes charge of
another’s abandoned business or property without the owner’s consent or
authority.
o The officious manager is entitled only to reimbursement for expenses and not to
remuneration. Negotiorum gestio is intended as an act of generosity and friendship
and not to allow the gestor to profit from his interfering.
b. Solutio Indebiti or undue payment
o This takes place when something is received when there is no right to demand it,
and it was unduly delivered thru mistake.
4. Act or omission punish by law or Delict
The obligation arised due to civil liability as a consequence of a criminal offense.
Extent of Civil Liability
This is governed by the Revised Penal Code and the Civil Code, it includes:
1. Restitution
 It is restoring to the rightful owner something that has been wrongfully taken
 means returning an injured party to a condition or situation that would have
obtained had no wrongful act been committed. (Oxford Public International Law)
2. Reparation of damages caused
 It refers to recompense given to one who has suffered legal injury at the hands of
another; to make amends, provide restitution, or give satisfaction or
compensation for a wrong inflicted
 also refers to the thing done or given to the injured party. (Oxford Public
International Law)
3. Indemnity for consequential damages (Art.104, Revised Penal Code-RPC). (Tolentino,
1987)
 Indemnification for consequential damages shall include not only those caused the
injured party, but also those suffered by his family or by a third person by reason of
the crime. (Art. 107 RPC)
Enforcement of Civil Liability
1. Independent
 Criminal and civil action arising from the same offense may be instituted
separately.
2. Suspended
 This is a situation where after criminal action had been commenced, the
prosecution for civil action is suspended in whatever stage it may be found, until
final judgment in the criminal proceeding is rendered.
3. Impliedly Instituted
 The civil action is impliedly instituted with the criminal action, in the following
situations:
a. offended party expressly waives the civil action or reserves the
right to institute a separate civil action; or
b. the law provides for an independent civil action
5. Quasi-delicts or torts
Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict. (Art. 2176 NCC)
Requisites of Quasi-delict
a) there must be an act or omission;
b) such act or omission causes damage to another;
c) such act or omission is caused by fault or negligence; and
d) there is no pre-existing contractual relation between the parties.
Difference between quasi-delict and crime
1. Quasi-delict is a private offense against private individual whereas crime is a public
offense against the State.
2. Criminal intent is not necessary in quasi-delict but it is necessary for
criminal liability.
3. Quasi-delict gives rise to liability for damage to the injured party. There are crimes
where no civil liability arises.
4. In quasi-delict, there can be reparation, compensation or indemnification of the injury
suffered by the injured party, in crimes fine or imprisonment or both can be
assessed.
5. Preponderance of evidence is the degree of proof in quasi-delict, in crimes it is proof
of guilt beyond reasonable doubt.
6. Quasi-delict can be compromised, crimes cannot be compromisediTIt is restoring to
the rightful owner something that has been wrongfully taken; it also means returning
an injured party to a condition or situation that would have obtained had no wrongful
act been committed. (Oxford Public International Law)
CHAPTER I ASSESSMENT AND EVALUATION
CHAPTER II: NATURE AND EFFECTS OF OBLIGATIONS
(Article 1163 to Article 1178)
KINDS OF PRESTATION
1. Obligation to give: real obligation
There is an obligation to provide something to another person. It consists in the delivery
of a specific or determinate thing, or a generic or indeterminate thing to another.
Determinate Thing
 something which is susceptible of particular designation or specification;
 obligation is extinguished if the thing is lost due to fortuitous events.
 Cannot be substituted
Indeterminate Thing
 something that has reference only to a class or genus;
 obligation to deliver is not so extinguished by fortuitous events.
 Can be substituted
Before delivery
 There exists a personal right to demand fulfillment of the obligation to give, to do or not
to do.
 Personal right refers to a right enforceable only against the debtor. It is a right of the
creditor to demand from the debtor, the fulfillment of a prestation to give, to do or not
to do and is vested before delivery.
After deliver
 A real right exist over the thing.
 Real right is a right enforceable against the world and is vested after delivery.
Actual Delivery
 There is actual delivery of a thing when from the hand of one party it was handed to
the other party (personally), or manifested by certain acts done with the consent of the
other such as execution of a deed of sale involving real estate which therefore transfer
ownership from one party to the others even without physical delivery of the land itself.
