REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Different Kinds of Obligations
Classification of Conditions as to the Party
and/or Factor They Depend
Primary Classification of Obligations
1. Pure obligation
2. Conditional obligation
3. Obligation with a period
4. Alternative obligation
5. Facultative obligation
6. Joint obligation
7. Solidary obligation
8. Divisible obligation
9. Indivisible obligation
10. Obligation with a penal clause
Potestative Condition
It is a condition that depends upon the will
of one of the contracting parties (e.g. if the
creditor takes a bath tomorrow).
Casual
It is a condition that depends upon chance
or upon the will of a third person (e.g., if the debtor
wins first prize in lotto, if a specified third person
goes to Baguio).
Pure Obligation
It is one without a term or condition and is
demandable at once.
Conditional Obligation
It is one whose demandability or
extinguishment depends upon the happening of a
condition.
Condition
It is a future and uncertain event, upon the
happening of which, the effectivity or
extinguishment of an obligation (or rights) subject
to it depends.
Characteristics of a Condition
1. Future and uncertain (e.g., if the creditor
graduates in law school); or
2. Past but unknown (e.g., if the creditor wins
his case against a specified third person
when it is not known to the parties that the
court had already decided about the case)
Primary Classification of Conditions
Suspensive Condition
It is a condition the happening of which will
give rise to the demandability of the obligation
(also called condition antecedent or condition
precedent).
Resolutory Condition
It is a condition the happening of which
extinguishes the obligation (also called condition
subsequent). The obligation is demandable at
once but it shall be extinguished upon the
happening of the condition.
Mixed
It is a condition that depends partly upon
the will of one of the parties and partly upon the
will of a third person (e.g., if the creditor marries a
specified third person).
***
Effect of Potestative Conditions
1. Suspensive condition potestative on the
part of the debtor – the obligation is void.
2. Resolutory condition potestative on the
part of the debtor – the obligation is valid.
3. Suspensive or resolutory condition
potestative on the part of the creditor – the
obligation is valid in both cases.
Classification of Conditions as to Possibility of
Fulfillment
Possible Condition
It is one that is capable of fulfillment in its
nature and by law.
Impossible Condition
It is one that is not capable of fulfillment in
its nature (e.g., if the creditor swims across the
Pacific Ocean) or due to operation of law (e.g., if
the debtor kills a specified third person). In this
case, the obligation and the condition are void.
***
Condition Not to Do an Impossible Thing
It shall produce the same effect as a pure
obligation as if no condition has been agreed upon
(e.g., if the debtor does not swim across the
Pacific Ocean).
Page 1 of 13
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Pre-Existing Obligation Subject to an Impossible
Condition
If the obligation is a pre-existing obligation
(e.g., the debtor has already received the amount
he loaned from the creditor), only the impossible
condition is void.
Classification of Conditions as to Being Positive
or Negative
Positive Condition
It is a condition that some event happen at
a determinate time. Here, the obligation is
extinguished as soon as the time expires, or it has
become indubitable that the event will not take
place (e.g., if the creditor marries a specified third
person on or before 2021).
Negative Condition
It is a condition that some event will not
happen at a determinate time. Here, the obligation
becomes effective as soon as the time indicated
has elapsed or it has become evident that the
event will not occur (e.g., if the debtor does not
marry a specified third person on or before 2021).
Classification of Conditions as to Divisibility
Divisible Condition
It is one that is capable of partial
performance (e.g., The debtor will give the creditor
P1,000 if the latter wears facemask during the
whole day and a watch if he eats oranges.).
Indivisible Condition
It is one that is not capable of partial
performance (e.g., The debtor will give the creditor
P1,000 if the latter wears facemask during the
whole day and eats oranges.).
***
Constructive Fulfillment of Suspensive Condition
A suspensive condition is deemed fulfilled
if the debtor voluntarily prevents the fulfillment of
such condition; hence, the obligation becomes
immediately demandable.
Constructive Fulfillment of Resolutory Condition
A resolutory condition is deemed fulfilled if
the creditor voluntarily prevents the fulfillment of
such condition; hence, the obligation ceases to be
demandable.
