OBLIGATIONS AND CONTRACTS
By: M.S. Corpuz

CHAPTER 1
General Provisions

Article 1156. An obligation is a juridical necessity to give, to
do or not to do.

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
OBLIGATION is the juridical necessity to comply
with a prestation; a legal relation established
between one person and another, whereby the latter
is bound to the fulfillment of a prestation which the
former may demand of him
CIVIL OBLIGATION is one which has a binding force
in law, and which gives to the obligee or creditor the
right of enforcing it against the obligor or debtor in a
court of justice
NATURAL OBLIGATION is one which cannot be
enforced by action, but which is binding on the party
who makes it in conscience and according to natural
law
Article 1160. Obligations derived from quasi-contracts shall
be subject to the provisions of Chapter 1, Title XVII, of this
Book. (n)


Requisites of Obligations
1.
2.
3.
4.
ACTIVE SUBJECT – (obligee/creditor) has the right
demand the fulfillment of an obligation.
PASSIVE SUBJECT – (obligor/debtor) is duty bound
to the fulfillment of the obligation.
JURIDICAL/LEGAL TIE – binds the parties to an
obligation.
PRESTATION – constitute the object of the
obligation.
a. To give (ex: A binds himself to give cow to
B)
b. To do (ex: A binds himself to do the
assignment of B)
c. Not to do (ex: C binds himself to pay B if he
doesn’t do the assignment of A)
Article 1157. Obligations arise from:
1. Law; (1158)
2. Contracts; (1159)
3. Quasi-contracts; (1160)
4. Acts or omissions punished by law (1161); and
5. Quasi-delicts. (1089a) (1162)
Article 1158. Obligations derived from law are not presumed.
Only those expressly determined in this Code or in special
laws are demandable, and shall be regulated by the precepts
of the law which establishes them; and as to what has not
been foreseen, by the provisions of this Book. (1090)

LAW IS THE SOURCE OF OBLIGATION - when the
law establishes the obligation and the act or
condition upon which it is based is nothing more than
a factor for determining the moment when it becomes
demandable
o Example of obligations arising from law:

the government mandated the day
when the tax should be paid

the provides that one must provide
support to his/her family (Law on
Support)
Article 1159. Obligations arising from contracts have the force
of law between the contracting parties and should be complied
with in good faith. (1091a)

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)
Requisites of Contracts:
o Consent
o Object
o Consideration
Example: Bryan will sell (consent) his ROLEX watch
(object) to Mira for Php950,000.00 (consideration)
QUASI-CONTRACTS - juridical relations arising
from lawful, voluntary, and unilateral acts, by virtue of
which the parties become bound to each other,
based on the principle that no one should be unjustly
enriched or benefited at the expense of another.
Important JURIDICAL RELATIONS recognized by
Civil Code.
o Negotiorum Gestio – juridical relation
which arises whenever a person voluntarily
takes charge of the agency or management
of the business or property of another
without any power or authority from the
latter.
o Solutio Indebiti – juridical relation which
arises whenever a person unduly delivers a
thing through mistake to another who has
no right to demand it.
Article 1161. Civil obligations arising from criminal offenses
shall be governed by the penal laws, subject to the provisions
of article 2177, and of the pertinent provisions of Chapter 2,
Preliminary Title, on Human Relations, and of Title XVIII of this
Book, regulating damages. (1092a)
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General Rule: Every person liable for a felony is also
civilly liable
Criminal and civil actions arising from the same
offense may be instituted separately
o But AFTER criminal action has been
commenced, civil action CANNOT be
instituted until final judgment has been
rendered in the criminal action
Civil action has been filed BEFORE criminal action,
and the criminal action is subsequently commenced
o Civil action is SUSPENDED in whatever
stage it may be found until final judgment in
criminal action has been rendered
o However, if no final judgment has been
rendered in the civil action, the same may
be consolidated with the criminal action
General Rule: Civil action to recover damages from
the person criminally liable is not independent from
the criminal action
o Exception: Where civil action to recover
damages is entirely separate and
independent from the criminal action,
although the act or omission which is the
basis thereof may be a criminal offense

Where the civil action is based on
an obligation not arising from the
act or omission complained of as a
criminal offense or felony
Article 1162. Obligations derived from quasi-delicts shall be
governed by the provisions of Chapter 2, Title XVII of this
Book, and by special laws. (1093a)
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

Quasi-delicts refer to all of those obligations which
do not arise from law, contracts, quasi-contracts or
criminal offenses
Art. 2176; Art. 2180
REQUISITES OF LIABILITY
o Fault or negligence of the defendant
o Damage suffered or incurred by the plaintiff
OBLIGATIONS & CONTRACTS | M.S. CORPUZ
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o
Relation of cause and effect between the
fault or negligence of the defendant and the
damage by the plaintiff
CHAPTER 2
Nature and Effect of Obligations
Article 1165 (1). When what is to be delivered is a
determinate thing, the creditor, in addition to the right granted
him by article 1170, may compel the debtor to make the
delivery.
OBLIGATION TO GIVE DETERMINATE
(SPECIFIC)
Article 1163. Every person obliged to give something is also
obliged to take care of it with the proper diligence of a good
father of a family, unless the law or the stipulation of the parties
requires another standard of care. (1094a)
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
RIGHTS OF CREDITOR:
1.
2.
DETERMINATE - when the object is particularly
designated or physically segregated from all others
of the same class. In here, the object is concrete,
particularized thing, indicated by its own individuality.
(ex: Vios 2018 – ABC 12345)
GENERIC/INDETERMINATE - when the object is
designated merely by its class or genus without any
particular designation or physical segregation from
all others of the same class. In here, the object is one
whose determination is confined to that of its nature
– to the genus to which it pertains. (ex: Black Vios
2018)
What does it mean by, “DILIGENCE OF A GOOD FATHER
OF A FAMILY?
OBLIGATIONS OF DEBTOR:
1.
2.
3.
4.
Article 1164. The creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises. However, he
shall acquire no real right over it until the same has been
delivered to him. (1095)


A PERSONAL RIGHT is “a right pertaining to a
person to demand from another the fulfillment of a
Prestation to give, to do, or not to do.” It is a jus ad
rem.
a right enforceable only against a definite person or
group of persons, such as the right of a creditor to
demand from the debtor the delivery of the object of
the obligation after the perfection of the contract.
Example: On December 1, Bryan and Mira entered into an
agreement that Bryan will deliver a piglet to Mira on December
10. However, Bryan did not deliver this on the expected date.
Mira now has a personal right to compel Bryan to deliver
the piglet.
Note: In other words, it is a claim or demand against specific
person or entity for the performance of an act.


A REAL RIGHT is a “right pertaining to a person over
a specific thing, without a passive subject individually
determined against whom such right may be
personally enforced.
It is a jus in re, a right enforceable against the whole
world, such as the right of ownership, possession,
usufruct, or easement.
Example: ownership (dominium) over a parcel of lot,
usufruct, easements, mortgages, and pledges.
It is clear from these definitions that before delivery, the
creditor, in obligations to give, has merely a personal right
against the debtor – a right to ask for delivery of the thing and
the fruits thereof. Once the thing and the fruits are delivered,
then he acquires a real right over them, a right which is
enforceable against the whole world.
To perform the obligation specifically
To take care of the thing with the proper
diligence of a good father of a family.
To deliver all accessions and accessories of the
thing, even though they may not have been
mentioned.
To be liable for the damages in case of breach
of the obligation by reason of delay, fraud,
negligence, or contravention of the tenor
thereof.
Article 1165 (2). If the thing is indeterminate or generic, he
may ask that the obligation be complied with at the expense
of the debtor.
OBLIGATION TO GIVE INDETERMINATE
(GENERIC)
It refers to the ORDINARY DILIGENCE which an average or
reasonably prudent person would exercise over his own
property.
Exception: If the law or parties stipulate another standard of
car.
To compel specific performance
To recover damages for breach of the obligation
RIGHTS OF CREDITOR:
1.
2.
3.
To ask performance of the obligation
To ask that the obligation be complied with at the
expense of the debtor
To recover damages for the breach of the obligation
OBLIGATIONS OF DEBTOR:
1.
2.
To deliver a thing which is neither superior nor inferior
quality
To be liable for damages in case of breach of the
obligation be reason of delay, fraud, negligence or
contravention of the tenor thereof
Article 1165 (3). If the obligor delays, or has promised to
deliver the same thing to two or more persons who do not have
the same interest, he shall be responsible for any fortuitous
event until he has effected the delivery. (1096)
Article 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and accessories,
even though they may not have been mentioned. (1097a)
ACCESSIONS - all of those things which are produced by the
thing which are produced by the thing which is the object of
the obligation as well as all of those which are naturally or
artificially attached thereto.
ACCESSORIES - all of those which are used for the
embellishment or perfection of a thing for its extended use.
Article 1167. If a person obliged to do something fails to do it,
the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention
of the tenor of the obligation. Furthermore, it may be decreed
that what has been poorly done be undone. (1098)
OBLIGATION TO DO
In POSITIVE PERSONAL OBLIGATIONS (to do), if the
obligor (debtor) fails to do that which he has obligated himself
to do, obligee can have the obligation:
OBLIGATIONS & CONTRACTS | M.S. CORPUZ
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1.
2.
Performed or executed at the expense of the former;
and
demand for damages by reason of the breach.
1.
2.
If there has been a performance of the obligation, but in
contravention of the tenor thereof, the rights of the OBLIGEE
(CREDITOR) are:
1.
2.
3.
To have the obligation performed or executed at the
expense of the obligor;
To ask that what has been poorly done be undone;
and
To recover damages because of breach of the
obligation
Article 1168. When the obligation consists in not doing, and
the obligor does what has been forbidden him, it shall also be
undone at his expense. (1099a)
In NEGATIVE PERSONAL OBLIGATIONS (not to do), the
object of the obligation is fulfilled or realized so long as that
which is forbidden is not done by the obligor.
If the obligor DOES what has been forbidden him, the
remedies of the obligee are:
1.
2.
To have it undone at the expense of the obligor
To ask for damages.
Note: In obligations not to do, delay or mora is not possible
because the obligation is either fulfilled or not fulfilled
Article 1169. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their
obligation.
In general, breach of an obligation may either be voluntary or
involuntary:


VOLUNTARY if the debtor/obligor in the
performance of his obligation is guilty of default, or
fraud, or negligence, or in any manner contravenes
the tenor thereof
INVOLUNTARY if he is unable to comply because of
an event which cannot be foreseen, or which, though
foreseen, was inevitable
In Positive obligations: obligor incurs in delay from the time the
obligee DEMANDS, judicial or extrajudicial, from him the
fulfillment of the obligation
DEFAULT or mora signifies the idea of delay in the fulfillment
of an obligation with respect to time
Three Kinds Of Default
1.
2.
3.
Mora solvendi – delay of the obligor (debtor) to
perform his obligation
Mora accipiendi – delay of the oblige (creditor) to
accept the delivery of the thing due which is the
object of the obligation
Compensatio morae – delay of the parties or obligors
in reciprocal obligations
GENERAL RULE:
DAMAGES.
NO
DEMAND,
NO
DELAY,
The demand may be JUDICIAL or EXTRAJUDICIAL, how?
1.
2.
Obligation is demandable and already liquidated
Obligor/Debtor delays performance; and
Creditor requires the performance judicially or
extrajudicially
JUDICIAL – it is made by filing a case in court.
EXTRAJUDICIAL – it is made outside of court, by
the creditor demanding its fulfillment either orally or
in writing.
Article 1169 (3). In reciprocal obligations, neither party incurs
in delay if the other does not comply or is not ready to comply
in a proper manner with what is incumbent upon him. From
the moment one of the parties fulfills his obligation, delay by
the other begins. (1100a)
RECIPROCAL OBLIGATIONS are created or established at
the same time, out of the same cause, and which result in
mutual relationships of creditor and debtor between the
parties.
Conditional in the sense that fulfillment of an obligation by one
party depends upon the fulfillment of the obligation by the
other.
GENERAL RULE: Fulfillment by both parties should be
SIMULTAANEOUS or at the SAME TIME.
If neither party complies or is ready to comply with what is
incumbent upon him, the default of one compensates for the
default of the other – there can be NO legal delay.
Article 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for
damages. (1101)
Four (4) ways of Committing Breach of Obligations
1.
2.
3.
4.
Fraud (1171)
Negligence (1172)
Delay (1173 [1])
Contravention of the tenor of the obligation (1173 [2])
Article 1171. Responsibility arising from fraud is demandable
in all obligations. Any waiver of an action for future fraud is
void. (1102a)
FRAUD or dolo consists in the conscious and intentional
proposition to evade the normal fulfillment of an obligation
Under our legal system, fraud in general may be classified into
civil and criminal fraud.
1.
2.
Criminal fraud
Civil fraud, in turn, may be classifi ed into the
following:
a. the fraud or dolo in the performance of an
obligation; and
b. the fraud or dolo in the constitution or
establishment of an obligation.