Constructive Tradition
 There is representative or symbolical delivery, in essence, with intention to transfer the
ownership.
Debtor’s Obligation in case of specific things
Specific things refer to those particularly designated or physically segregated from all
other of the same class; identified by individuality.
1. To preserve or take care of the thing.
2. To deliver the specific thing (the thing of the quality intended by the parties in case of
generic things) fruits, accessions and accessories.
3. To pay damage in case of breach.
Fruits:
The fruits mentioned by the law refer to natural, industrial, and civil fruits.
a) Natural fruits are the spontaneous products of the soil, and the young and other
products of animals, e.g., grass; all trees and plants on lands produced without the
intervention of human labor.
b) Industrial fruits are those produced by lands of any kind through cultivation or labor,
e.g., sugar cane; vegetables; rice; and all products of lands brought about by reason
of human labor.
c) Civil fruits are those derived by virtue of a juridical relation, e.g., rents of buildings,
price of leases of lands and other property and the amount of perpetual or life
annuities or other similar income.
Accessories:
Those joined to or included with principal for the latter’s completion, better use,
perfection or enjoyment.
Accessions:
It refers to additions to or improvement upon a thing, either naturally or artificially.
Rights of Creditor in real obligation to give
1. To compel specific performance.
2. To ask for damage in case of breach of the contract.
3. Entitlement to fruits and interest from the time to deliver arise.
4. To ask that the obligation be complied with by a third person at the expense of the
debtor in case of generic things.
Generic things refers to object which is designated only by its class/genus/
species. Debtor can give anything of the same class as long as it is of the same kind.
2. Obligation to do: positive personal obligation
There is an obligation to do something to another person. It covers all kinds of works
or services whether physical or mental.
Remedies of creditor in positive personal obligation.
a. If the debtor fails to comply with his obligation to do, the creditor has the right:
a. to have the obligation performed by himself, or by another unless personal
considerations are involved, at the debtor’s expense; and
b. to recover damages. (Art. 1170.)
b. In case the obligation is done in contravention of the terms of the same or is poorly
done, it may be ordered (by the court) that it be undone if it is still possible to undo what
was done.
3. Obligation not to do: negative personal obligation
There is an obligation not to do, to refrain or abstain from doing an act. It includes the
obligation not to give.
Duties of Debtor
1. Not to do what should not be done
2. To shoulder the cost of undoing what should not have been done
3. To pay for damages in case of breach
Rights of Creditor
a) To ask to undo what should not be done
b) To recover damages, where it would be physically or legally impossible to undo what
has been undone, because of:
o the very nature of the act itself;
o rights acquired by third persons who acted in good faith;
o when the effects of the acts prohibited are definite in character and will not
cease even if the thing prohibited be undone.
BREACH OF OBLIGATION
Breach of obligation can be:
1. Voluntary- such as fraud, negligence, delay or contravention of the tenor of the obligation.
2. Involuntary-in the case of fortuitous event.
Voluntary
1. Fraud (Dolo) - there exist an intention to evade the fulfillment of the obligation and to cause
damage. The fraud is causal (dolo causante) when fraud was used to induce a person to agree
to a contract. This kind of fraud is a ground for annulment of the contract plus damages;
2. Negligence or fault - this refer to the omission of that diligence which is required by the nature
of the obligation and corresponds with the circumstances of the person, time and place.
Required Diligence (De Leon 2003)
a) By stipulation - those agreed upon by the parties.
b) By law - if parties did not stipulate, that required by law applicable to the particular
case.
c) Diligence of a good father of a family - if both the parties and the law did not provide
the required diligence.
Difference between fraud and negligence
a) In fraud there is deliberate intention to cause damage there is none in negligence.
b) In fraud, the liability cannot be mitigated in negligence it can be mitigated.
c) Waiver for future fraud is void, gross negligence may not be excused while simple
negligence may be excused in certain situation.
3. Delay
a) Ordinary delay is merely the failure to perform an obligation on time.
b) Legal delay or default or mora is the failure to perform an obligation on time which
failure, constitutes a breach of the obligation.
There can be no delay in negative personal obligation.