Effects of Fulfillment of Suspensive Condition in
Obligations to Give
General rule: It shall retroact to the day of
the constitution of the obligation (i.e., the fruits
and interest to be considered are those from the
day of the constitution of the obligation).
Exceptions:
1. Reciprocal obligations – Fruits and
interests are mutually compensated.
2. Unilateral obligations – The debtor keeps
the fruits and interests received before the
fulfillment of the suspensive condition.
The duty of mutual restitution is not only
applicable on object and price but also to the fruits
and interest. Additionally, the party who receives
the fruits has the obligation to pay the expenses
made by the other party in their production,
gathering, and preservation.
Effect of Fulfillment Suspensive Condition 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.
Rights of the Creditor Before the Fulfillment of
Suspensive Condition
He may bring the appropriate actions for
the preservation of his right (e.g., asking for
security if the debtor is about to be insolvent,
asking the court to prevent alienation).
Rights of the Debtor Before the Fulfillment of
Suspensive Condition
He may recover what he has paid by
mistake (i.e., thing delivered mistakenly before the
obligation becomes demandable).
Kinds of Loss
Physical Loss
It occurs when a thing perishes as when a
house is burned and reduced to ashes.
Legal Loss
It occurs when a thing goes out of
commerce (e.g., when it is expropriated or taken
away by the State from the owner) or when a thing
heretofore legal becomes illegal (e.g., American
dollars during the Japanese occupation).
Page 2 of 13
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Civil Loss
It occurs when a thing disappears in such
a way that its existence is unknown (e.g., missing
dog); or even if known, it cannot be recovered
whether as a matter of fact (e.g., ring dropped
from a ship at sea) or of law (e.g., property is lost
through prescription).
into debtor, and the debtor into creditor. It
is as if the condition is a suspensive
condition because it gives rise to the
obligation of the creditor.
3. The duty of mutual restitution is not only
applicable on object and price but also to
the fruits and interest. Additionally, the
party who receives the fruits has the
obligation to pay the expenses made by
the other party in their production,
gathering, and preservation.
4. The rules in case of loss, deterioration, or
improvement of determinate thing before
the fulfillment of suspensive condition
shall continue to apply (but it is the other
way around).
Rules in Case of Loss, Deterioration, or
Improvement of Determinate Thing Before the
Fulfillment of Suspensive Condition
Event
Loss of the Without
thing
debtor’s
fault
With
debtor’s
fault
Deterioration Without
of the thing
debtor’s
fault
With
debtor’s
fault
Effect
Obligation
extinguished.
is
Debtor is obliged to
pay damages.
Impairment shall be
borne
by
the
creditor.
Creditor
may
choose between:
a.
Rescission
plus damages, and
b.
Fulfillment
plus damages.
Improvement
of the thing
By
nature or
by time
At
the
expense
of
the
debtor
Improvement shall
inure to the benefit
of the creditor.
Debtor will have the
rights granted to a
usufructuary.
Usufruct
It is a real right that authorizes the
temporary use and enjoyment of another's
property with the basic obligation of preserving its
form and substance and returning it at a
designated time. The one who has this right to a
property is called the usufructuary.
Effect of Fulfillment of Resolutory Condition in
Obligations to Give
1. The obligation is extinguished.
2. The parties shall return to each other what
they have received. The fulfillment of the
resolutory condition converts the creditor
Effect of Fulfillment of Resolutory Condition 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.
Kinds of Obligation According to the Person
Obliged
Unilateral Obligation
It is one where only one party is obliged to
comply with a prestation (e.g., obligation to pay
taxes).
Bilateral Obligation
It is one where both parties are mutually
bound to each other. In other words, both parties
are debtors and creditors of each other.
Kinds of Bilateral Obligations
Reciprocal Obligations
These are those which arise from the same
cause and in which each party is a debtor and
creditor of the other, such that the performance of
one is designed to be the equivalent and the
condition for the performance of the other (e.g., in
a contract of sale: obligation of the seller to deliver
the thing sold upon the payment of the purchase
price by the buyer and vice versa).
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REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Non-Reciprocal Obligations
These are those which do not impose
simultaneous and correlative performance on
both parties. In other words, the performance of
one party is not dependent upon the simultaneous
performance by the other (e.g., A borrowed from B
P10,000. B borrowed A’s car.).