If there is breach by reason of fraud on the part of the
obligor/ debtor, he can be held liable for damages.
What is prohibited is the waiver or renunciation which
is made in advance or in anticipation of the fraud, and
not that which is made after fraud has already been
committed.
NO
Requisites in order that obligor or debtor may be
considered in default
1.
2.
3.
3.
When the obligation or the law expressly so declare;
or
When from the nature and the circumstances of the
obligation it appears that the designation of the time
when the thing is to be delivered or the service is to
be rendered was a controlling motive for the
establishment of the contract; (time is of essence) or
When demand would be useless, as when the
obligor has rendered it beyond his power to perform.

Exceptions: (Article 1169. [2]) However, the demand by the
creditor shall not be necessary in order that delay may exist:
OBLIGATIONS & CONTRACTS | M.S. CORPUZ
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Article 1172. Responsibility arising from negligence in the
performance of every kind of obligation is also demandable,
but such liability may be regulated by the courts, according to
the circumstances. (1103)
NEGLIGENCE or culpa consists in the omission of that
diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the
time and of the place
a.
2.
Civil negligence may either be:
1.
2.
Culpa contractual - fault or negligence of the obligor
by virtue of which he is unable to perform his
obligation arising from a pre-existing contract
because of the omission of the diligence
Culpa aquiliana - fault or negligence of a person
who, because of the omission of the diligence,
causes damage to another
TEST OF NEGLIGENCE: Did the defendant in doing the
alleged negligent act use the reasonable care and caution
which an ordinarily prudent person would have used in the
same situation?
Article 1173. The fault or negligence of the obligor consists in
the omission of that diligence which is required by the nature
of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. When negligence
shows bad faith, the provisions of articles 1171 and 2201,
paragraph 2, shall apply.
If the law or contract does not state the diligence which is to
be observed in the performance, that which is expected of a
good father of a family shall be required. (1104a)
What is the DOCTRINE OF RES IPSA LOQUITUR? One is
presumed to be negligent if it had exclusive control of
whatever caused the injury even though there is no specific
evidence; “the thing speaks for itself”
For the doctrine of RES IPSA LOQUITUR to apply, the
following REQUISITES should be present:
1.
2.
3.
the accident is of a kind which ordinarily does not
occur in the absence of someone’s negligence;
it is caused by an instrumentality within the exclusive
control of the defendant or defendants;
The possibility of contributing conduct which would
make the plaintiff responsible is eliminated.
Article 1174. Except in cases expressly specified by the law,
or when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.
(1105a)
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FORTUITOUS EVENT is an event which could not
be foreseen, or which, though foreseen, was
inevitable
Unforeseeability or inevitability
Comprehends “ACTS of GOD” or those which are
absolute independent of human intervention
Broad enough to include force majeure or events
which arise from legitimate or illegitimate acts of
persons other than the obligor, such as commotions,
riots, wars, robbery, and similar acts
Fortuitous events may be produced (1) by nature and (2) by
the act of man
Classification of fortuitous events
1.
Fortuitous event proper (act of God)
absolutely
independent
of
human
intervention
b. Force majeure (fuerza mayor) - arises from
legitimate or illegitimate acts of persons
other than the obligor
As to foreseeability
a. Ordinary fortuitous event - event which
usually happens or which could have been
reasonably foreseen
b. Extraordinary fortuitous event - event which
does not usually happen and which could
have been reasonably foreseen
GENERAL RULE: If obligor is unable to comply with his
obligation by reason of fortuitous event, he/she is
EXEMPTED FROM ANY LIABILITY.
Provided that:
1.
2.
3.
Event must be independent of the will of the obligor
Event must be either unforeseeable or inevitable
Event must be of such a character as to render it
impossible for the obligor to fulfill his obligation in a
normal manner.
Exceptions:
1.
2.
3.
Liability is expressly specified by law
Declared by the stipulation of the parties; and
Nature of the obligation requires the assumption of
risk
Article 1175. Usurious transactions shall be governed by
special laws. (n)
Article 1176. The receipt of the principal by the creditor
without reservation with respect to the interest, shall give rise
to the presumption that said interest has been paid.
The receipt of a later installment of a debt without reservation
as to prior installments, shall likewise raise the presumption
that such installments have been paid. (1110a)
Presumption No. 1: The receipt of the principal by the
creditor without reservation with respect to the interest,
shall give rise to the presumption that said interest has
been paid. Normally, if the debt produces an interest, you first
pay the interest and not the principal. Otherwise, the interest
paid will decrease, to the detriment of a creditor.
Presumption No. 2: The receipt of a later installment of a
debt without reservation as to prior installments, shall
likewise raise the presumption that such installments
have been paid.
Article 1177. The creditors, after having pursued the property
in possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of the latter for
the same purpose, save those which are inherent in his
person; they may also impugn the acts which the debtor may
have done to defraud them. (1111)
REMEDIES OF CREDITOR TO PROTECT CREDIT:
1.
2.
3.
to EXHAUST the property in possession of the
debtor;
to be SUBROGATED to all of the rights and actions
of the debtor save those which are inherent in his
person
to IMPUGN all of the acts which the debtor may have
done to defraud him.
Article 1178. Subject to the laws, all rights acquired in virtue
of an obligation are transmissible, if there has been no
stipulation to the contrary. (1112)
As to whether there is human intervention or not
OBLIGATIONS & CONTRACTS | M.S. CORPUZ
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GENERAL RULE: Rights of obligations or rights acquired by
virtue of obligation are transmissible.
a.
EXCEPTION:
b.
1.
2.
3.
They are a PERSONAL RIGHT;
There is a STIPULATION between parties;
Not transmissible BY OPERATION OF LAW.
5.
SECTION 1
Pure and Conditional Obligations
b.
6.
Art. 1180. 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.
PURE OBLIGATION - one whose effectivity or extinguishment
does not depend upon the fulfillment or non-fulfillment of a
condition or upon the expiration of a term or period;
characterized by the quality of immediate demandability, but
there must be a reasonable period of grace.
b.
7.
Conjuctive - there are several conditions,
all of which must be realized
Alternative - there are several conditions,
but only one must be realized
Express vs. Implied
a.
b.
Express – condition is stated expressly
Implied – condition is tacit
Article 1181. 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. (1114)

SUSPENSIVE CONDITION (condition precedent) future and uncertain event upon the happening or
fulfillment of which rights arising out of the obligation
are acquired

RESOLUTORY CONDITION (condition subsequent)
- future and uncertain event upon the happening or
fulfillment of which rights which are already acquired
by virtue of obligation are extinguished or lost
CONDITION is a future and uncertain fact or event upon which
an obligation is subordinated or made to depend
CONDITIONAL OBLIGATION is one whose effectivity is
subordinated to the fulfillment or nonfulfillment of a future and
uncertain fact or event- EVENT MUST BOTH BE FUTURE
AND UNCERTAIN
Divisible - condition is susceptible of partial
realization
Indivisible - condition is not susceptible of
partial realization
Conjunctive vs. Alternative
a.
Article 1179. 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.
Every obligation which contains a resolutory condition shall
also be demandable, without prejudice to the effects of the
happening of the event. (1113)
Divisible vs. Indivisible
a.
CHAPTER 3
Different Kind of Obligations
Positive - condition involves performance
of an act
Negative - condition involves omission of
an act
Classification of Conditions
1.
Suspensive vs. Resolutory (Art.1181)
a.
b.
2.
Potestative vs. Casual vs. Mixed (Art. 1182)
a.
b.
c.
3.
Potestative - fulfillment of the condition
depends upon the will of a party to the
obligation
Casual - fulfillment of the condition
depends upon chance and/or the will of a
third person
Mixed - fulfillment of the condition depends
partly upon the will of a party to the
obligation and partly upon chance and/or
the will of third person
Article 1182. When the fulfillment of the condition depends
upon the sole will of the debtor, the conditional obligation shall
be void. If it depends upon chance or upon the will of a third
person, the obligation shall take effect in conformity with the
provisions of this Code. (1115)
Possible vs. Impossible (Art. 1183)
a.
b.
4.
Suspensive Condition - fulfillment of the
condition results in the acquisition of rights
arising out of the obligation
Resolutory Condition - fulfillment of the
condition results in the extinguishment of
rights arising our of the obligation
Possible - condition is capable of
realization according to nature, law, public
policy or good customs
Impossible - condition is not capable of
realization according to nature, law, public
policy or good customs
Positive vs. Negative (1184-1185)
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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. (1120)
Retroactivity of effect. — once the event which constitutes
the condition is fulfilled thus resulting in the effectivity of the
obligation, its effects must logically retroact to the moment
when the essential elements which gave birth to the obligation
have taken place and not to the moment when the accidental
element was fulfilled.
Article 1183. 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.

In obligations to give - 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.