Kinds of delay (mora)
A. Mora solvendi or the delay on the part of the debtor to fulfill his obligation (to give or to do)
by reason of a cause imputable to him.
Requisites
a) Obligation must be liquidated, due and demandable.
b) Non-performance on the part of the debtor on the period agreed upon.
c) Demand by the creditor.
Kinds:
a) mora solvendi ex re – default in real obligations (to give)
b) mora solvendi ex persona – default in personal obligations (to do)
Effects:
a) debtor – liable for damages and interests
b) debtor – liable for the loss of a thing due to a fortuitous event
B. Mora accipiendi or the delay on the part of the creditor without justifiable reason to accept
the performance of the obligation.
Requisites
a) Debtor offers of performance
b) Offer must be in compliance with the prestation.
c) Creditor refuses the performance without just cause.
Effects:
a) creditor – liable for damages
b) creditor – bears the risk of loss of the thing
c) debtor – not liable for interest from the time of creditor’s delay d. debtor – release
himself from the obligation
C. Compensatio morae or the delay of the obligors in reciprocal obligations (like in sale).
Effect: The default of one compensates the default of the other; their respective liabilities
shall be offset equitable.
 Default / Delay in negative obligation is not possible. (In negative obligation, only
fulfillment and violation are possible)
Rules in mora, delay or default
A. Unilateral Obligation
General Rule: No demand no delay
Exception:
a) The obligation or the law provides
b) Time is of the essence
c) Demand is useless
d) Debtor acknowledge that he is in default
B. Reciprocal obligation
General rule: Delay occur from the moment one party fulfill his undertaking, while the
other does not comply or is not ready to comply in a proper manner with what is incumbent
upon him.
Exception: The parties fix a different date for the performance of their respective
obligations.
4. Contravention of the tenor
Violation of the terms and condition stipulated in the obligation, which must not be due
to a fortuitous event or force majeure. (De Leon 2003)
Involuntary
1. Fortuitous event (Force majeure)
Any event which could not be foreseen or which though foreseen is inevitable. (Art. 1174) A
happening independent of the will of the debtor and which makes the normal fulfillment of the
obligation impossible. (De Leon 2003) Fortuitous event can be:
a) Act of God
An accident due directly or exclusively to natural causes without human intervention,
which by no amount of foresight, pains or care reasonably to have been expected, could
have been prevented.
b) Act of man
Force majeure is a superior or irresistible force, which is essentially an act of man;
includes unavoidable accidents, even if there has been an intervention of human element,
provided that no fault or negligence can be imputed to the debtor.
Liability for Fortuitous Event
No person shall be liable for Fortuitous Event, UNLESS
1. Expressly authorize by law;
2. By stipulation of the parties;
3. The nature of the obligation requires assumption of risk;
4. When debtor is guilty of concurrent or contributory negligence;
5. Debtor promise the same thing to two or more person who does not have the same
interest;
6. The thing is lost due to obligor’s fraud, negligence, delay or contravention of the tenor
of the obligation (Art. 1170)
7. The obligation to deliver a specific thing arises from a crime (Art. 1268)
8. The object is a generic thing as genus never perishes.
Requisites for Exemption
1. The event must be independent of the debtor’s will;
2. The event must be unforeseeable or inevitable;
3. The event renders it impossible for the debtor to fulfill his obligation in a normal
manner;
4. The debtor must be free of any participation in the aggravation of the injury to the
creditor. (Tolentino 1987; De Leon 2003)
5. It must be the only and sole cause, not merely a proximate cause. “Proximate cause
has been defined as “that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without which the result
would not have occurred.” People vs. Villacorta (GR 186412, Sept. 7, 2011)
REMEDIES TO CREDITORS
Rights acquired by virtue of an obligation are transmissible in character, UNLESS prohibited:
1. By their very nature (personal obligation);
2. By stipulations of the parties;
3. By Law
Primary Remedies
1. Specific performance- performance by the debtor of the prestation itself.
2. Substituted Performance- Someone else performs or something else is performed
at the debtor’s expense.
3. Equivalent Performance- right to claim damages (performance or recission)
4. Rescission- right to rescind or cancel the contract.
5. Pursue the leviable- to attach the property of the debtor, except those exempted
by law from execution.