Remedies of Injured Party in Reciprocal
Obligations
Any of the following at the injured party’s
option but not both:
1. Rescission with damages; or
2. Fulfillment of the obligation with damages.
However, he may also seek rescission,
even after he has chosen fulfillment, if the latter
becomes impossible (but not the other way
around).
Rules When Both Parties in a Reciprocal
Obligation Are Guilty of Breach
1. First infractor known – The liability of the
first infractor should be equitably reduced.
2. First infractor cannot be determined – The
contract shall be deemed extinguished
and each shall bear his own damages.
Obligation with a Period
It is one whose demandability or
extinguishment is subjected to the expiration of
the term which must necessarily come.
Period
It is a space of time which determines the
effectivity or extinguishment of an obligation (e.g.,
space of time between January 1, 2021 and
January 1, 2022).
Day Certain
It is that which must necessarily come
although it may be not known when (e.g., death of
a person).
Period and Condition Distinguished
Period
As
to An event that
fulfillment must necessarily
come
As to time Always refers to
the future
As
to
influence
on
the
obligation
As to the
will of the
debtor
Condition
An event that
may or may
not happen
May refer to
the future or
to a past
event
unknown to
the parties
Merely fixes the Causes
an
time
for
the obligation to
efficaciousness
arise or cease
of an obligation
If dependent upon If suspensive
the will of the condition is
debtor, the court dependent
is authorized to upon the will
fix its duration
of the debtor,
the obligation
is void.
Kinds of Period According to Effect
Ex Die
It is a period with a suspensive effect.
Here, the obligation becomes demandable upon
the lapse of the period.
In Diem
It is a period with a resolutory effect. Here,
the obligation is demandable at once but is
extinguished upon the lapse of the period.
Kinds of Period According to Source
Legal Period
It refers to a period fixed by law.
Voluntary Period
It refers to a period fixed by the parties.
Judicial Period
It refers to a period fixed by the court.
Page 4 of 13
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Kinds of Period According to Definiteness
Definite Period
It refers to a period that is fixed or it is
known when it will come (e.g., until the 15 day of
September 2021).
th
Indefinite Period
It refers to a period that is not fixed or is
not known when it will come (e.g., the next time
when it rains in Manila).
Rules in Case of Loss, Deterioration, or
Improvement of the Thing Before the Arrival of
Period
The same rules as in the case of loss,
deterioration, or improvement of the thing during
the pendency of a condition shall apply in the case
of obligations with a period.
Rule on Payment or Delivery Made by Debtor
Before the Arrival of the Period
1. If made by mistake, the debtor has the
right to recover what has been paid
(solutio indebiti). The debtor has the
burden of proving that he was unaware of
the period.
2. He may no longer recover the thing or
money once the period has arrived but he
can recover the fruits or interests thereof
from the date of premature performance to
the date of maturity of the obligation.
Rule on Performance or Compliance with
Obligations to Do or Not to Do Before the Arrival
of Period
Recovery is not applicable in personal
obligations. It is physically impossible to recover
he service rendered (to do) and as the obligor
performs by not doing, he cannot, of course,
recover what he has not done (not to do).
Presumption as to Who Has the Benefit of the
Period
General rule: It is presumed to have been
established for the benefit of both the creditor and
the debtor.
Exception: Unless from the tenor of the
obligation or other circumstances, it should
appear that it ha been established for the benefit
of only one of the parties.
Effects of Having the Benefit of Period
1. Creditor’s benefit – Before the expiration
of the period, the debtor may not fulfill the
obligation (e.g., to allow for further
accumulation of interest in case of a loan).
2. Debtor’s benefit – Before the expiration of
the period, the creditor may not demand
the fulfillment of the obligation without the
consent of the other (e.g., to let the debtor
to use the funds during the pendency of
the period in case of a loan).
Effect of Acceptance by Creditor of Partial
Payment in an Obligation with a Suspensive
Period
It amounts to a waiver of the period agreed
upon during which payment should not be made.
