OBLIGATIONS AND CONTRACTS

ARTICLE 1207-1261

1. JOINT VS. SOLIDARY OBLIGATIONS

Joint obligation or one where the whole obligation is to be paid or fulfilled

proportionately by the different debtors and/or is to be demanded proportionately by
the different creditors.

Solidary obligation or one where each one of the debtors is bound to render,
and/or each one of the creditors has a right to demand from any of the debtors, entire
compliance with the prestation.

2. WHAT ARE JOINT INDIVISIBLE OBLIGATIONS? WHAT ARE ITS

CHARACTERISTICS?

Joint Indivisible Obligation Art. 1209 speaks of joint indivisible obligation.

The obligation is joint because the parties are proportionately liable. It is indivisible
because the object or the subject matter is not physically divisible into different parts.
In other words, it is joint as to liabilities of debtors or rights of the creditor but
indivisible as to compliance.
Characteristics:
1. No creditor can act in representation of the others
2. No debtor can be compelled to answer for the liability of the others.
3. If there are two or more debtors, the fulfillment of or compliance with the
obligation requires the concurrence of all the debtors, although each for
his own share and for the enforcement of the obligation.
IN CASE OF BREACH, where one of the joint debtors fails to comply with
his undertaking, the obligation can no longer be fulfilled or performed.
Consequently, it is converted into one of indemnity for damages.

INCASE OF INSOLVENCY OF ONE OF THE DEBTORS. The others shall

not be liable for his shares. To hold otherwise would destroy the joint
character of the obligation.

3. DISTINGUISH SURETYHIP FROM SOLIDARITY

SURETYSHIP - someone who agrees to be legally responsible if another
person fails to pay or to perform duty.
SOLIDARITY – refers to the legal tie or vinculum, and consequently to the
subjects or parties of the obligation. Plurality (large number of things) of subjects is
indispensable (important). When there is liability on the part of the debtors because of the
breach, the solidarity among the debtors remains.

4. RIGHTS OF SOLIDARY CREDITORS

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.

5. EFFECT OF LOSS OR IMPOSSIBILITY

A. Loss is without faultand before delay – EXTINGUISHED
B. Loss is due to fault on the part of a solidary debtor – ALL ARE
RESPONSIBLE FOR THE PRICE AND DAMAGES, (but the other two
can recover their payment from negligent debtor).
C. Loss is without fault but after delay – ALL DEBTORS ARE
RESPONSIBLE EVEN FORTUITOUS EVENTS.

6. RULES OF PAYMENT IN SOLIDARY OBLIGATIONS

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.

7. DIVISIBLE VS. INDIVISIBLE OBLIGATIONS: WHAT IS THE TEST FOR

DISTINCTION?
Divisible Obligation- is one the object of which, in its delivery or performance,
is capable of partial fulfillment.

Indivisible Obligation- is one the object of which, in its delivery or

performance, is not capable of partial fulfillment.

TEST FOR DISTINCTION

In determining whether an obligation is divisible or not, the controlling
circumstances is the purpose of the obligation or the intention of the parties. If the obligation
is physically divisible, it is still divisible if so provided by the law or intended by the parties.
If the object is not physically divisible, it is always indivisible.

8. OBLIGATION’S WITH A PENAL CLAUSE

It is one which contains an accessory undertaking to pay a previously
stipulated indemnity in case of breach of the principal prestation, intended primarily to
induce its fulfillment.
 PENAL CLAUSE- is an accessory undertaking attached to an obligation to
assume greater liability in case of breach. (e.g The obligation is not fulfilled, or is partly or
irregularly complied with.

9. PRINCIPAL OBLIGATION VS. ACCESSORY OBLIGATION

PRINCIPAL OBLIGATION – one which can stand by itself and does not
depend for its validity and existence upon another obligation.
ACCESSORY OBLIGATION-one which attached to a principal obligation
and, therefore cannot stand alone.

10. PENALTY AS A SUBSTITUTE FOR DAMAGES

As a general rule, in an obligation with a penal clause, the penalty takes the
place of the indemnity for damages and the payment of interest in case of non- compliance.
Proof of actual damages suffered by the creditor is not necessary in order that the penalty
may be enforced.

11. EFFECT OF NULLITY OF THE PENAL CLAUSE

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 the penal clause (Art. 1230)
If only the penal clause is void, the principal obligation remains valid and
demandable. The penal clause is just disregarded. The injured party may recover indemnity
for damages in case of non-performance of the obligation as if no penalty had been stipulated.

12. WHAT IS SO CALLED MACEDA LAW

13. WHAT IS SO CALLED RECTO LAW

 14. WHAT ARE THE MODES OF EXTINGUISHMENT OF OBLIGATION?
a. By Payment or Performance
b. By the Loss of the thing due
c. By the condonation or remission of debt
d. By the confusion or merger of the rights of the creditor & debtor
e. By compensation
f. By novation

15. PAYMENT OR PERFORMANCE

PAYMENT means not only the delivery of money but also the performance in
any other manner of an obligation. PAYMENT may consist of not only in the delivery of
money but also the giving of the thing, the doing of an act, or not doing of an act. In law,
payment and performance are synonymous.