Subsidiary Remedies
General Rule: Contract are binding only between the parties, their heirs, assigns and the
estate UNLESS accion subrogatoria and accion pauliana.
1. Accion subrogatoria - right of creditor to exercise all of the right and bring all of the
actions which his debtor may have against third person.
Requisites
1. The debtor to whom the right of action properly pertains must be indebted to
the creditor;
2. That debt is due and demandable;
3. The creditor must be prejudiced by the failure of the debtor to collect his own
debt to the third person either through malice or negligence;
4. The debtor’s assets are insufficient;
5. The right of action is not purely personal to the debtor.
It is not required that creditor’s claim is prior to acquisition of the right by the
debtor. There is no need for fraudulent intent. Period does not prescribe.
2. Accion pauliana - Rescission, which involves the right of the creditor to attack or
impugn by means of a rescissory action any act of the debtor which is in fraud
and to the prejudice of his right as creditor.
Requisites
a. There is a credit in favor of the plaintiff prior to alienation;
b. The debtor has performed a subsequent contract conveying
patrimonial benefit to third person;
c. The creditor has no other legal remedy to satisfy his claim;
d. The debtor’s act are fraudulent to the prejudice of the creditor;
e. The third person who receive the property is an accomplice in the fraud.
Credit must exist before the fraudulent act. Fraudulent intent is required if
the contract is onerous. Prescribe in four year from discovery of the fraud.
USURIOUS TRANSACTION
 Usury – stipulation of interest rates higher than those imposed by law.
Determination of Liability for Interest
If there is no agreement, a party is not entitled to pay interest because payment of interest
a
must be stipulated by the parties (Art. 1956). However, even without stipulation as to payment of
interest, a person can be charge legal interest for breach of obligation.
On the payment of interest, the 12% rate is applied only when the obligation breached
consists in the payment of a sum of money, i.e., forbearance of money, in the absence of a
stipulation. Otherwise the applicable rate is 6% per annum. Upon the finality of this ruling, the
rate of interest shall be 12% per annum for the entire judgment, until its satisfaction. (United
Planters Sugar Milling, Inc. v. CA, et al., G.R. No. 126890, November 28, 2006).
Forbearance is refraining from the enforcement of something (such as a debt, right, or
obligation) that is due.(Merriam-Webster Dictionary)
Kinds of Loan
1. Commodatum - where the bailor delivers to the bailee a non-consumable thing so
that the latter may use it for a certain time and return the identical thing. Bailor
refers to an individual who temporarily relinquishes possession but not ownership of a
good or other property under a bailment. Bailee is one to whom Personal Property is
entrusted for a particular purpose by another, the bailor, according to the terms of an
express or implied agreement. (Free dictionary) Bailment is a legal relationship in
common law, where the owner transfers physical possession of personal property
("chattel") for a time, but retains ownership.
2. Simple loan or mutuumn - delivery by lender to the borrower of money or other
consumable thing upon the condition that the latter shall pay the same amount of the
same kind and quality.
CHAPTER II ASSESSMENT AND EVALUATION
CHAPTER III: DIFFERENT KINDS OF OBLIGATIONS
I.
II.
III.
IV.
V.
VI.
VII.
Pure and Conditional Obligations
Reciprocal Obligations
Obligations with a Period
Alternative and Facultative Obligations
Joint and Solidary Obligations
Divisible and Indivisible Obligations
Obligations with a Penal Clause
I. PURE AND CONDITIONAL OBLIGATIONS
Condition
It is a future and uncertain event upon which the existence or extinguishment of an obligation
is made to depend.
Conditional Obligation
The effectivity of the obligation is subject to the fulfillment or non-fulfillment of the condition,
which is characterized to be a FUTURE and UNCERTAIN event. (Art. 181)
Pure Obligation
It is one which does not contain any condition or term upon which the fulfillment of the
obligation is made to depend. It is immediately demandable by the creditors and the debtor cannot
be excused for not complying with his prestation.
Effects of happening of conditions
1. Suspensive Condition
Obligation shall only be effective upon the fulfillment of the condition (Art.1181). What is
acquired by the obligee upon the constitution of the obligation is mere hope or expectancy, but
is protected by law.