Computation of Term or Period
1. Year = 365 days regardless of whether it is
a year or a leap year
2. Month = 30 days
3. Day = 24 hours
4. Night is from sunset to sunrise.
5. If months are designated by their name,
they shall be computed by the number of
days which they respectively have.
6. In computing a period, the first day shall be
excluded, and the last day included.
Instances When the Court May Fix the Period
1. If the obligation does not fix for a period,
but from its nature and circumstances it
can be inferred that a period was intended
(e.g., construction of a building)
2. When the duration of the period depends
upon the will of the debtor (e.g., when my
means permit me to do so)
If there is a period agreed upon by the
parties and it has already lapsed or expired, the
court cannot fix another period.
Instances When the Debtor Loses His Right to
Make Use of the Period
1. When he becomes insolvent, unless he
gives a guaranty or security for the debt;
2. When he fails to furnish the guaranties or
securities that he has promised;
3. When he impairs the said guaranties or
securities by his own acts, or when
through a fortuitous event they disappear,
Page 5 of 13
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
unless he gives new ones equally
satisfactory;
4. When he violates any undertaking in
consideration of which the creditor agreed
to the period; and
5. When he attempts to abscond.
Kinds of Obligations According to the Number of
Prestations
Simple Obligation
It is one where there is only one prestation.
Compound Obligation
It is one where there are several
prestations.
Kinds of Compound Obligations
Conjunctive Obligation
It is a compound obligation where several
prestations are due but all must be performed.
Distributive or Disjunctive Obligation
It is a compound obligation which may be
alternative or facultative.
***
Alternative Obligation
It is one wherein various prestations are
due but the performance of one of them is
sufficient for the extinguishment of the obligation
(e.g., obligation to give P10,000, or a color
television set, or to paint someone’s house).
Rules on the Right of Choice in Alternative
Obligations
General rule: The right to choose the
prestation belongs to the debtor.
Exceptions:
1. When it is expressly granted to the
creditor; or
2. When it is given to a third person by
common agreement.
Limitations on the Right of Choice of Debtor
1. He cannot choose those prestations which
are void:
• Impossible,
• Unlawful, or
• Which could not have been the object
of the obligation.
2. He cannot choose part of one prestation
and part of another prestation.
Right of the Debtor to Rescind Contract Involving
an Alternative Obligation
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 (e.g., If through the fault of the
creditor, one of the items due alternatively is
destroyed.).
Instances When Obligation Ceases to Be
Alternative and Becomes a Simple Obligation
1. When the debtor has communicated his
choice.
2. When among the prestations whereby the
debtor is alternatively bound, only one is
practicable.
3. When the creditor has communicated his
choice to the debtor, if the creditor has
been expressly given the right of choice.
Rules in Case of Loss Things or Impossibility of
Services Which Are Alternatively the Object of
the Obligation Before the Choice Is
Communicated
When the Right of Choice Is With the Debor
If only one or some are The debtor may
lost through a fortuitous deliver any of the
event or through the remainder, or that
debtor’s fault
which remains if
only one subsists.
If all are lost through a The obligation is
fortuitous event
extinguished.
If all are lost through the The debtor shall pay
debtor’s fault
the value of the last
thing that was lost
plus damages.
If all except one are lost The
debtor’s
through the debtor’s obligation
is
fault, and the remaining extinguished.
item is subsequently
lost through a fortuitous
event
If all except one are lost The debtor shall pay
through a fortuitous damages.
event, and the remaining
item is subsequently
lost
through
the
debtor’s fault
Page 6 of 13
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
When the Right of Choice Is Expressly Granted
to the Creditor
If only one or The debtor shall deliver that
some are lost which the creditor should
through
a choose
among
the
fortuitous
remainder, or that which
event
remains if only one subsists
If all are lost The obligation shall be
through
a extinguished.
fortuitous
event
If only one or The creditor may claim any of
some are lost those subsisting, or the price
through
the of any of those which were
debtor’s fault
lost through the debtor’s fault
plus damages.
If all are lost The creditor may claim the
through
the price of any of them plus
debtor’s fault
damages.
Facultative Obligation
It is an obligation where only one
prestation is due but the debtor may render
another in substitution (e.g., I will give you my
piano [principal thing] but I may give my television
set as a substitute.).