In obligations to do or not to do - the courts will
have to determine in each case the retroactive effect
of the condition that has been complied with. This
duty of the courts includes the power to determine
whether the effects of the fulfi llment of the condition
shall retroact to the very moment of the constitution
of the obligation or only to a specifi ed date before
fulfi llment. It can even include the power to
determine whether or not there will be any
retroactivity of effects.
The condition not to do an impossible thing shall be
considered as not having been agreed upon. (1116a)
Effects. — According to Art. 1183 of the Civil Code, impossible
conditions as well as those which are contrary to good
customs or public policy and those which are prohibited by law
shall annul the obligation which depends upon them. This
rule is logical considering that the obligation depends for its
perfection upon the fulfi llment of a condition which is either
impossible, illegal, inappropriate or illicit in character.
Article 1184. 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. (1117)
Article 1185. 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.
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.
(1118)
Article 1188. The creditor may, before the fulfillment of the
condition, bring the appropriate actions for the preservation of
his right.
The debtor may recover what during the same time he has
paid by mistake in case of a suspensive condition. (1121a)
RULE 1: to protect the CREDITOR.
Pending the happening of the suspensive condition, the
creditor cannot compel the debtor to perform the Prestation.
All that the creditor has in the meanwhile is a mere expectancy
contingent to the happening of the condition.
REMEDIES THAT THE CREDITOR MAY AVAIL FOR THE
PRESERVATION OF THE PRESTATION:
1.
POSITIVE CONDITION – if the condition has become
indubitable that the event will not take place, the obligation will
be extinguished.
2.
NEGATIVE CONDITION – the condition is that the event will
not take place.
3.
Article 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment. (1119)
CONSTRUCTIVE FULFILLMENT – refers to an obligation
prevented by the obligor from happening.
RULE: Doctrine only applies to suspensive and not resolutory
condition.
RULES ON CONSTRUCTIVE FULFILLMENT:
1.
2.
an intent to prevent the fulfillment
Actual prevention of the condition
Article 1187. 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. 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. 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.
4.
5.
Action for prohibition restraining the alienation of the
thing pending the happening of the suspensive
condition;
Registration/Petition (with the appropriate Registry of
property like land is involved), for the annotation of
the creditor’s right; THIS IS NON-JUDICIAL.
Action to demand security if the debtor has become
insolvent;
Action to set aside alienation made by the debtor in
fraud of creditors; or
Action against adverse possessors to interrupt the
running of the prescriptive period.
RULE 2: to protect the DEBTOR.
If the payment made with knowledge of the conditions herein
stipulated, whatever has been paid cannot recovered,
because it impliedly waived such conditions.
Article 1189. 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.
2.
If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
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;
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Refer only to conditional obligations to give
a determinate thing; natural consequences
of the principle of retroactivity.
USEFUL IMPROVEMENTS - these are improvements which
increase the value or the utility of the thing and answers a
universal aspiration of man (E.G. fence around the property)
When is a thing considered LOST?
Article 1190. 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.
1.
2.
3.
3.
When it PERISHES
When
it
goes
OUT
OF
COMMERCE
When it DISAPPEARS in such a
way that its existence is unknown
or it cannot be recovered
When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor;
What if the thing DETERIORATES
WITHOUT THE FAULT OF THE DEBTOR?
What are your REMEDIES?
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.
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. (1123)
IMPAIRMENT is to be borne by the
CREDITOR (NO DAMAGES)
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;
What if the thing DETERIORATES
THROUGH THE FAULT OF THE
DEBTOR? What are your REMEDIES?
1.
2.
3.
5.
RESCISSION with indemnity for
damages
FULFILLMENT with indemnity for
damages
RECISSION - to extinguish it and to
restore (as far as possible) the parties
to the positions they were in before
contracting.
If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
IMPROVED
BY
ITS
NATURE?
IMPROVEMENT shall inure to the benefit of
the CREDITOR, WITH REIMBURSEMENT
to the DEBTOR – upon the necessary
expenses incurred for the preservation of
the thing.
6.
If it is improved at the expense of the debtor, he shall
have no other right than that granted to the
usufructuary. (1122)
IMPROVED AT THE EXPENSE OF THE DEBTOR?
DEBTOR shall have no other right than that granted to the
RIGHTS OF USUFRUCTUARY:
1.
2.
Cannot gain reimbursement for the useful expenses
Right of limited removal (3) Debtor can set off the
value of damages he might’ve incurred.
Article 1191. 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.
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.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
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. (1124)
The power to rescind is always implied upon non-compliance
of the obligation. Note: It is essential to must be invoked
judicially.
IF THE CONTRACT DOES NOT CONTAIN A PROVISION
authorizing rescission and there is a breach committed by one
of the parties, the rescission must only be made by means of
judicial action. It will be the courts’ decision which will operate
to rescind the contract.
RULE: WON there is a provision in the contract regarding
rescission, RESCISSION CAN ONLY BE MADE FOR A
SERIOUS BREACH; a casual or slight will not suffice for a
rescission. The breach must be substantial in character as to
defeat the very object of the obligation.
USUFRUCT- right or enjoyment of a thing, the property of
which is vested in another and to draw from the same all the
profit, utilities, and advantage it may produce without altering
the form of the thing.
Two possibilities if you rescind:
RULE: The debtor cannot ask for reimbursement for
expenses incurred for useful improvements or improvements
for pleasure; the debtor may have the right to remove such
improvements provided it is possible to do so without damage
to the thing or property.
Article 1192. In case both parties have committed a breach of
the obligation, the liability of the first infractor shall be equitably
tempered by the courts. If it cannot be determined which of the
parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages. (n)
1.
2.
AGREEMENT
REFUSAL – the court will then decide if rescission
was proper.
Effect of Breach by Both Parties. — The above rules are
deemed just. The first one is fair to both parties because the
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second infractor also derived, or thought he would derive,
some advantage by his own act or neglect. The second rule is
likewise just because it is presumed that both at about the
same time tried to reap some benefit.
Section 2
Obligations with a Period
Article 1193. Obligations for whose fulfillment a day certain
has been fixed, shall be demandable only when that day
comes.
Obligations with a resolutory period take effect at once, but
terminate upon arrival of the day certain.
A day certain is understood to be that which must necessarily
come, although it may not be known when.
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. (1125a)
7.
Indefinite - can only be determined by an event
which must necessarily come to pass, although it
may not be known when
Article 1194. 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. (n)
Article 1195. 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. (1126a)


Only applies in obligations to give
If payment or delivery was made voluntarily or with
knowledge of the period or of the fact that obligation
has not yet become due and demandable - NO
RIGHT TO RECOVER whatsoever
TERM or PERIOD is an interval of time, which, exerting an
influence on an obligation as a consequence of a juridical act,
either suspends its demandability or produces its
extinguishment
Article 1196. 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.
(1127)
OBLIGATIONS WITH A PERIOD - those whose
demandability or extinguishment is subject to the expiration of
a terms or period
GENERAL RULE: the period is established for the benefit of
both parties UNLESS there is stipulation that it is only for the
benefit of one of them.
Consequently, as a general rule, the creditor cannot demand
the performance of the obligation before the expiration of the
designated period; neither can the debtor perform the
obligation before the expiration of such period.
Reasons why creditor cannot be compelled to accept
payment:
1.
2.
3.
Payment of interest
Creditor may want to keep his money invested safely
instead of having it in his hands
Under Usury Law, there is a special prohibition of
payment of interest in advance for more than one
year
Article 1197. 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.
The courts shall also fix the duration of the period when it
depends upon the will of the debtor.
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. (1128a)
Classification of term or period:
1.
2.
Suspensive (ex die) - obligation becomes
demandable only upon the arrival of day certain
Resolutory (in diem) - obligation is demandable at
once, although it is terminated upon the arrival of a
day certain
3.
4.
5.
Legal - granted by law
Conventional - stipulated by the parties
Judicial - fixed by courts
6.
Definite - date or time is known beforehand
It is not necessary that the creditor will expressly ask in the
complaint for the court to fix the period, such may be granted
although the complaint does not ask for such relief.
1. if the obligation does not fox a period, but it can
be inferred that a period was intended by the
parties
This cannot be applied to:
a. Contract for services in which no period was
fixed by the parties. In such contracts the
period of employment is understood to be
implicitly fixed, in default of express
stipulation, by the period of the payment of
the salary of the employee, in accordance
with the custom universally observed
throughout the world.
b. pure obligations
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2.
3.
if the duration of the period depends upon the
will of the debtor
a. Just and logical, because otherwise, there
would always be the possibility that the
obligation will never be fulfilled or
performed.
If the debtor binds himself to pay when his means
permit him to do so.
Article 1198. 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. (1129a)
SECTION 3
ALTERNATIVE OBLIGATIONS
Characteristic feature of an ALTERNATIVE OBLIGATION
is that various objects being due, the payment or performance
of one of them, determined by the election which, as a GR,
pertains to obligor/debtor, is sufficient
Characteristic feature of FACULTATIVE OBLIGATION is
that only one object or prestation is due, but the obligor/debtor
may deliver another object or perform another prestation in
substitution
Article 1199. A person alternatively bound by different
prestations shall completely perform one of them.
The creditor cannot be compelled to receive part of one and
part of the other undertaking. (1131)
Article 1200. The right of choice belongs to the debtor, unless
it has been expressly granted to the creditor.
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. (1132)
GENERAL RULE: right of choice belongs or pertains to
debtor (once the choice is made and communicated to the
creditor, the obligations becomes simple)
Exceptions:
1. When right of choice has been expressly granted to
the creditor
2. When it has been expressly granted to a third person
Limitation upon the right of choice are provided in par 2,
Art. 1200. (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. (1132))
Article 1201. The choice shall produce no effect except from
the time it has been communicated. (1133)
Rule is applicable whether right of choice is exercised by
debtor, or creditor or by a third person
Article 1202. The debtor shall lose the right of choice when
among the prestations whereby he is alternatively bound, only
one is practicable. (1134)
When only one Prestation is practicable, the debtor loses his
right of choice altogether. The obligation then becomes
simple.
Article 1203. 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. (n)
When Choice Is Rendered Impossible. — The above article
does not have any counterpart in the Spanish Civil Code. The
rule, however, is logical. Since the debtor’s right of choice is
rendered ineffective through the creditor’s fault, his only
possible recourse will be to bring an action to rescind the
contract with damages.
Article 1204. The creditor shall have a right to indemnity for
damages when, through the fault of the debtor, all the things
which are alternatively the object of the obligation have been
lost, or the compliance of the obligation has become
impossible.
The indemnity shall be fixed taking as a basis the value of the
last thing which disappeared, or that of the service which last
became impossible.
Damages other than the value of the last thing or service may
also be awarded. (1135a)
According to Article 1204, “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.”
Article 1205. 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.
Until then the responsibility of the debtor shall be governed by
the following rules:
1.
2.
3.
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;
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;
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.
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. (1136a)
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. Until then,
the responsibility of the debtor shall be governed by the rules
above.
Article 1206. When only one prestation has been agreed
upon, but the obligor may render another in substitution, the
obligation is called facultative.
The loss or deterioration of the thing intended as a substitute,
through the negligence of the obligor, does not render him
liable. But once the substitution has been made, the obligor is
OBLIGATIONS & CONTRACTS | M.S. CORPUZ
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liable for the loss of the substitute on account of his delay,
negligence or fraud. (n)
a.
E. G. Article 927, 1824, 1911, 1915, 2146,
2157, and 2194 NCC and Article 110 (RPC)
The NATURE of the obligation requires solidarity.
a. E.G. Obligations arising from criminal
offenses or torts
3.
Article 1208. 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. (1138a)
JOINT DIVISIBLE OBLIGATIONS - Each creditor can
demand only for the payment of his proportionate share of the
credit, while the debtors can be held liable only for the
payment of his proportionate share of the debt.
Example:
1.
A, B, and C, joint debtors and X and Y, the joint
creditors. If the obligation is joint on both sides, how
do you DETERMINE how much can X acting
alone, collect from A?
Answer: Divide the total amount to the number of debtors.
Then, further divide by number of creditors. (Divided into as
many equal shares)
Illustration: Divide the amount to the number of debtors:
6000/3 (A,B,C) = 2,000.00 – X or Y can collect 2,000.00 from
A.
Section 4
Joint and Solidary Obligations
Collective Obligations
Obligation
6000
Creditor
X = 3,000.00
Y = 3,000.00
A
C=
=2,000.00 B = 2,000.00
2,000.00
Debtor
2.
JOINT OBLIGATION (obligación mancomunada) – an
obligation where there is a concurrence of several creditors,
or of several debtors, or of several creditors and debtors, by
virtue of which each of the creditors has a right to demand,
and each of the debtors is bound to render, compliance with
his PROPORTIONATE PART of the prestation which
constitutes the object of the obligation. (KKB)
SOLIDARY OBLIGATION (obligación solidaria) - an
obligation where there is a concurrence of several creditors,
or of several debtors, or of several creditors and several
debtors, by virtue of which each of the creditors has a right to
demand, and each of the debtors is bound to render, ENTIRE
COMPLIANCE with the prestation which constitutes the object
of the obligation. (All for one, one for all)
Article 1207. 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. (1137a)
GENERAL RULE: If in a debt there are several debtors and
creditors, it is PRESUMED that the obligation is JOINT.
EXCEPTIONS:
1. There is STIPULATION to the contrary.
a. “Jointly and severally”
b. “Individually and collectively”
2. When the LAW requires solidarity.
A, B, C, and D, joint debtors have to pay 12K to X
and Y, solidary debtors. How much can X acting
alone collect from A?
Obligation
12000
Creditor = solidary
X
Debtor = jointly
A
Y
B
C
D
ANSWER: X can only collect 3K. While X can collect the whole
debt because he is solidary creditor, the fact remains that A is
merely a joint debtor. Therefore, his maximum credit from A is
only 3k.
3.
A, B, C, and D, solidary debtors have to pay 12K to
X and Y, joint debtors. How much can X acting alone
collect from A? (6K)
While each of the debtors can be held for the limited, X is
limited because he is a joint creditor; he cannot act on behalf
of Y. (Divide amount to those jointly bound)
Obligation
12000
Creditor = jointly
Debtor = solidary
X
A
Y
B
C
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10
Article 1209. 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. (1139)
JOINT INDIVISIBLE OBLIGATIONS – Juridically speaking,
the parties are merely jointly bound. The debtors are merely
joint debtors and the creditors are merely joint creditors BUT
the object of the obligation is merely indivisible.
1. No creditor can act in representation of others
2. No debtor can be compelled to answer for the liability
of others
EFFECT OF BREACH: If 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.
Article 1210. The indivisibility of an obligation does not
necessarily give rise to solidarity. Nor does solidarity of itself
imply indivisibility. (n)
Article 1212. 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. (1141a)
EFFECTS OF PREJUDICIAL ACTS OF A CREDITOR TO:
1. DEBTORS – valid and binding because of the
principle of mutual representation which exists
among the creditors
2. SOLIDARY CREDITORS – the creditor who
performed the act shall incur the obligation of
indemnifying the others for damages.
Article 1211. Solidarity may exist although the creditors and
the debtors may not be bound in the same manner and by the
same periods and conditions. (1140)
ACTIVE SOLIDARITY (solidarity of creditors) - tie or vinculum
existing among several creditors of one and the same
obligation by virtue of which each of them, in relation to his cocreditors, possesses the character of creditor only with
respect to his share in the obligation, but in relation to the
common debtor/ s, represents all of the other creditors
PASSIVE SOLIDARITY (solidarity of debtors) - tie or
vinculum existing among several debtors of one and the same
obligation by virtue of which each of them, in relation to his co
debtors, possesses the character of debtor only with respect
to his share in the obligation, but in relation to the common
creditor/s, represents all of the other debtors
PREJUDICIAL ACTS:
1. Novation
2. Compensation
3. Confusion
4. Remission
Example: A, B, and C, joint debtors are required to deliver a
particular horse to X and Y, the solidary creditors. The
obligation is bounded upon a written document with a period
of 10 years, the parties forgot about that obligation. When the
10th year was about to expire, one of the joint creditors, X,
suddenly realized it was about to expire. Can X, acting alone,
send a demand letter to A, B, and C.
MANRESA – According to Article 1209, “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.” The act of sending a
demand letter to the debtors is not a prejudicial act, as a
matter of fact; it is a BENEFICIAL ACT, because it will operate
to prevent prescription from setting in. Since the act is
beneficial and the law only speaks of prejudicial acts, the act
of a single creditor directed against the debtor should operate.
TOLENTINO – that is not sufficient. The fact remains that the
obligation remains JOINT and there is no mutual
agency/representation. X acting alone as a joint creditor has
no right to represent the interest of Y, his co- joint creditor - he
can only act on his own behalf. Therefore, the act regardless
if it is prejudicial or beneficial should not be considered
juridical. (✓)
Article 1213. A solidary creditor cannot assign his rights
without the consent of the others. (n)