Before fulfillment of the condition
The demandability and acquisition or effectivity of the rights arising from the obligation is
suspended. Anything paid by mistake during such time may be recovered.
After fulfillment of the Condition
The obligation arises or becomes effective. The obligor can be compelled to comply with what
is incumbent upon him.
Effects of the fulfillment of a suspensive condition
a. Real obligations: General Rule: Effects retroact to the day of constitution of the obligation.
Exception: No retroactivity as to; a. fruits b. interests
Exception to the exception: There may be retroactivity as to the fruits and interests in unilateral
obligations if such intention appears
b. Personal obligations The court determines the retroactive effect of the condition fulfilled.
2. Resolutory Condition: Obligation becomes demandable immediately after its establishment or
constitution. The rights are immediately vested to the creditor, but always subject to the threat
or danger of extinction by the happening of the resolutory condition (Tolentino, 1987).
Before Fulfillment of the condition
Preservation of creditor’s rights (Art. 1188, par. 1) also applies to obligations with a resolutory
condition. The creditor may, before the fulfilment of the condition, bring the appropriate action for the
preservation of his rights. This does not grant to the creditor any preference of credit but only the
preservation of his rights.
After Fulfillment of the condition Whatever may have been paid or delivered by one or both of the
parties upon the constitution of the obligation shall have to be returned upon the fulfillment of the
condition. There is no return to the status quo. However, when condition is not fulfilled, rights are
consolidated and they become absolute in character.
3. Potestative Condition A condition which depends exclusively upon the sole will of one of the
contracting parties.
Exclusively upon the creditor’s will, the condition and obligation is valid
Exclusively upon the Debtor’s Will in case of a Suspensive Condition (Art. 1182) Condition and
obligation are void as it contravenes the principle of mutuality of contract for being illusory. Example:
I will pay you if when I want to.
Exclusively upon the Debtor’s Will in case of a Resolutory Condition (Art. 1179, par 2) Both the
condition and obligation are valid because the position of the debtor is exactly the same as the position
of the creditor when the condition is suspensive.
4. Casual Condition: The fulfillment of the condition depends upon chance and/or upon the will
of a third person (Art. 1182) Example:
5. Depends upon chance-I will give you Php 100,000 if I win the super lotto.
6. Depends upon 3rd person- I will give you Php 200,000 if XX pass the 2021
bar examination.
7. Mixed Condition: The fulfillment of the condition depends partly upon the will of a party to the
obligation and partly upon chance and/or will of a third person. Both conditions must happen
before the obligation will arise. Example: I will give you Php 300,000 if I win the super lotto
and XX pass the 2021 bar examination.
8. Impossible Condition: Two kinds of impossible condition (De leon, De Leon 2014) a. Physically
impossible condition-It refers to a condition that cannot exist or
9. cannot be done.
10. Example:
I will give you Php 30,000 if you will become a frog.
b. Legally impossible condition-a condition that is contrary to law, morals, good customs, public order,
or public policy. The conditions which are impossible,
Effects of Loss, Deterioration, and Improvement in Real Obligations Pending the
Condition (Art. 1189)
Loss
There is loss when a thing perishes; goes out of commerce; disappears in such a way that its
existence is unknown or it cannot be recovered.
If the loss occurred without the debtors fault-The obligation is extinguish. If the loss is with debtor’s
fault-The obligation is converted into one of indemnity for damages. Example: X oblige to deliver to Y
his dog named Xander on or before September 30, 2020. X is not liable if the dog died without his
fault. X is liable if the dog died because it was hit by a truck when it went out of the house. Y can ask
for damage due to failure to deliver the dog.
Deterioration A thing deteriorates when its value is reduced or impaired. If the things deteriorates
without the debtors fault – The impairment is to be borne by the
creditor.
If the thing deteriorates with debtor’s fault- The creditor may choose between bringing an action for
rescission of the obligation OR bringing an action for specific performance with damages in either
case. Example: X allowed Y to use his car for a trip to Vigan on August 15, 2020. X is not liable if the
side mirror was damaged because it was hit by a drunk driver. X is liable if the side mirror was
damaged when he drove the car while under the influence of alcohol.