Rules in Case of loss of Principal Thing and
Substitute
Lost Thing
Principal
thing
Substitute
Lost Thing
Principal
thing
Substitute
Alternative Obligation and Facultative Obligation
Distinguished
Alternative Obligation
Facultative
Obligation
Several prestations are Only one prestation,
due,
but
the the
principal
performance of one is obligation, is due.
sufficient to extinguish
the debt.
If there are void If
the
principal
prestations, the others obligation is void, the
may still be valid, debtor is not required
hence, the obligation to give the substitute.
remains.
The right of choice is The right of choice
with the debtor, unless belongs to the debtor
expressly given to the only.
creditor.
If all prestations are If
the
principal
impossible except one, obligation
is
that which is possible impossible,
the
must still be given.
debtor is not required
to give the substitute.
Kinds of Obligations According to the Number of
Parties
Individual Obligation
It is one where there is only one debtor and
one creditor.
Before Substitution
Due to
Due to the
Fortuitous Event Debtor’s Fault
The obligation is The
debtor
extinguished.
shall
pay
damages.
It
imposes
no
additional
obligation on the debtor because
it is not due.
After Substitution
Due to
Due to the
Fortuitous Event Debtor’s Fault
It
imposes
no
additional
obligation on the debtor because
it is not due.
The obligation is The
debtor
extinguished.
shall
pay
damages.
Collective Obligation
It is one where there are two or more
debtors and/or two or more creditors.
Kinds of Collective Obligations
Joint Obligation
It is one where the whole obligation is to be
paid or fulfilled proportionately by the different
debtors and/or is to be demanded proportionately
by the different creditors.
Solidary Obligation
It is one where each one of the debtors is
bound to render, and/or each one of the creditors
has a right to demand entire compliance with the
prestation.
Page 7 of 13
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Presumption on the Nature of Collective
Obligation
A collective obligation is presumed to be
joint unless otherwise evident that it is solidary.
debtors is liable to render, and each one of the
creditors has a right to demand, entire compliance
with the obligation.
Kinds of Solidarity According to Source
Words Used to Indicate Joint Liability
1. Mancum
2. Mancomunada
3. Mancomunadamente
4. Pro rata
5. Proportionately
6. Jointly
7. “We promise to pay” signed by two or more
persons
Instances When Obligation Is Considered Solidary
1. When the obligation expressly so states;
2. When the law requires solidarity;
3. When the nature of the obligation requires
solidarity; or
4. When it is imposed in a final judgment
against several defendants.
Words Used to Indicate Solidarity
1. Severally
2. Jointly and/or severally
3. Solidaria
4. In solidum
5. Solidarily
6. Together and/or separately
7. Individually and/or collectively
8. Individually and jointly
9. Juntos o suparadamente
10. “I promise to pay” signed by two or more
persons
Kinds of Solidarity According to the Parties
Bound
Passive Solidarity
It refers to solidarity on the part of the
debtors where anyone of them can be made liable
for the fulfillment of the entire obligation.
Active Solidarity
It refers to solidarity on the part of the
creditors, where anyone of them can demand the
fulfillment of the entire obligation.
Mixed Solidarity
It refers to solidarity on the part of both the
debtors and creditors, where each one of the
Conventional Solidarity
It is one where solidarity is agreed upon by
the parties.
Legal Solidarity
It is one where solidarity is imposed by the
law
***
Joint Indivisible Obligation
It constitutes the middle ground between a
joint obligation and a solidary obligation.
1. The debtors are jointly liable meaning
there are as many debts as there are
debtors.
2. The prestation is indivisible (e.g., to give a
specific car).
The debt can only be enforced by
proceeding against all the debtors for compliance
is not possible unless they act together. If one of
the debtors is not willing to deliver, the liability is
converted into one for damages. The obligation
remains solidary without prejudice to the right
against the guilty or negligent debtor (who may be
required to pay additional damages).
Indivisibility and Solidarity Distinguished
Indivisibility
Solidarity
It refers to the It refers to the juridical or
prestation.
legal tie that binds the
parties
Only the debtor All of the debtors are
guilty of breach of liable for the breach of
obligation is liable the obligation committed
for damages.
by a co-debtor.