If the assignment is made to anyone of the other
solidary creditors without the consent of the others,
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
there is no violation because there can be no
invasion of personal or confidential relationship
existing among the creditors
If the assignment is made to a third person without
the consent of others, there would be a violation of
the precept
o The other solidary creditors, as well as the
debtor/s, are NOT BOUND to recognize the
validity or efficacy of assignment
o This is without prejudice to liability of
creditor-assignor to the other solidary
creditors for damages which may have
been incurred
Article 1214. The debtor may pay any one of the solidary
creditors; but if any demand, judicial or extrajudicial, has been
made by one of them, payment should be made to him.
(1142a)

In case of mixed solidarity, judicial/extrajudicial
demand would prohibit the debtor upon whom the
demand is made from making a payment to any
creditor other than the one who made the demand
o Prohibition does not extend to other debtors
upon whom no demand has been made and
so each of such debtors can still validly
tender payment to a creditor other than to
creditor who made the demand
Article 1215. 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.
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. (1143)
NOVATION - change or substitution of an obligation by
another, resulting in its extinguishment or modification, either
by:
a. Changing its object or principal condition
b. Substituting another in place of the debtor
c. Subrogating a third person in the rights of
the creditor.
COMPENSATION - weighing two obligations simultaneously
in order to extinguish them to the extent that the amount of
one is covered by the amount of the other.

TOTAL COMPENSATION - both amounts are the
same.

PARTIAL COMPENSATION - if they are not the
same, only on concurrent amount.
CONFUSION - refers to the merger of the qualities of creditor
and debtor in one and the same person with respect to one
and the same obligation.
REMISSION - act of pure liberality by virtue of which the
creditor, without having received any compensation or
equivalent, renounces his right to enforce the obligation,
thereby extinguishing the same either in its entirety or in the
part or aspect thereof to which the remission refers
As far as the solidary debtors are concerned, effects of
remission are:
1.
If remission covers entire obligation - obligation is
totally extinguished and entire juridical relation
among debtors is terminated altogether
a. If whole obligation is condoned through the
efforts of a solidary debtor for his benefit, he
is not entitled to any reimbursement from
his co debtors
2.
3.
If remission is for benefit of one of the debtors and
covers his entire share in the obligation - he is
completely released from the creditor/s, but he is still
bound to his co-debtors
If remission is for benefit of one of the debtors and
covers only a part of his share in the obligation, his
character as solidary debtor is not affected;
continues both with respect to the creditor/s and with
respect to other debtors
Article 1216. 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. (1144a)
Since any one of the solidary debtors can be held liable for the
payment of the entire obligation, it is but logical that the
creditor may proceed against any one or some or all of them
simultaneously.
Article 1217. 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.
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.
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. (1145a)



As a rule, interest shall be computed from the time
payment was made
If payment was made before debt became due, no
interest during intervening period may be demanded
o Interest shall be computed from the time the
debt became due, not from the time
payment was made
Before payment is actually made, the right of the
solidary debtor to demand reimbursement from his
co-debtors is merely contingent and conditional
o Once payment has already been made, the
right becomes real and existing
Article 1218. 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. (n)
Nature of right of debtor. — It must be observed that, under
the law, before the payment is actually made, the right of the
solidary debtor to demand reimbursement from his co-debtors
is merely contingent and conditional. Once payment has
already been made, the right becomes real and existing. The
old obligation in favor of the creditor is extinguished, but a new
obligation is created in favor of the solidary debtor who made
the payment. There is, therefore, no real case of subrogation.
Article 1219. 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. (1146a)
Article 1220. The remission of the whole obligation, obtained
by one of the solidary debtors, does not entitle him to
reimbursement from his co-debtors. (n)
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Article 1221. 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.
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.
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. (1147a)
Effect of loss or impossibility of performance
1.
If loss of the thing or impossibility of complying with
the prestation is not due to the fault of the solidary
debtors obligation is EXTINGUISHED
2.
If loss or impossibility is due to fault of one of the
solidary debtors - obligation is converted to an
obligation of indemnity for damages, but solidary
character of obligation remains
a. Creditor can still proceed against one, or
some, or all of the debtors for the payment
of the price, plus damages
b. It is without prejudice to subsequent right of
action of debtor/s who paid to proceed
against the guilty or negligent debtor for
reimbursement
3.
If loss or impossibility is due fortuitous event after
one of the debtors had already incurred in delay obligation is converted into an obligation of indemnity
for damages, but solidary character of obligation
remains
Article 1222. 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. (1148a)
DEFENSES AVAILABLE TO A SOLIDARY DEBTOR:
1. Defenses derived from the nature of the obligation.
E.G. Payment or performance; res judicata;
prescription; those which invalidate the
contract such as mistake, violence, undue
influence, fraud, etc.
2. Defenses personal to him/ pertaining to his own
share.
E.G. minority; insanity, etc.
3. Defenses personal to the others, but only as regards
that part of the debt for which the latter is responsible.
This is merely a partial defense.
SECTION 5
Divisible and Indivisible Obligations
DIVISIBLE OBLIGATIONS - those which have as their object
a prestation which is susceptible of partial performance
without the essence of obligation being changed
INDIVISIBLE OBLIGATIONS - those which have as their
object a prestation which is not susceptible of partial
performance, because, otherwise, the essence of the
obligation will be changed


A thing is INDIVISIBLE - if separated into parts, its
essence is changed or its value is decreased
disproportionately
A thing is DIVISIBLE - if separated into parts, its
essence is not changed or its value is not decreased
proportionately, because each of the parts into which
it is divided are homogenous and analogous to each
other as well as to the thing itself
o It must be possible to reconstruct the thing
itself into its condition prior to the division
o Kinds of division:

Quantitative - thing can be
materially divided into parts and
such parts are homogenous to
each other

Qualitative - thing can be
materially divided, but the parts
are not exactly homogenous; ex.
partition of inheritance

Ideal or intellectual - thing can
only be separated into ideal or
undivided parts, not material parts,
as in the case of co-ownership
Article 1223. The divisibility or indivisibility of the things that
are the object of obligations in which there is only one debtor
and only one creditor does not alter or modify the provisions
of Chapter 2 of this Title. (1149)
Article 1224. A joint indivisible obligation gives rise to
indemnity for damages from the time anyone of the debtors
does not comply with his undertaking. 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. (1150)
General Rule: Creditor cannot be compelled partially to
receive prestation in which the obligation consists; neither
may the debtor be required to make partial payments
Exceptions:
1. When obligation expressly stipulates the contrary
2. When different prestations constituting the objects of
the obligation are subject to different terms and
conditions
3. When obligation is in part liquidated and in part
unliquidated
Where there is plurality of debtors and creditors, the effect of
divisible or indivisible character of the obligation shall depend
upon whether the obligation is joint or solidary
Breach of joint indivisible obligations - the debtor who
failed to comply with his obligation shall bear the burden of
paying all of the damages suffered by the creditor/s as a result
of the nonfulfillment of the obligation
Article 1225. For the purposes of the preceding articles,
obligations to give definite things and those which are not
susceptible of partial performance shall be deemed to be
indivisible.
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.
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.
In obligations not to do, divisibility or indivisibility shall be
determined by the character of the prestation in each
particular case. (1151a)
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13
True test of divisibility: Whether the obligation is susceptible
of partial compliance or not
a stipulated indemnity or perform a stipulated prestation in
case of breach
Penal clause or penalty has a three-fold purpose:

The purpose of the obligation is the controlling
circumstance
IN OBLIGATION TO GIVE


If the obligation to give something which is definite or
which by its very nature is indivisible, it is evident that
it is not susceptible of partial compliance - deemed
to be INDIVISIBLE
If obligation to give something which by its nature is
divisible
General Rule - is that the obligation is also
DIVISIBLE since it is susceptible of partial
compliance
o Rule is not absolute because even though
the object may be physically indivisible, the
obligation is considered divisible if it is so
provided by law or is intended by the parties
o Intention may be:

Express

Implied

from the fact that
although the object of the
obligation
can
be
separated into parts, yet
each part constitutes a
necessary complement
of the other parts; or

from the very purpose of
the obligation itself which
requires the delivery of
all the parts
IN OBLIGATIONS TO DO


In obligations to do, if it is not susceptible of partial
performance, it shall be deemed INDIVISIBLE
If the obligation to do is susceptible of partial
performance, GR is that it is DIVISIBLE
o In determining whether an obligation to do
is divisible or indivisible, OBJECT or
PURPOSE of the obligation must always be
considered
o Obligation shall be considered DIVISIBLE
when it has for its object:

Execution of a certain number of
days of work; or Accomplishment
of work by metric units; or

Accomplishment of analogous
things which by their nature are
susceptible of partial performance