Improvement There is improvement of a thing when its value is increased or enhanced by nature or
by time at the expense of the debtor or creditor. If the improvement is at the debtor’s expense, the
debtor shall ONLY have usufructuary rights. Usufruct refers to the legal right of using and enjoying
the fruits or profits of something belonging to another. (Merriam-Webster dictionary)
If the improvement of the thing is by the thing’s nature or by time it shall inure to the benefit of the
creditor. Example: X parked his tricycle near the side of the street and did not use it because it needs
repair. Y repaired, painted and installed a stereo in the tricycle, the improvement belongs to X but Y
can be allowed to use the tricycle.
II. Reciprocal Obligation Obligations which are established from same cause, such that one
obligation is correlative to the other. It is performed simultaneously, so that the performance of one is
conditioned upon the fulfilment of the other. Example: X sold his car to Y for Php 500,000. If X deliver
the car, Y needs to pay the agreed amount of Php 500,000.
In case one party does not comply with his obligation the aggrieved party may choose between two
(2) remedies:
a. Specific performance with damages. Specific performance is doing what was promised instead of
paying damage for not doing what was promised. b. Action for rescission of the obligation also with
damage. Rescission – refers to an action to cancel the agreement or contract when the other party
did not comply with his legal obligation.
The aggrieved party may choose only one of the remedies, not both, except when specific
performance become impossible, the aggrieved party may also seek rescission. Example: X agreed
to sell his house and lot to Y for 2M. Y will convert the house as warehouse for his upcoming raw
materials delivery on September 5, 2020. They agreed that the sale will be on August 30, 2020. If X
did not comply with his obligation to sell the house, Y can file an action for specific performance to
compel X to deliver or sell the house. If X cannot deliver the house because it was already sold to W,
Y can still avail rescission as the remedy because X can no longer sell the house as it was already
sold to another.
However, if both parties have committed a breach of obligation, the liability will be shouldered by the
first infractor to be determined by the courts. However, if it cannot be determined who was the first
infractor, the contract shall be deemed extinguished and each shall bear his own damages (Art.1192).
III. Obligations with a Period Obligation with a period It refers to one whose effects or consequences
are subjected in one way or another to the expiration or arrival of said period or term. (De Leon, De
Leon 2014)
Period or Term Interval of time, which either suspends demandability or produces extinguishment.
The period must be: future, certain, and possible (Tolentino, 1987).
A period of one (1) year = twelve (12) calendar months A period of one (1) month = thirty (30) days A
period of one (1) day = twenty-four (24) hours
Fortuitous event does not interrupt the running of the period. It only relieves the contracting parties
from the fulfilment of their respective obligations during the period.
Kinds of Period 1. Ex die - period with a suspensive effect. Obligation becomes demandable after
the lapse of the period. 2. In diem - period with a resolutory effect. Obligation is demandable at once
but is extinguished upon the lapse of the period. (Art. 1193)
Difference between term/period and conditions
1. Term/Period It refers to the interval of time which is future and uncertain. Condition This
pertains to fact and event which is future and uncertain.
2. Term/Period Term or period must necessarily come although it may not be known when.
Condition The condition may or may not happen.
3. Term/Period
5. Debtor attempts to abscond
6. By law or stipulation
7. Parties stipulate an acceleration clause. Acceleration clause is a clause in the contract which
provides that in case of non-payment or any portion of the loan when due, the entire obligation
shall become due and demandable. Example: On July 25, 2020, X borrowed Php 1M to Y at
10% interest payable monthly at Php 100,000 per month with acceleration clause in case of
non payment of at least two monthly instalments.
IV. Alternative and Facultative Obligations
Alternative Obligation (Art. 1199) It is one where several prestations are due but the performance of
one is sufficient.
General rule The right to choose the prestation belongs to the debtor.
Limitation on the right to choose The debtor cannot choose those prestations which are void as ff:
(a) impossible, (b) unlawful, or (c) which could not have been the object of the obligation.
Exception The right may be exercised a. by the creditor when expressly granted to him (Art. 1205),
or b. by a third person when the right is given to him by a common agreement, (Art. 1306)
Effect, Choice Choice shall produce no effect except from the time it has been communicated. Notice
of selection or choice may be in any form provided it is sufficient for the other party to know that the
selection has been made. Creditor’s concurrence is not needed when choice has been communicated
by the debtor to the creditor.