It
can
exist There must be at least
although there is two debtors or two
only one debtor and creditors.
one creditor.
The others are not The
others
are
liable in case of proportionately liable in
insolvency of one case of insolvency of one
debtor.
debtor.
Page 8 of 13
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Kinds of Solidary Obligation According to the
Legal Tie
Uniform Solidary Obligation
It is one where the parties are bound by the
same stipulations or clauses (i.e., manner, period,
conditions).
Non-Uniform or Varied Solidary Obligation
It is one where the parties are not bound in
the same manner and by the same periods and
conditions.
***
Rule on the Exercise of Creditor’s Right Against
Solidary Debtors Not Bound to the Same
Stipulations and Conditions
The creditor may bring his action in toto
(as a whole) against any of the solidary debtors
less the shares of the other debtors with
unexpired terms or unfulfilled conditions who are
entitled to defenses under Article 1222. Upon the
expiration of the term or the fulfillment of the
condition, the creditor will have the right to
demand the payment of the remainder.
Joint Obligation on the Side of the Creditors and
Solidary on the Side of the Debtors
Each creditor can demand only his share in
the obligation but each debtor may be compelled
to pay the entire obligation to the creditors.
Solidary Obligation on the Side of the Creditors
and Joint on the Side of the Debtors
Each creditor can demand the entire
obligation but each debtor may only be compelled
his share in the obligation.
Acts of Solidary Creditor Affecting His CoCreditor
Each one of the solidary creditors may do
whatever may be useful (e.g., demanding for
payment) to the others, but not anything which
may be prejudicial (e.g., remission or
condonation) to the latter. In case a solidary
creditor executes a novation, compensation,
confusion, or remission of the obligation, he has
to reimburse the other creditors for the latter’s
share.
Rule on the Assignment of a Solidary Creditor’s
Rights
1. Third person – He cannot assign his rights
to a third person without the consent of the
others.
2. Co-creditor – If the assignment is made to
a co-creditor, the consent of the other
creditors is not necessary.
Payment to Solidary Creditors
1. If no demand has been made yet – the
debtor may pay any on of the solidary
creditors.
2. If a creditor makes a demand – payment
should be made to him.
3. In case of mixed solidarity – the debtor to
whom demand has been made, may pay
any of the solidary creditors.
Effect of Novation, Compensation, Confusion, or
Remission Executed by a Solidary Creditor
He should be liable to the others for their
corresponding shares considering that such acts
are prejudicial to them.
Effect of Extension of Time Given by Creditor to a
Solidary Debtor
The other solidary debtors shall be liable
for the whole debt less the share of the debtor
granted the extension. Upon the expiration of the
term, the creditor can demand payment of the
unpaid share from any of the solidary debtors.
Effect of Novation, Compensation, Confusion,
Remission, Prescription, Etc. in a Joint Obligation
In a joint obligation, any cause of
modification or extinction does not extinguish or
modify the obligation except with respect to the
creditor and debtor affected, without extending its
operation to any other part of the debt or of the
credit.
Right of Creditor to Proceed Against Any Solidary
Debtor
In a solidary obligation (passive solidarity),
any one or some or all of the solidary debtors
simultaneously, may be made to pay the debt so
long as it has not yet been fully collected.
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REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Summary of Rules Various Rules on Passive
Solidarity
Event
If payment has been
made by one of the
solidary debtors
If two or more
solidary debtors offer
to pay
If payment has been
made by one of the
solidary debtors
Effect
The
obligation
extinguished.
is
The
creditor
may
choose which offer to
accept.
He shall be entitled to
claim reimbursement
from his co-debtors
only to the share which
corresponds to each of
them (joint).
If a solidary debtor He
can
recover
pays the obligation in reimbursement only in
part
so far as his payment
exceeded his share in
the obligation.
If the amount of He cannot demand
payment made by a reimbursement.
solidary debtor is
equal
to
his
proportionate share
in the obligation
If the amount of He cannot demand
payment made by a reimbursement.
solidary debtor is
less
than
his
proportionate share
in the obligation
In case of insolvency The others assume the
of any of the solidary share of the insolvent
debtors
one jointly.