16. WHERE SHOULD PAYMENT BE MADE

a. If there is a stipulation, the payment shall be made in the place designated.
b. If there is a stipulation and the thing to be delivered is specific, the payment
shall be made at the place where the thing was, at the perfection of the
contract.
c. If there is no stipulation, and the thing is generic, the place of payment shall
be the domicile of the debtor.

17. MAY A THIRD PERSON PAY THE OBLIGATION OF ANOTHER?

YES. Payment made by the third person who does not intend to be reimbursed
by the debtor is deemed to be donation, which requires the debtor’s consent. But the payment
is in any case valid as to creditor who has accepted it.

18. COMPENSATION: WHAT ARE THE REQUIREMENTS OF COMPENSATION?

COMPENSATION- is the extinguishment to the concurrent amount of the
debts of two persons who, in their own right, are debtors and creditors of each other.
REQUIREMENTS OF COMPENSATION
a. The parties are principal creditors and principal debtors of each other.
b. Both debts consist in a sum of money, or of consumable things of the ame kind
and quality.
c. The two debts are due or demandable
d. The two debts are liquidated
e. No retention or controversy commenced by a third person
 19. DISTINGUISH COMPENSATION FROM PAYMENT
PAYMENT – means not only delivery of money but also performance, in any
manner, of the obligation.
COMPENSATION – extinguishment to the concurrent amount of the debts of
two person who, in their own right are debtors and creditors of each other.

20. CAN THERE BE COMPENSATION OF ONE’S OBLIGATION OVER TAXES

DUE? WHY?

21. WHAT IS APPLICATION OF PAYMENT?

It is the designation of the debt to which should be applied the payment made
by a debtor who has various debts of the same kind in favor of one and the same creditor.

22. REQUISITES FOR THE APPLICATION OF PAYMENT

a. There must be one debtor and one creditor.
b. There must be two or more debts.
c. The debts must be of the same kind.
d. The debts to which payment made by the debtor has been applied must be due.
e. The payment made must not be sufficient to cover all the debts.

23. HOW IS APPLICATION OF PAYMENT MADE?

 24. WHO MAKES THE APPLICATION OF PAYMENT? GENERAL RULE AND
EXCEPTION.
a. The debtor has first choice, he must indicate at the time of making payments.
If in making use of his right, the debtor applied the payment to a debt, he
cannot later claim that it should be applied to another debt.
b. The right to make the application once exercised is irrevocable unless the
creditor consents to the change.
c. If the debtor does not apply payment, the creditor may make the designation
by specifying in the receipt which debt is being paid.
d. If the application of the creditor is not valid, the debt which is most onerous to
the debtor among those due, shall be deemed to have been satisfied.
e. If the debts due are of the same nature and burden, the payment shall applied
to all of them proportionately.

25. WHAT IS DACION EN PAGO?

It is the conveyance (transfer) of ownership of a thing as an accepted
equivalent of performance. It is a special form of payment because it is not the ordinary way
of extinguishing an obligation. An existing debt in money is satisfied, not by payment of
money but by the alienation of property.

26. WHAT IS VOLUNTARY ASSIGNMENT IN FAVOR OF CREDITOR?

27. REQUISITES FOR VOLUNTARY ASSIGNMENT

28. WHAT ARE THE EFFECTS OF VOLUNTARY ASSIGNMENT

 29. WHAT IS CONSIGNATION? WHAT IS TENDER?
CONSIGNATION- is the act of depositing the thing or amount due with the
proper court when the creditor does not desire or cannot receive it, after complying with the
formalities required by the law. Consignation is applicable when there is a debt or an
obligation to pay. It is always judicial and it generally requires a prior tender of payment
which is, by its very nature, extrajudicial.
TENDER OF PAYMENT- is the act, on the part of the debtor, of offering to
the creditor the thing or amount due.

30. WHEN SHALL CONSIGNATION WITHOUT TENDER OF PAYMENT

PRODUCE PAYMENT.
a. When the creditor is absent or unknown, or does not appear at the place of
payment.
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 same right to collect
e. When the title of the obligation has been lost

31. WHAT ARE THE REQUISITES FOR A VALID CONSIGNATION?

a. Existence of a valid debt which is due.
b. Tender of payment by the debtor and refusal without justifiable reason by the
creditor to accept it
c. Previous notice of consignation to persons interested in the fulfillment of the
obligation.
d. Consignation of the thing or sum due.
e. Subsequent notice to consignation made to the interested parties.

32. WHAT ARE THE EFFECTS OF CONSIGNATION?

33. CAN TRUE BE CONSIGNATION WITHOUTPRIOR TENDER?

YES. It is mentioned in article 1256 that tender of payment is not necessary
before the debtor can consign the thing due with the court.