The effect of the notice is to limit the obligation to the object or prestation selected. (Art. 1210)
Example: X obliged himself to give Y an Iphone SE or a samsung galaxy A70. X informed Y that he
chose the samsung galaxy A70. X is obliged to deliver the samsung galaxy A he cannot change it
without the consent of Y.
Effect of Loss of object, debtor’s choice All objects lost Fortuitous event – Debtor is released from
the obligation Debtor’s fault-Creditor shall have the right to indemnity for damages based on the value
of the last thing which disappeared or service which become impossible. Example: X obliged himself
to give Y an Iphone SE or a samsung galaxy A70. If a typhoon flooded X house together with the
Iphone SE and Samsung galaxy A70, the obligation of X is extinguished. On a trip to Boracay, X lost
the Iphone SE to a thief and the Samsung galaxy was damaged when he step on it. X needs to pay
Y the value of Samsung galaxy A70 as it was the last thing which disappeared.
Some were lost Fortuitous event- Debtor to deliver that which he shall choose from among the
remainder. Debtor’s fault- Debtor to deliver that which the creditor shall choose from among the
remainder without damages. Example: X obliged himself to deliver to Y an Iphone SE, a Samsung
galaxy A70 and a Huawei P pro. On a trip to Boracay, X carried all the phones and Samsung galaxy
A70 was lost. Y can choose from Iphone SE or the Huawei P40 pro.
One remains Fortuitous event-Debtor to deliver that which remains. Debtor’s fault - Debtor to deliver
that which remains.
Effect of Loss of object, creditor’s choice All objects lost Fortuitous event – Debtor is released
from the obligation. Debtor’s fault-Creditor may claim the price/value of any of them with indemnity for
damages. Some were lost Fortuitous event- Debtor to deliver that which he shall choose from among
the remainder. Debtor’s fault- Creditor may claim any of these subsisting without a right of damages.
One remains Fortuitous event-Creditor may claim any of those subsisting without a right to damages
or price/value of the thing lost with right to damages. Debtor’s fault – Creditor may claim the remaining
thing without a right to damages or the price/value of the thing lost with right to damages.
FACULTATIVE OBLIGATION (Art. 1206) It is an obligation where only one prestation is due but the
debtor may substitute another.
Only one prestation has been agreed upon but the debtor may render another in substitution (De
Leon, 2003) Example: X promise to give Y and Iphone Pro Max but may give a Huawei P40 pro as a
substitute. It is only the Iphone Pro Max that is due.
Effect of Loss of Substitute Before Substitution is Made If the loss of substitute is due to bad faith
or fraud of the obligor, the obligor is liable. If the loss of substitute is due to negligence of the obligor,
the obligor is not liable.
After Substitution is Made The loss or deterioration of the substitute on account of the obligor’s delay,
negligence or fraud, obligor is liable because once substitution is made, the obligation is converted
into a simple one with the substituted thing as the as the object of the obligation.
Distinction between facultative and alternative obligation In facultative obligation one object due,
in alternative obligations several objects are due;
In facultative obligations delivery of another object or performance of another prestation in substitution
of that which is due is considered compliance of the obligation, whereas alternative obligations
delivery of one of the objects or by the performance of one of the prestations which is alternatively
due is considered as compliance of the obligation;
In facultative obligation, the right of choice pertains only to the debtor, in alternative obligation, the
right of choice may pertain to the creditor or even to a third person;
The loss or impossibility of the object or prestation which is due without any fault of the debtor is
sufficient to extinguish the obligation in facultative obligation, whereas in the alternative
A and B are joint debtors of C and D, joint creditors, for Php 1M. If C sued A for non- payment and
the case was settled by payment of A. The decision in the case will not extend to B as he can be
required to pay the amount of Php 500,000.
Joint Divisible Obligation Each creditor can demand only payment of his proportionate share of the
credit, while each debtor can be liable only for the payment of his proportionate share of the debt. (Art
1208) In case of breach of obligation, by one of the debtor, the damages due may be borne by him
alone.