If a solidary debtor He cannot demand
pays the obligation reimbursement
after the obligation because the obligation
has
already is already extinguished.
prescribed
or
become illegal
If payment by a Such remission is of no
solidary debtor is effect because there is
made first and the no more obligation to
obligation is remitted remit.
by the creditor
If the obligation is Solutio indebiti arises.
remitted
by
the
creditor first and a
solidary
debtor
makes a payment
If one of the solidary
debtors
obtains
remission from the
creditor
If one of the solidary
debtors has effected
novation,
compensation,
or
confusion with the
creditor
He cannot demand
reimbursement
because
he
pays
nothing to the creditor.
He
can
recover
reimbursement only in
so far as his payment
exceeded his share in
the obligation.
Liability of Solidary Creditor Receiving Payment
The receiving creditor is jointly liable to the
others for their corresponding shares.
Prescription
It allows one to acquire ownership and
other rights through the lapse of time in the
manner and under the conditions laid by law. In
the same way, rights and actions are lost by
prescription.
Prescriptive Periods
Prescriptive Period
Right of Action
Must be brought within ten Upon a written
(10) years from the right of contract
action accrues
Upon
an
obligation created
by law
Upon a judgment
Must
be
commenced Upon an oral
within six (6) years
contract
Upon a quasicontract
Must be instituted within Upon an injury to
four (4) years
the rights of the
plaintiff
Upon a quasidelict
Rules in Case Thing Has Been Lost or Prestation
Has Become Impossible
Event
Loss is without
fault and before
delay
Loss is due to
fault on the part
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Effect
The obligation shall
extinguished.
be
All the debtors shall be
solidarily liable to the
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
of a solidary
debtor
Loss is without
fault but after
delay
creditor for the price of
thing plus damages.
All the debtors shall
solidarily liable to
creditor for the price of
thing plus damages.
the
be
the
the
Defenses Available to a Solidary Debtor
1. Defenses derived from the nature of the
obligation (considered as complete
defense) – e.g., A solidary debtor may put
up defense of payment in case the
obligation has already been paid and the
creditor still demands payment.
2. Defenses personal to, or which pertain to
share of, debtor sued – e.g., A solidary
debtor may put up a defense of insanity
with respect to the entire obligation if he
was insane at the time the obligation was
contracted.
3. Defenses personal to other solidary
debtors. – e.g., A solidary debtor may put
up a defense of insanity with respect to the
share of the other solidarity debtor if the
latter was insane at the time the obligation
was contracted.
Rules on Divisibility of Obligations
1. Even though the object or service may be
physically divisible, an obligation is
indivisible if so provided by law or intended
by the parties.
2. If the object is not physically divisible or
the service is not susceptible of partial
performance, the obligation is always
indivisible, the intention of the parties to
the contrary notwithstanding.
3. An obligation is presumed indivisible
where there is only one creditor and only
one debtor.
Kinds of Division
Qualitative Division
It is one based on quality, not on number
or quantity of the things that are the object of the
obligation (e.g., inheritance divided to two
siblings: a car to one and a house and lot to the
other).
Quantitative Division
It is one based on quantity rather than on
quality (e.g., obligation to give 300 cavans of
palay).
Ideal or Intellectual Division
It is one which exists only in the minds of
the parties (e.g., inheritance of land to be divided
to two siblings giving rise to co-ownership before
the land is actually divided between them).
Kinds of Indivisibility
Legal Indivisibility
It occurs when a specific provision of law
declares as indivisible, obligations which, by their
nature, are divisible.
Conventional Indivisibility
It occurs when the will of the parties
makes as indivisible, obligations which, by their
nature, are divisible.
Natural Indivisibility
It occurs when the nature of the object or
prestation does not admit of division (e.g.,
obligation to give a particular car).
***
Effect of Non-Compliance by a Debtor in a Joint
Indivisible Obligation
The obligation is transformed into one for
damages. The creditor cannot ask for specific
performance or rescission because there is no
cause of action against the other debtors who are
willing to fulfill their promises. The innocent
debtors shall not contribute beyond their
respective shares of the obligation. The obligation
becomes a divisible one.