It may still be considered
indivisible if so provided by the law
or so intended by the parties
1.
2.
3.
Función coercitiva o de garantia - to insure
performance of obligation;
Función liquidatoria - to liquidate the amount of
damages to be awarded to injured party in case of
breach of the principal obligation; and
Función estricamente penal - in certain exceptional
cases, to punish the obligor in case of breach of the
principal obligation
Kinds of penalty:
1.
2.
3.
As to origin
a. Legal - constituted by law
b. Conventional - constituted by agreement
of parties
As to purpose
a. Compensatory - established for the
purpose of indemnifying the damages
suffered by the obligee or creditor in case of
breach of obligation
b. Punitive - established for purpose of
punishing the obligor or debtor in case of
breach of obligation
As to effect
a. Subsidiary - only the penalty may be
demanded in case of breach of obligation
b. ART. 1226 Joint - injured party may
demand the enforcement of both penalty
and principal obligation
Article 1226. 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.
The penalty may be enforced only when it is demandable in
accordance with the provisions of this Code. (1152a)
In obligation with a penal clause, penalty can substitute the
payment of damages and interests.
PURPOSE: To punish the obligor.
GENERAL RULE: the penalty is fixed by the parties as a
compensation or substitute for damages in case of breach.
EXCEPTIONS:
1. There is stipulation to the contrary
2. When the obligor refusal to pay the agreed penalty
3. When the obligor is guilty of fraud
*In this situation damages other than the agreed penalty may
be recovered.
SECTION 6
Obligations with Penal Clause
Article 1227. 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.
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. 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.
(1153a)
OBLIGATION WITH A PENAL CLAUSE - one to which an
accessory undertaking is attached for the purpose of insuring
its performance by virtue of which the obligor is bound to pay
Limitation upon Right of Debtor. — The debtor cannot
exempt himself from the performance of the principal
obligation by paying the stipulated penalty.
IN OBLIGATIONS NOT TO DO

The determination of the character of the obligation
NOT TO DO will depend upon the sound discretion
of the court
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14
4)
Exception: when the right has been expressly reserved for
him.
Limitation upon Right of Creditor. — creditor cannot demand
the fulfillment of the principal obligation and the satisfaction of
the stipulated penalty at the same time, (Exception:) unless
this right has been clearly granted to him.
Article 1228. Proof of actual damages suffered by the creditor
is not necessary in order that the penalty may be demanded.
(n)



Applicable only if the penalty is compensatory in
character
In this sense, penalty is identical with “liquidated
damages”
If the aspect of penalty is punitive, creditor must
prove amount of damages actually suffered
Article 1229. 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. (1154a)
When penalty may be reduced:
1.
2.
3.
If principal obligation has been partly complied with
 Contemplates a case where not all of the
prestations are complied with
If principal obligation has been irregularly complied
with
 Contemplates a case where all of the
prestations are complied with but not in
accordance with the tenor of the agreement
If penalty is iniquitous or unconscionable even if
there has been no performance
 Contemplates a case where the only
question raised is whether the amount of
the stipulated penalty is reasonable or
unconscionable
5)
6)
By the CONFUSION OR MERGER of the rights of
creditor and debtor;
By COMPENSATION;
By NOVATION.
Other causes of extinguishment of obligations, such as
ANNULMENT, RESCISSION, FULFILLMENT OF A
RESOLUTORY CONDITION, and PRESCRIPTION, are
governed elsewhere in this Code. (1156a)
Section 1
Payment of Performance
Article 1232. Payment means not only the delivery of money
but also the performance, in any other manner, of an
obligation. (n)
Concept of Payment or Performance

Consist in the fulfillment of the obligation either
voluntarily
or
involuntarily,
including
its
extinguishment by any means or mode whatsoever

Consists in the normal and voluntary fulfillment of the
obligation by realization of the purposes for which it
was constituted
o Adopted concept by the NCC

Consists in the fulfillment of obligation by delivery of
a sum of money
GENERAL RULE: Article 1233. A debt shall not be
understood to have been paid unless the thing or service in
which the obligation consists has been completely delivered
or rendered, as the case may be. (1157)
Obligation to give understood to have been paid - when
debtor/ obligor has completely delivered the thing which he
had obligated himself to deliver
EXCEPTION 1. Article 1234. If the obligation has been
substantially performed in good faith, the obligor may recover
as though there had been a strict and complete fulfillment, less
damages suffered by the obligee. (n)
It has been held that the amount stipulated by the parties may
be reduced by the courts even if it is not contrary to law,
morals, good customs, public order or public policy, provided
it is unreasonable or unconscionable
In case of substantial performance, the obligee is benefited.
So the obligor should be allowed to recover as if there has
been a strict and complete fulfillment, less damages suffered
by the obligee. This last condition affords a just compensation
for the relative breach committed by the obligor.
Stipulated penalty can be deleted by the court:
1. Where there ha been substantial performance in GF
by the obligor
2. When penalty clause suffers from fatal infirmity
3. When exceptional circumstances warrant it
EXCEPTION 2: Article 1235. When the obligee accepts the
performance, knowing its incompleteness or irregularity, and
without expressing any protest or objection, the obligation is
deemed fully complied with. (n)
Article 1230. The nullity of the penal clause does not carry
with it that of the principal obligation.
The nullity of the principal obligation carries with it that of the
penal clause. (1155)


Penalty is merely an accessory obligation
Efficacy of the principal obligation does not depend
upon efficacy of penal clause
Chapter 4
Extinguishment of Obligations
General Provisions
Article 1231. Obligations are extinguished:
1) By PAYMENT OR PERFORMANCE;
2) By the LOSS OF THE THING DUE;
3) By the CONDONATION OR REMISSION of the debt;
Note: This rule is based on the principle of estoppel.
Article 1236. The creditor is not bound to accept payment or
performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the
contrary.
WHO CAN PAY THE OBLIGATION:
1. debtor himself or his legal representative
2. Any third person.
Note: Third person, whether he has an interest in the
obligation or not, and whether the payment was
made with the knowledge and consent of the debtor
or not, may pay the obligation.
These rules, however, cannot be applied to the case of a third
person who pays the redemption price in sales with right of
repurchase (pacto de retro). This is so because the vendor a
retro is not a debtor within the meaning of the law.
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15
Whoever pays for another may demand from the debtor what
he has paid, except that if he paid without the knowledge
or against the will of the debtor, he can recover only insofar
as the payment has been beneficial to the debtor. (1158a)
Right of creditor
GENERAL RULE IN PAYMENT BY THIRD PERSON:
Creditor is not bound to accept payment or performance by a
third person
EXCEPTIONS:
1. When made by a third person who has an interest in
the fulfillment of the obligation, such as joint debtor,
guarantor or surety
2. Where there is a stipulation to the contrary creditor is deemed to have waived his right to
refuse to deal with strangers to the obligation
Reimbursement is merely a simple personal action available
to the third person or payor against the debtor to recover from
the latter what he has paid insofar as the payment has been
beneficial to the said debtor.
Right of Reimbursement
Rights of a third person who pays the obligation with
knowledge and consent of the debtor
1. He can recover from debtor the entire amount which
he has paid
2. He is subrogated to all of the rights of the creditor
Right of a third person who pays without knowledge or
against the will of the debtor
1. He can only recover insofar as the payment has been
beneficial to the said debtor
Article 1237. Whoever pays on behalf of the debtor without
the knowledge or against the will of the latter, cannot compel
the creditor to subrogate him in his rights, such as those
arising from a mortgage, guaranty, or penalty. (1159a)
Subrogation is a right available to the third person or payor,
whereby he is entitled, not only to demand reimbursement
from the debtor, but also to exercise all of the rights which the
creditor could have exercised against the debtor and against
third persons, such as those arising from a mortgage, a
guaranty, or a penalty.
Right of Subrogation: If the payment was effected with the
knowledge and consent of the debtor, the third person who
made the payment shall be subrogated to all of the rights
which the creditor could have exercised, not only against
the debtor, but even against third persons.
Article 1238. Payment made by a third person who does not
intend to be reimbursed by the debtor is deemed to be a
donation, which requires the debtor's consent. But the
payment is in any case valid as to the creditor who has
accepted it. (n)
GENERAL RULE: If the payment is made by a third person
who does not intend to be reimbursed by the debtor, the
presumption arises that such payment is a donation.
Exception: If such consent, however, is not secured, the rules
stated in Arts. 1236 and 1237 will still apply.
Exception to exception: As far as the creditor who has
accepted the payment is concerned, the debtor’s consent is
immaterial; the payment is valid in any case.
the provisions of article 1427 under the Title on "Natural
Obligations." (1160a)
GENERAL RULE: The person who pays the obligation should
have the necessary legal capacity to effect such payment.
(especially true in obligations to give)
Requisites:
1. payor should have the free disposal of the thing due
2. the capacity to alienate it
Note: If the payment was effected by a person who does not
have the free disposal of the thing due and/or the capacity to
alienate it, as in the case of a minor or an insane person, such
payment is not valid. In other words, even if the creditor has
already accepted it, it may still be annulled by a proper
action in court at the instance of the payor or his legal
representative, unless it falls within the purview of the
exception expressly provided for in Art. 1427 of the Code.
Article 1240. Payment shall be made to the person in whose
favor the obligation has been constituted, or his successor in
interest, or any person authorized to receive it. (1162a)
GENERAL RULE: Payment shall be made to:
1. the person in whose favor the obligation has been
constituted, or
2. his successor in interest, or
3. any person authorized to receive it.
Payment to Unauthorize Person: If the payment is made to
a person other than those enumerated in Art. 1240, it shall not
be valid.
Exceptions:
1. Payment made to a third person, provided that is has
redounded to the benefit of the creditor;
2. Payment made to the possessor of the credit,
provided that it was made in good faith.
PAYMENT TO INCAPACITATED PERSON: Article
1241. Payment to a person who is incapacitated to administer
his property shall be valid if he has kept the thing delivered,
or insofar as the payment has been beneficial to him.
Article 1241 (2): Payment made to a third person shall also
be valid insofar as it has redounded to the benefit of the
creditor. Such benefit to the creditor need not be proved in the
following cases:
1) If after the payment, the third person acquires the
creditor's rights;
2) If the creditor ratifies the payment to the third person;
3) If by the creditor's conduct, the debtor has been led
to believe that the third person had authority to
receive the payment. (1163a)
EXCEPTION TO ARTICLE 1240: Article 1242. Payment
made in good faith to any person in possession of the credit
shall release the debtor. (1164)
Payment to Possessors of Credit - the payment made to the
original creditor by a debtor who is not aware of the fact that
the credit has already been assigned to another person shall
release the debtor provided it was made in good faith.
Article 1243. Payment made to the creditor by the debtor after
the latter has been judicially ordered to retain the debt shall
not be valid. (1165)
After debtor has received notice of attachment or
garnishment, payment can no longer be made to the creditor
whose credit has been attached
Article 1239. In obligations to give, payment made by one
who does not have the free disposal of the thing due and
capacity to alienate it shall not be valid, without prejudice to
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16
Article 1244. The debtor of a thing cannot compel the creditor
to receive a different one, although the latter may be of the
same value as, or more valuable than that which is due.
In obligations to do or not to do, an act or forbearance cannot
be substituted by another act or forbearance against the
obligee's will. (1166a)
GENERAL RULE: Creditor/ obligee cannot be compelled to
accept delivery of a different thing or substitution of the act or
forbearance.
EXCEPTION: If he accepts, such acceptance shall give the
delivery or substitution the same effect as a fulfillment or
performance of the obligation
Article 1245. Dation in payment, whereby property is
alienated to the creditor in satisfaction of a debt in money,
shall be governed by the law of sales. (n)
Dation in payment (dación en pago) is defined as the
transmission of the ownership of a thing by the debtor to the
creditor as an accepted equivalent of the performance of the
obligation.
DATION IN PAYMENT (dación en pago) - if creditor and
debtor enter into an agreement by virtue of which a certain
property is alienated by the debtor to the creditor as equivalent
of performance of the obligation
Article 1246. When the obligation consists in the delivery of
an indeterminate or generic thing, whose quality and
circumstances have not been stated, the creditor cannot
demand a thing of superior quality. Neither can the debtor
deliver a thing of inferior quality. The purpose of the obligation
and other circumstances shall be taken into consideration.
(1167a)
If object is generic, the obligation can only be fulfilled by the
delivery of a thing which is neither of superior not inferior
quality.
Article 1247. Unless it is otherwise stipulated, the
extrajudicial expenses required by the payment shall be for
the account of the debtor. With regard to judicial costs, the
Rules of Court shall govern. (1168a)
Expenses of Payment. — To the rules specifi ed in the above
article we must add the supplementary rule stated in the fourth
paragraph of Art. 1251 that if the debtor changes his domicile
in bad faith or after he has incurred in delay, the additional
expenses shall be borne by him.
Article 1248. Unless there is an express stipulation to that
effect, the creditor cannot be compelled partially to receive the
prestations in which the obligation consists. Neither may the
debtor be required to make partial payments.
However, when the debt is in part liquidated and in part
unliquidated, the creditor may demand and the debtor may
effect the payment of the former without waiting for the
liquidation of the latter. (1169a)
GENERAL RULE: Creditor cannot accept partial payments
Exceptions:
1. The obligation expressly stipulates the contrary.
2. When the different Prestation which constitute the
objects of the obligation are subject to different terms
and conditions
3. When the obligation is in part liquidated and in part
unliquidated.
Article 1249. The payment of debts in money shall be made
in the currency stipulated, and if it is not possible to deliver
such currency, then in the currency which is legal tender in the
Philippines.
The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or when
through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation
shall be held in the abeyance. (1170)
Legal tender, within the meaning of Art. 1249 of the Code,
refers to such currency which may be used for the payment of
all debts, whether public or private. Under our law, the legal
tender of the Philippines would be all notes and coins issued
by the Central Bank.
Note:


In paying in peso coins, the maximum amount
allowed under BSP Circular No. 537, is 1K.
For coins with lower denominations 1 cnetavo-25
centavos, the legal tender is up to 100.
PAR 1: In monetary obligations, payment shall be made in the
currency stipulated. If it is not possible to pay in the currency
stipulated, then the payment shall be made in legal tender of
the Philippines.
PAR 2: GENERAL RULE: Negotiable papers or mercantile
documents, such as promissory notes payable to order or bills
of exchange, are not legal tender, it is logical that the delivery
of such papers or documents by the debtor to the creditor shall
not produce the effect of payment.
EXCEPTIONS: It must be noted, however, that under the law
there are two cases when the delivery produces the effect of
a valid payment.
1. When the document has been cashed.
2. When it had been impaired through the fault of the
creditor.
Article 1250. In case an extraordinary inflation or deflation of
the currency stipulated should supervene, the value of the
currency at the time of the establishment of the obligation shall
be the basis of payment, unless there is an agreement to the
contrary. (n)
EXTRAORDINARY INFLATION or DEFLATION - that which
is unusual or beyond the common fluctuation in value of the
currency, which the parties could not have reasonably
foreseen or which was manifestly beyond their contemplation
at the time when the obligation was established.
Requisites of extraordinary inflation or deflation:
1. there must be a decrease or increase in the
purchasing power of the currency which is unusual
or beyond the common fluctuation in the value of said
currency; and
2. such decrease or increase could not have been
reasonably foreseen or was manifestly beyond the
contemplation of the parties at the time of the
establishment of the obligation.
Article 1251. Payment shall be made in the place designated
in the obligation.
There being no express stipulation and if the undertaking is to
deliver a determinate thing, the payment shall be made
wherever the thing might be at the moment the obligation was
constituted.
In any other case the place of payment shall be the domicile
of the debtor.
OBLIGATIONS & CONTRACTS | M.S. CORPUZ
17
If the debtor changes his domicile in bad faith or after he has
incurred in delay, the additional expenses shall be borne by
him.
These provisions are without prejudice to venue under the
Rules of Court. (1171a)
PAR 2: When debts are of same burden. — If the debts
which are due are of the same nature and burden, the rule is
that the payment shall be applied to all of them pro rata or
proportionately.
SUBSECTION 2. Payment by Cession
SUBSECTION 1. Application of Payments
Article 1252. He who has various debts of the same kind in
favor of one and the same creditor, may declare at the time of
making the payment, to which of them the same must be
applied. Unless the parties so stipulate, or when the
application of payment is made by the party for whose benefit
the term has been constituted, application shall not be made
as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an
application of the payment is made, the former cannot
complain of the same, unless there is a cause for invalidating
the contract. (1172a)
APPLICATION OF PAYMENT – designation of the debt to
which the payment must be applied when the debtor has
several obligations of the same kind in favor of the same
creditor.
NOTE: The mere fact that the amount pain is identical to one
of the debts does not mean it should be applied for that debt.
Requisites:
1. Only one debtor and only one creditor
2. Two or more debts of the same kind
3. Debts must be due
4. Amount paid to debtor must not be sufficient to cover
the total amount of all debts
Article 1255. The debtor may cede or assign his property to
his creditors in payment of his debts. This cession, unless
there is stipulation to the contrary, shall only release the debtor
from responsibility for the net proceeds of the thing assigned.
The agreements which, on the effect of the cession, are made
between the debtor and his creditors shall be governed by
special laws. (1175a)
Cession or assignment may be defined as a special form of
payment whereby the debtor abandons all of his property for
the benefit of his creditors in order that from the proceeds
thereof the latter may obtain payment of their credits.
Requisites:
1. Plurality of debts;
2. Partial or relative insolvency of the debtor; and
3. Acceptance of the cession by the creditors.
Note: If the creditor did not accept the cession, apply the
insolvency law.
Payment by cession may either be contractual or
judicial.
-
Article 1253. If the debt produces interest, payment of the
principal shall not be deemed to have been made until the
interests have been covered. (1173)
Article 1254. When the payment cannot be applied in
accordance with the preceding rules, or if application can not
be inferred from other circumstances, the debt which is most
onerous to the debtor, among those due, shall be deemed to
have been satisfied.
If the debts due are of the same nature and burden, the
payment shall be applied to all of them proportionately.
(1174a)
PAR 1: When the debts due are not of the same burden, the
rule is that the debt which is most onerous to the debtor shall
be deemed to have been satisfied.
EFFECTS OF CESSION:
1. Partial extinguishment
2. No transfer of ownership to the creditors only transfer
of possession including administration
SUBSECTION 3. Tender of Payment and
Consignation
Article 1256. If the creditor to whom tender of payment has
been made refuses without just cause to accept it, the debtor
shall be released from responsibility by the consignation of the
thing or sum due.
Consignation alone shall produce the same effect in the
following cases:
1)
2)
3)
4)
5)
When the creditor is absent or unknown, or does not
appear at the place of payment;
When he is incapacitated to receive the payment at
the time it is due;
When, without just cause, he refuses to give a
receipt;
When two or more persons claim the same right to
collect;
When the title of the obligation has been lost. (1176a)
Tender of payment consists in the manifestation made by the
debtor to the creditor of his decision to comply immediately
with his obligation.
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b.) when he is incapacitated to receive the
payment at the time it is due;
c.) when, without just cause, he refuses to give
a receipt;
d.) when two or more persons claim the right to
collect; and
e.) when the title of the obligation has been
lost.
EFFECTS OF TENDER OF PAYMENT:
1. stops the accrual of interest
2. release the debtor from liability over the thing due
3. ask the judge to order the cancellation of the
obligation
4. preserve the right of the debtor (Francisco v.
Bautista)
Consignation refers to the deposit of the object of the
obligation in a competent court in accordance with the rules
prescribed by law after refusal or inability of the creditor to
accept the tender of payment.
3.
It is also essential in order that the consignation shall
be effective that previous notice thereof had been
given to the persons interested in the fulfillment of the
obligation.
Article 1257. In order that the consignation of the thing due
may release the obligor, it must first be announced to the
persons interested in the fulfillment of the obligation.
4.
It is essential that the thing or amount due must be
placed at the disposal of judicial authority.
5.
After consignation had been made, persons
interested in fulfillment of obligation had been notified
thereof
The consignation shall be ineffectual if it is not made strictly in
consonance with the provisions which regulate payment.
(1177)
GENERAL RULE: Tender of payment must precede
consignation.
When consignation without a previous tender of payment
is allowed:
1.
2.
3.
4.
5.
When the creditor is absent or unknown, or does not
appear at the place of payment;
when he is incapacitated to receive the payment at
the time it is due;
General Rule: Payment to an incapacitated person
is invalid since incapacitated persons do not have the
capacity to administer their property; the debtor will
be made to pay again because the payment is
invalid.
EXCEPTIONS: (1) Kept (2) Redounded to the benefit
of the creditor
when, without just cause, he refuses to give a
receipt;
when two or more persons claim the right to collect;
and
when the title of the obligation has been lost.
Article 1258. Consignation shall be made by depositing the
things due at the disposal of judicial authority, before whom
the tender of payment shall be proved, in a proper case, and
the announcement of the consignation in other cases.
The consignation having been made, the interested parties
shall also be notified thereof. (1178)
In order that consignation shall produce the effects of
payment, it is essential that certain special requirements must
be complied with; the debtor must show:
Requisites:
1. There is a debt due
2.
There must have been a tender of payment made by
the debtor to the creditor.
Requisites:
a. that the tender of payment must have been
made prior to the consignation;
b. that it must have been unconditional; and
c. that the creditor must have refused to
accept the payment without just cause.
Exceptions:
a.) when the creditor is absent or unknown, or
does not appear at the place of payment;
Article 1259. The expenses of consignation, when properly
made, shall be charged against the creditor. (1179)
When consignation is considered properly made:
1. when the creditor accepts the thing or amount
deposited as payment of the obligation without
contesting the efficacy or validity of the consignation;
2. when the creditor contests the efficacy or validity of
the consignation and the court finally decides that it
has been properly made or debtor asks the judge to
order the cancellation of the obligation
Article 1260. Once the consignation has been duly made, the
debtor may ask the judge to order the cancellation of the
obligation.
Before the creditor has accepted the consignation, or before
a judicial declaration that the consignation has been properly
made, the debtor may withdraw the thing or the sum
deposited, allowing the obligation to remain in force. (1180)
Effects of consignation:
1. If the creditor finally accepts the thing or amount
deposited, the payment is settled altogether
2. If the creditor refuses to accept the thing deposited,
litigation for the extinguishment or cancellation of the
obligation on the ground of a valid and effective
consignation will arise.
3. If the creditor neither refuses nor accepts, the debtor
may ask the court to cancel the obligation after
showing the requisites of consignation have been
complied with
Article 1261. If, the consignation having been made, the
creditor should authorize the debtor to withdraw the same, he
shall lose every preference which he may have over the thing.
The co-debtors, guarantors and sureties shall be released.
(1181a)
Effects of Withdrawal by the debtor:
1. made before the creditor has accepted the
consignation or before judicial declaration, the
obligation remains in force
2. made with the consent of the creditor, the creditor
loses every preference which he may have over the
thing. Solidary co-debtors, guarantors and sureties,
shall be released.
3. The solidary co-debtors are released only with
regard to their solidarity but not with their respective
share in the obligation
4. the guarantors and sureties are released from the
obligation since the obligation could have been
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extinguished if not for the consent of the creditor to
withdraw the thing from consignation;
NOTE: Prayer of the creditor that the thing be adjudicated in
his favor is already an acceptance on the part of the creditor;
the debtor cannot withdraw the thing anymore.
SECTION 2
Loss of the Thing Due
“Loss of the thing due” means that:
1. the thing which constitutes the object of the
obligation perishes, or
2. goes out of the commerce of man, or
3. disappears in such a way that its existence is
unknown or it cannot be recovered.
GENERAL RULE: Article 1262. An obligation which consists
in the delivery of a DETERMINATE THING shall be
extinguished if it should BE LOST OR DESTROYED without
the fault of the debtor, and before he has incurred in delay.
It is evident from this rule that before the loss of the thing due
will result in the extinguishment of the obligation, it is
necessary that the following requisites must concur:
1. The thing which is lost must be DETERMINATE.
2. The thing is LOST WITHOUT ANY FAULT OF THE
DEBTOR.
3. The thing is LOST BEFORE THE DEBTOR HAS
INCURRED IN DELAY.
When by law or stipulation, the obligor is liable even for
fortuitous events, the loss of the thing does not extinguish the
obligation, and he shall be responsible for damages. The
same rule applies when the nature of the obligation requires
the assumption of risk. (1182a)
EXCEPTIONS:
1. When by law, the debtor is liable even for fortuitous
events;
2. When by stipulation of the parties, the debtor is
liable even for fortuitous events;
3. When the nature of the obligation requires the
assumption of risk;
4. When the loss of thing is due partly to the fault of
the debtor;
5. When the loss of the thing occurs after the debtor
has incurred in delay;
6. When the debtor promised to deliver the same
thing to two or more persons who do not have the
same interest;
7. When the obligation to deliver arises from a
criminal offense; and
8. When the obligation is generic.
Article 1263. In an obligation to deliver a generic thing, the
loss or destruction of anything of the same kind does not
extinguish the obligation. (n)
In an obligation to deliver a GENERIC THING, the loss or
destruction of anything of the same kind DOES NOT
EXTINGUISH OBLIGATION.
Article 1264. The courts shall determine whether, under the
circumstances, the partial loss of the object of the obligation is
so important as to extinguish the obligation. (n)
EXAMPLE: A certain race horse or a fighting cock. When a
leg or wing is broken, it’s considered “lost.”
Article 1265. Whenever the thing is lost in the possession of
the debtor, it shall be presumed that the loss was due to his
fault, unless there is proof to the contrary, and without
prejudice to the provisions of article 1165. This presumption
does not apply in case of earthquake, flood, storm, or other
natural calamity. (1183a)
GENERAL RULE: Whenever the thing is lost in the
possession of the debtor, it shall be presumed that the loss
was due to his fault, UNLESS there is proof to the contrary.
(Without prejudice to Article 1165.)
EXCEPTION: When the loss happened during a natural
calamity. NATURAL CALAMITY – sudden events caused by
environmental factors (E.G. earthquake, flood, storm, etc.)
Note: BURDEN of proof of absence of fault rests to the
DEBTOR.
Article 1266. The debtor in obligations to do shall also be
released when the prestation becomes legally or physically
impossible without the fault of the obligor. (1184a)
The debtor in OBLIGATIONS TO DO shall be released when
the Prestation becomes legal and physical impossibility.
LEGAL IMPOSSIBILITY:

Direct - when the law prohibits the performance or
execution of the work agreed upon, as where it is
immoral or dangerous;

Indirect - where the law imposes duties of a superior
character upon the obligor which are incompatible
with the work agreed upon, although the latter may
be perfectly licit
PHYSICAL IMPOSSIBILITY:

from the death of the obligor

from mere accident,

from the acts of the debtor himself in which there is
no fault

From the acts of 3rd persons affecting the debtor’s
capacity to execute the work agreed upon.
Article 1267. When the service has become so difficult as to
be manifestly beyond the contemplation of the parties, the
obligor may also be released therefrom, in whole or in part. (n)
GENERAL RULE: Impossibility of performance of an
obligation to do shall release the obligor. HOWEVER, When
the service has become so difficult as to be manifestly beyond
the contemplation of the parties, the court should be
authorized to release the obligor in whole or in part.
This is based upon the principle GENUS NUNQUAM PERUIT
which means the generic things never perishes.
Consequently, the debtor can still be compelled to deliver a
thing which must be neither of superior nor inferior quality.
Article 1268. When the debt of a thing certain and
determinate proceeds from a criminal offense, the debtor shall
not be exempted from the payment of its price, whatever may
be the cause for the loss, unless the thing having been offered
by him to the person who should receive it, the latter refused
without justification to accept it. (1185)
EXCEPTION: Where the object is a particular class/group
within specific/determinate qualities. (E.G. Cattles in a ranch
wiped by epidemic) GENERIC – designated merely by its
class or genus without any particular designation or physical
segregation from all others of the same class.
Applicable to:
1. to the case where there is an obligation of restitution
of a certain and determinate thing on the part of the
person criminally liable as provided for in the Penal
Code,
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2.
3.
to the case where such obligation arises by virtue of
reparation or indemnification.
to the persons who are principally liable, but also to
those who are subsidiarily liable.
GENERAL RULE: In all of these cases, if the thing is lost, the
debtor shall not be exempted from the payment of the price of
the thing, whatever may be the cause for the loss.
EXCEPTION: Only case where the debtor is relieved from
liability is when he had offered the thing to the obligee and the
latter had refused to accept it without justification
When the offer has been made by the debtor and the
creditor refuses to accept it without justification, he may
choose either of two courses:
1. he may make a consignation of the thing and thereby
completely relieve himself of further liability, or
2. he may keep the thing in his possession, in which
case, the obligation shall still subsist but with this
difference — that if the thing is lost through a
fortuitous event, Arts. 1262 and 1265, and not Art.
1268, shall govern
Article 1269. The obligation having been extinguished by the
loss of the thing, the creditor shall have all the rights of action
which the debtor may have against third persons by reason of
the loss. (1186)
If the obligation is extinguished by the loss of the thing, all of
the rights of action which the debtor may have against third
persons by reason of the loss are transmitted by operation of
law to the creditor. The application of the precept is illustrated
in a case where the object which is due is insured and by
reason of some cause is lost or destroyed.
Article 1270. Condonation or remission is essentially
gratuitous, and requires the acceptance by the obligor. It may
be made expressly or impliedly.
One and the other kind shall be subject to the rules which
govern inofficious donations. Express condonation shall,
furthermore, comply with the forms of donation. (1187)
Before an obligation has been condoned by the creditor, it is
essential that it must be an act of pure liberality of the creditor
for the benefit of the debtor; in other words, the creditor should
not have received any price or equivalent from the debtor as
a result of his act in renouncing the enforcement of the
obligation.
Article 1271. The delivery of a private document evidencing a
credit, made voluntarily by the creditor to the debtor, implies
the renunciation of the action which the former had against the
latter.
GENERAL RULE: Art. 1271 enunciates the rule that if the
creditor voluntarily delivers the private document evidencing
the credit to the debtor, there is a presumption that he
renounces his right of action against the latter for the collection
of the said credit
Requisites:
1. that the document evidencing the credit must have
been delivered by the creditor to the debtor;
2. that the document must be a private document;
3. that the delivery must be voluntary.
If in order to nullify this waiver it should be claimed to be
inofficious, the debtor and his heirs may uphold it by proving
that the delivery of the document was made in virtue of
payment of the debt. (1188)
Remission is an act of liberality by virtue of which the obligee,
without receiving any price or equivalent, renounces the
enforcement of the obligation, as a result of which it is
extinguished in its entirety or in that part or aspect of the same
to which the remission refers.
INOFFICIOUS - contrary to moral obligation as it impairs the
legitime
LEGITIME - that part of the dead person's estate that he
cannot dispose of because the law has reserved it for his
compulsory heirs.
COLLATION - a way of protecting the legitimes; when a
person dies, the value of all of his current properties and those
he donated will be collated and will be considered part of his
estate.
Requisites:
1. it must be gratuitous;
2. it must be accepted by the obligor;
3. the obligation must be demandable.
Article 1272. Whenever the private document in which the
debt appears is found in the possession of the debtor, it shall
be presumed that the creditor delivered it voluntarily, unless
the contrary is proved. (1189)
Kinds of Remission:
GENERAL RULE: Art. 1272, whenever the private document
evidencing the credit is found in the possession of the debtor,
there arises a presumption that the creditor delivered it to him
voluntarily.
SECTION 3
Condonation or Remission of the Debt
EXCEPTION: Unless the contrary is proved.
Article 1273. The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of the
latter shall leave the former in force. (1190)
If the remission refers to the principal obligation, all the
accessory obligations are extinguished, since the latter
depend upon the former for their existence or effi cacy.
However, if the remission refers to the accessory obligations,
the principal obligation continues to subsist.
Article 1274. It is presumed that the accessory obligation of
pledge has been remitted when the thing pledged, after its
delivery to the creditor, is found in the possession of the
debtor, or of a third person who owns the thing. (1191a)
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According to Art. 1274, it is presumed that the accessory
obligation of pledge has been remitted when the thing
pledged, after its delivery to the creditor, is found in the
possession of the debtor or of a third person who owns the
thing.
Example: PLEDGE - something held as security on a contract
(what you enter into a pawnshop)
SECTION 4
Confusion or Merger of Rights
Article 1275. The obligation is extinguished from the time the
characters of creditor and debtor are merged in the same
person. (1192a)
Confusion maybe defined as the merger of the characters
of creditor and debtor in one and the same person by virtue of
which the obligation is extinguished.
Confusion or merger of rights will necessarily result in the
extinguishment of the obligation because of the
impossibility of enforcing it since it would certainly be absurd
for a person to enforce a claim against himself.
Requisites:
1. that the merger of the characters of creditor and
debtor must be in the same person;
2. that it must take place in the person of either the
principal creditor or the principal debtor; and
3. that it must be complete and definite.
SECTION 5
Compensation
Article 1278. Compensation shall take place when two
persons, in their own right, are creditors and debtors of each
other. (1195)
Compensation may be defined as a mode of extinguishing in
their concurrent amount those obligations of persons who in
their own right are creditors and debtors of each other.
Kinds of Compensation:
1. Legal — when it takes effect by operation of law from
the moment all of the requisites are present. This is
the fixed type which is regulated by Arts. 1278 and
1279 of the Civil Code.
2. Voluntary — when the parties who are mutually
creditors and debtors agree to compensate their
respective obligations, even though all of the
requisites for compensation may not then be present.
3. Judicial — when it takes effect by judicial decree.
This occurs, for instance, where one of the parties to
a suit over an obligation has a claim for damages
against the other and the former sets it off by proving
his right to said damage and the amount thereof.
As to effect, compensation may be:
1. Total — when the debts to be compensated are
equal in amount.
2. Partial — when the debts to be compensated are not
equal in amount.
Kinds of Confusion or merger:
1. As to cause or constitutions
a. inter vivos, when it is constituted by
agreement of the parties
b. mortis causa, when it is constituted by
succession
2. As to extent or effect
a. total, if it results in the extinguishment of the
entire obligation
b. partial if it results in the extinguishment of
only a part of the obligation
i. when the confusion or merger
refers only to a part of the
obligation;
ii. when the obligation is joint
Article 1276. Merger which takes place in the person of the
principal debtor or creditor benefits the guarantors. Confusion
which takes place in the person of any of the latter does not
extinguish the obligation. (1193)
1.
2.
if the confusion or merger of rights will take place in
the person of either the principal creditor or the
principal debtor, the effect is the extinguishment, not
only of the principal obligation, but even of the
accessory obligation.
If, on the other hand, the confusion or merger will
take place in the person of a subsidiary creditor or a
subsidiary debtor, such as a guarantor, it is evident
that there is no extinguishment of the principal
obligation; there will be only a substitution of creditor
or debtor.
Article 1277. Confusion does not extinguish a joint obligation
except as regards the share corresponding to the creditor or
debtor in whom the two characters concur. (1194)
GENERAL RULE: confusion does not extinguish a joint
obligation
EXCEPTION: as regards the share corresponding to the
creditor or debtor in whom the characters meet or concur.
Article 1279. In order that compensation may be proper, it is
necessary:
1. That each one of the obligors be bound principally,
and that he be at the same time a principal creditor
of the other;.
2. That both debts consist in a sum of money, or if the
things due are consumable, they be of the same
kind, and also of the same quality if the latter has
been stated;
3. That the two debts be due;
4. That they be liquidated and demandable;
5. That over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor. (1196)
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Requisites of Compensation:
1. There must be two parties, who, in their own right,
are principal creditors and principal debtors of each
other;
2. Both debts must consist in money, or if the things due
are fungibles (consumables), they must be of the
same kind and quality;
3. Both debts must be due;
4. Both debts must be liquidated and demandable;
5. There must be no retention or controversy
commenced by third persons over either of the debts
and communicated in due time to the debtor; and
6. The compensation must not be prohibited by law.
Article 1280. Notwithstanding the provisions of the preceding
article, the guarantor may set up compensation as regards
what the creditor may owe the principal debtor. (1197)
Guarantor, in case payment of debt is demanded from him,
may set up compensation, not only for what such creditor
owes him, but also for what such creditor owes the principal
debtor
The bond of the guarantor cannot be resorted to so
long as the debtor can pay although it may be in the
abbreviated form of compensation
If the principal obligation is extinguished, the
accessory obligation of guarantor is also
extinguished
Article 1281. Compensation may be total or partial. When the
two debts are of the same amount, there is a total
compensation. (n)
TOTAL – 2 debts are equal to each other
PARTIAL – 2 debts are not equal to each other
Example: A owes B 700 and B owes A 500. What is the
effect?
The 2 obligations will be extinguished up to the concurrent
amount:

The obligation of B to A is extinguished.