Presumption: Credit or debt shall be presumed to be divided into as many equal shares as there are
creditors or debtors.
Joint creditor cannot act in representation of the other’s, neither can a joint debtor be compelled to
answer for the liability of others.
Joint Indivisible Obligation No creditor can act in representation of the other; no debtor can be
compelled to answer for the liability of the others. (Art. 1209)
If there are two or more debtors, the fulfillment of or compliance with the obligation requires the
concurrence of all the debtors, although each for his own share and for the enforcement of the
obligation
In case of breach Where one of the joint debtors fails to comply with his undertaking, the obligation
can no longer be fulfilled or performed. Consequently, it is converted into one of indemnity for
damages. Example : X, Y and Z owe a particular lot to D, due on or before September 1, 2020. A
week after the lapse of the period, D demands X to deliver the lot but X is not ready to comply with
the demand. Y and Z must each contribute their share in the value of the lot and deliver the amount
to D.
In this situation since the lot is an indivisible object failure to comply with the demand the obligation
becomes a money obligation.
X who is unable to comply will later on settle his obligation to Y or Z, whoever paid, for 1/3 the value
of the lot, which is actually X share, plus interest and damages.
If anyone of the debtors, X,Y and Z does not comply with his part of the joint indivisible obligation, the
obligation is converted into one for damages. The creditor cannot ask for a rescission or for a specific
performance because there is no cause of action for the other debtors who are willing to fulfill their
promises.
In case of insolvency of one of the debtors The other debtors shall not be liable for the share of
the insolvent debtor. To hold the other debtors liable will destroy the joint character of the obligation.
Solidary Obligation An obligation where there is concurrence of several creditors, or of several
debtors, by virtue of which, each of the creditors has the right to demand, and each of the debtors is
bound to render, entire compliance with the prestation which constitutes the object of the obligation.
Difference between Indivisibility and Solidarity
The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity itself
imply indivisibility. (Art. 1211) Indivisibility refers to the prestation which constitutes the object of the
obligation while solidarity refers to the legal tie, subject or parties of the obligation.
Indivisibility does not require plurality of subjects while in solidarity, plurality of subject is
indispensable.
The indivisibility of the obligation is terminated upon breach of the obligation which will then be
converted into one of indemnity for damages. Upon breach of the obligation, the solidarity of the
debtors remains.
Kinds of Solidary Obligations
1. Active (solidarity among creditors): Each creditor has the authority to claim and enforce the
rights of all, with the resulting obligation of paying everyone of what belongs to him.
2. Passive: (solidarity among debtors): Each debtor can be made to answer for the others, with
the right on the part of the debtor
 payor to recover from the others their respective shares. Example:
X,Y and Z are solidary debtors to A,B and C for Php 2M. If A demanded X to pay,
X, being a solidary debtor, needs to pay the entire Php 2M. X can run after Y and Z for their share in
the obligation.
3. Mixed: Solidarity among creditors and debtors Solidarity is not destroyed by the fact that the
obligation of each debtor is subject to different conditions or periods. The creditor can
commence an action against anyone of the debtors for the compliance with the entire
obligation minus the portion or share which corresponds to the debtor affected by the condition
or period. Example
X, Y and Z owe Php 1.2M to A,B, and C. X and Y debt is payable on or before
September 15, 2020 while Z debt is due on October 15, 2020. On September 16, 2020 any of the
creditors may go after X and Y for the payment of Php 800,000 (1.2M-400, share of Z) but not against
Z whose debt is not yet due.
Defenses Available to a Solidary Debtor (Art.1222)
1. Those derived from the nature of the obligation
2. Those personal to him
3. Those pertaining to his own share
4. Those personally belonging to other co-debtors but only as regards that part of the debt for
which the latter are responsible.
Effects of Demand to Solidary Debtors 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 (Art. 1216) The creditor may proceed with anyone of the solidary debtors or all
simultaneously. A creditors right to proceed against the surety exists independently of his right to
proceed against the principal.
Effects of Payment by the debtor
Full 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 (Art. 1217) The
solidary debtor who made the payment shall have the right to claim from his co-debtors the share
which corresponds to them with interest unless barred by prescription or become illegal (Art. 1218)