Obligations Deemed Indivisible
1. Obligations to give definite things – e.g., a
particular electric fan
2. Obligations which are not susceptible of
partial performance – e.g., to sing a song
3. Obligations provided by law to be
indivisible even if thing or service is
physically divisible – e.g., payment of
taxes
4. Obligations intended by the parties to be
indivisible even if thing or service is
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REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
physically divisible – e.g., to give P1,000
on a certain date
Obligations Deemed Divisible
1. Obligations which have for their object the
execution of a certain number of days of
work – e.g., to construct a house
2. Obligations which have for their object the
accomplishment of work by metrical units
– e.g., obligation of two debtors to deliver
20 cubic meters of sand
3. Obligations which by their nature are
susceptible of partial performance – e.g.,
to pay P12,000 in 12 monthly installments
of P1,000
Divisibility or Indivisibility in Obligations Not to Do
1. Indivisible obligation – e.g., not to sell
cigarettes in the debtor’s store for one year
(continuous)
2. Divisible obligation – e.g., not to sell
cigarettes in the debtor’s store only during
Sundays and holidays (not continuous)
Principal Obligation
It is one which can stand by itself and does
not depend for its validity and existence upon
another obligation.
Accessory Obligation
It is one which is attached to a principal
obligation and, therefore, cannot stand alone.
Obligation with a Penal Clause
It is one which contains an accessory
undertaking to pay a previously stipulated
indemnity in case of breach of the principal
prestation intended primarily to induce its
fulfillment.
Penal Clause
It is an accessory undertaking attached to
an obligation to assume greater liability on the
part of the debtor in case of breach of the
obligation (i.e., the obligation is not fulfilled, or is
partly or irregularly complied with).
Kinds of Penal Clause as to Origin
Conventional Penal Clause
It is one provided for by stipulation of the
parties.
Kinds of Penal Clause as to Purpose
Compensatory Penal Clause
It is one where the penalty takes place of
damages.
Punitive Penal Clause
It is one where the penalty is imposed
merely as punishment for breach.
Kinds of Penal Clause as to Dependability or
Effect
Subsidiary or Alternative Penal Clause
It is one where only the penalty can be
enforced.
Joint or Cumulative Penal Clause
It is one where both the principal
obligation and the penal clause can be enforced.
***
Rules on Liability for Penalty, Damages, and/or
Interests
General rule: Penalty substitutes
damages and interests.
Exceptions: In addition to the penalty,
creditor may recover damages and interests:
1. When so stipulated by the parties;
2. When the obligor refuses to pay
penalty; or
3. When the obligor is guilty of fraud in
fulfillment of the obligation.
for
the
the
the
Penalty Not Substitute for Performance
General rule: The debtor cannot just pay
the penalty instead of performing the obligation.
Exception: If the right to choose the
fulfillment of penalty instead of the principal
obligation has been expressly reserved for the
debtor, such obligation becomes an alternative
obligation.
Legal Penal Clause
It is one provided for by the law.
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REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Obligations (Different Kinds of Obligations)
Rights of the Creditor to Demand in an Obligation
with a Penal Clause
Event
General rule
Effect
The creditor cannot
demand the fulfillment
of the obligation and
the satisfaction of the
penalty at the same
time.
When
there
is There is no need for
performance by the demanding the penalty.
debtor
When there is no The creditor may ask
performance by the for the penalty or
debtor
require
specific
performance
alternatively.
When the creditor The
creditor
may
demands for specific subsequently
require
performance but the the fulfillment of the
same
becomes penalty.
impossible
When the right has He
can
demand
been clearly (not performance of the
required
to
be principal obligation and
expressly reserved) payment of penalty
granted
to
the jointly.
creditor
Proof of Actual Damages
1. Enforcement of penalty – not required.
2. Enforcement of damages recoverable in
addition to penalty – required.
Instances When Penalty May Be Reduced by the
Courts
1. When there is partial or irregular
performance
2. When the penalty agreed upon is
iniquitous or unconscionable (not right or
reasonable)
Accessory Follows the Principal
1. The nullity of the penal clause does not
carry with it that of the principal obligation.
2. The nullity of the principal obligation
carries with it that of the penal clause.
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