The obligation of A to B remains: 200.
Article 1282. The parties may agree upon the compensation
of debts which are not yet due. (n)
Article 1282 is an EXCEPTION to the general rule that only
debts which are due and demandable can be compensated.
In a voluntary compensation, parties may agree to
compensate their respective obligations, even though all of
the requisites for compensation may not then be present.
Article 1283. If one of the parties to a suit over an obligation
has a claim for damages against the other, the former may set
it off by proving his right to said damages and the amount
thereof. (n)
LAYMAN: If the defendant has a claim against the plaintiff,
then he must setup the nature of his claim in his answer and
raise a counter claim. So everything will depend upon the
evidence which will be presented by both parties in that case.
assignor was notified by the debtor at the time he gave his
consent, that he reserved his right to the compensation.
GENERAL RULE: If the debtor consented to the assignment,
he cannot set up compensation.
EXCEPTION: If he reserved his right to set up compensation.
If the creditor communicated the cession to him but the debtor
did not consent thereto, the latter may set up the
compensation of debts previous to the cession, but not of
subsequent ones.
If the debtor was informed or notified of his assignment but he
did not give his consent, he can set up compensation of all
debts prior to the session but not subsequent ones.
If the assignment is made without the knowledge of the debtor,
he may set up the compensation of all credits prior to the same
and also later ones until he had knowledge of the assignment.
(1198a)
If the debtor was not informed of the assignment then he can
set up compensation of all debts which mature and become
due until he has knowledge of the assignment.
Article 1286. Compensation takes place by operation of law,
even though the debts may be payable at different places, but
there shall be an indemnity for expenses of exchange or
transportation to the place of payment. (1199a)
Article 1287. Compensation shall not be proper when one of
the debts arises from a depositum or from the obligations of a
depositary or of a bailee in commodatum.
Neither can compensation be set up against a creditor who
has a claim for support due by gratuitous title, without
prejudice to the provisions of paragraph 2 of article 301.
(1200a)
There are five kinds of debts or obligations which are not
susceptible of legal compensation.
1. debts arising from contracts of depositum;
2. debts arising from contracts of commodatum;
3. claims for support due by gratuitous title;
4. obligations arising from criminal offenses; and
5. certain obligations in favor of the government, such
as taxes, fees, duties and others of a similar nature.
Article 1288. Neither shall there be compensation if one of the
debts consists in civil liability arising from a penal offense. (n)
Article 1289. If a person should have against him several
debts which are susceptible of compensation, the rules on the
application of payments shall apply to the order of the
compensation. (1201)
Article 1290. When all the requisites mentioned in article
1279 are present, compensation takes effect by operation of
law, and extinguishes both debts to the concurrent amount,
even though the creditors and debtors are not aware of the
compensation. (1202a)
SECTION 6
Novation
Article 1284. When one or both debts are rescissible or
voidable, they may be compensated against each other before
they are judicially rescinded or avoided. (n)
Before rescissible or voidable debts are judicially rescinded or
annulled, they are valid debts. Until the parties opt to rescind
or annul them, they can be compensated against each other.
Article 1285. The debtor who has consented to the
assignment of rights made by a creditor in favor of a third
person, cannot set up against the assignee the compensation
which would pertain to him against the assignor, unless the
Article 1291. Obligations may be modified by:
1)
2)
3)
Changing their object or principal conditions;
Substituting the person of the debtor;
Subrogating a third person in the rights of the
creditor. (1203)
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Novation is the substitution or change of an obligation by
another, resulting in its extinguishment or modification, either
by changing its object or principal conditions, or by substituting
another in place of the debtor, or by subrogating a third person
in the rights of the creditor.
Requisites:
1. previous valid obligation;
2. agreement of the parties to the new obligation;
3. extinguishment of the old obligation; and
4. validity of the new obligation.
Kinds of novation
1. As to its essence
a. Objective or real - change wither in the
cause, object or principal conditions of the
obligations
b. Subjective or personal - substitution of the
person of the debtor or to the subrogation
of a third person in the rights of the creditor
i. Passive - substitution of the
person of the debtor
ii. Active - substitution of the person
of the creditor
iii. Mixed - combination of objective
and subjective novation
2. As to form or constitution
a. Express - declared in unequivocal terms
that the old obligation is extinguished by a
new one
b. Tacit or implied - when old and new
obligations are incompatible with each
other on every point
3. As to its extent or effect
a. Total
b. Partial
OBJECTIVE NOVATION may be effected by:
1. Changing the cause of the obligation
2. Changing the object of the obligation
3. Changing the principal or essential conditions of the
obligation
Article 1292. In order that an obligation may be extinguished
by another which substitute the same, it is imperative that it be
so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.
(1204)
Form of extinguishment
1. Express - can only take place when the contracting
parties disclose that the object in making the new
contract is to extinguish the old one; otherwise, the
old contract remains in force and the new one is
added to it
2. Implied - intent to substitute a new obligation for the
old one must be clearly established.
a. test of incompatibility: whether or not both
of the old and new obligations can stand
together, each having its own independent
existence
i. If can stand together, no novation
ii. If cannot stand together, there is
incompatibility; there is novation
Novation is NEVER presumed and the animus novandi,
whether totally or partially, must appear by express agreement
of the parties, or by their acts that are too clear and
unequivocal to be mistaken
Article 1293. Novation which consists in substituting a new
debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but not
without the consent of the creditor. Payment by the new debtor
gives him the rights mentioned in articles 1236 and 1237.
(1205a)
THREE WAYS OF EFFECTING NOVATION:
1. Changing their object or principal conditions;
2. Substituting the person of the debtor
Two Ways of Substituting Debtor
a. EXPROMISSION – initiative comes from
the new debtor
b. DELEGACION – initiative comes from the
old debtor
 Can there be expromision without the
consent of the original debtor (NO)
 Can there be delegacion without the
consent of the original debtor (NO)
 Can there be expromision without the
consent of the original creditor (NO)
 Can there be delegacion without the
consent of the original creditor (NO)
NOTE: There must always be consent on the part of
the creditor.
3. Subrogating a third person in the rights of the creditor
Article 1294. If the substitution is without the knowledge or
against the will of the debtor, the new debtor's insolvency or
non-fulfillment of the obligations shall not give rise to any
liability on the part of the original debtor. (n)
Art. 1294 applies to expromisión

New debtor’s insolvency or nonfulfillment of the
obligation can never result in the revival of the
original debtor’s liability to the creditor if substitution
was made without knowledge of original debtor or
even against his will

If substitution was effected with knowledge and
consent of original debtor new debtor’s insolvency
or nonfulfillment of obligation shall REVIVE the
original debtor’s liability to the creditor
Article 1295. The insolvency of the new debtor, who has been
proposed by the original debtor and accepted by the creditor,
shall not revive the action of the latter against the original
obligor, except when said insolvency was already existing and
of public knowledge, or known to the debtor, when the
delegated his debt. (1206a)
Delegación refers to the substitution of debtors effected when
the original debtor offers and the creditor accepts a third
person who consents to the substitution.
Requisites:
1. the initiative for the substitution must emanate from
the old debtor;
2. consent of the new debtor; and
3. acceptance by the creditor.
Art. 1295 applies to delegación

Purpose of the two exceptions is to prevent
commission of fraud
o Initiative for the substitution must emanate
from the NEW debtor
o Consent of the creditor to the substitution

Two kinds:
o Substitution WITH knowledge and consent
of old debtor - If substitution was effected
WITH knowledge and consent of original
debtor, and subsequently payment is made
by new debtor with or without knowledge
and consent of such original debtor — new
debtor can

demand reimbursement from
original debtor of the entire
amount which he has paid and
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be subrogated in all of the rights of
the creditor
Substitution WITHOUT knowledge or
against the will of old debtor - If substitution
was effected WITHOUT knowledge and
consent
of
original
debtor,
and
subsequently, payment is made by new
debtor again without knowledge and
consent of original debtor — new debtor
can:

demand reimbursement from
original debtor only insofar as the
payment has been beneficial to
such debtor, but he cannot be
subrogated in the rights of the
creditor

If payment was made with
knowledge and consent of original
debtor, although substitution had
been effected without knowledge
and consent — new debtor can (1)
still demand reimbursement from
original debtor of the entire
amount which he has paid, and (2)
be subrogated in all the rights of
the creditor

o
SUBROGATION – substitution of a 3rd person in the rights of
the creditor.
MAY BE EFFECTED:
1. LEGALLY – [Article 1302] takes place by operation
of law
2. CONVENTIONAL – it takes place by reasonable
agreement of the parties in connection with this
matter; requires the consent of everyone.
Article 1301. Conventional subrogation of a third person
requires the consent of the original parties and of the third
person. (n)
Article 1296. When the principal obligation is extinguished in
consequence of a novation, accessory obligations may
subsist only insofar as they may benefit third persons who did
not give their consent. (1207)
Precept applies to objective novations as well as to those
novations effected by substituting the person of the debtor
Cannot apply to novations effected by subrogating a third
person in the rights of the creditor because it is regulated by
Arts. 1303 and 1304
Exception: Refers to a case where there is a stipulation
constituted in favor of a third person, which may be demanded
separately from the principal obligation, although
subordinated to the latter- Ex. stipulation pour au
Article 1302. It is presumed that there is legal subrogation:
1)
2)
3)
Article 1297. If the new obligation is void, the original one
shall subsist, unless the parties intended that the former
relation should be extinguished in any event. (n)
When a creditor pays another creditor who is
preferred, even without the debtor's knowledge;
When a third person, not interested in the obligation,
pays with the express or tacit approval of the debtor;
When, even without the knowledge of the debtor, a
person interested in the fulfillment of the obligation
pays, without prejudice to the effects of confusion as
to the latter's share. (1210a)
Article 1298. The novation is void if the original obligation was
void, except when annulment may be claimed only by the
debtor or when ratification validates acts which are voidable.
(1208a)
LEGAL SUBROGATION - takes place by operation of law
GENERAL RULE: If the new obligation is void, original one
shall subsist.
Article 1303. Subrogation transfers to the persons
subrogated the credit with all the rights thereto appertaining,
either against the debtor or against third person, be they
guarantors or possessors of mortgages, subject to stipulation
in a conventional subrogation. (1212a)
EXCEPTION: Unless the parties intended that the former
relation should be extinguished in any event.
Article 1299. If the original obligation was subject to a
suspensive or resolutory condition, the new obligation shall be
under the same condition, unless it is otherwise stipulated. (n)
GENERAL RULE: If the original obligation is subject to a
condition, the new obligation shall be subject to the same
condition
EXCEPTION: If there is stipulation to the contrary.
Article 1300. Subrogation of a third person in the rights of the
creditor is either legal or conventional. The former is not
presumed, except in cases expressly mentioned in this Code;
the latter must be clearly established in order that it may take
effect. (1209a)
General Rule: Not presumed
Exceptions: Those enumerated in the article
Article 1304. A creditor, to whom partial payment has been
made, may exercise his right for the remainder, and he shall
be preferred to the person who has been subrogated in his
place in virtue of the partial payment of the same credit. (1213)

Accessory obligations are not extinguished because
in such obligations the person subrogated also
acquires all of the rights which the original creditor
had against third persons
o Application of the rule is absolute with
respect to legal subrogations
o With respect to conventional subrogations,
such accessory obligations may be
increased or reduced depending upon
agreement of parties
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