AMPELOQUIO, KAREN S.

OBLIGATIONS AND CONTRACTS

CHAPTER 3
DIFFERENT KINDS OF OBLIGATIONS

SECTION 1. — Pure and Conditional Obligations

ART. 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)

Pure Obligation- one which is not subject to any condition and no specific date is mentioned for
its fulfillment and is, therefore, immediately demandable.

Conditional obligation- one whose consequences are subject in one way or another to the
fulfillment of a condition

Condition -a future and uncertain event, upon the happening of which, the effectivity or
extinguishment of an obligation (or rights) subject to it depends

Characteristics of a condition

(1) Future and uncertain

(2) Past but unknown

Two principal kinds of condition

(1) Suspensive condition (condition precedent or condition antecedent) or one the fulfillment of
which will give rise to an obligation (or right).

(2) Resolutory condition (condition subsequent) or one the fulfillment of which will extinguish an
obligation (or right) already existing.
Past Events

If an obligation is made dependent upon such past events, the obligation is not pure but appears to
be conditional.

Since a condition refers only to uncertain and future events, a past event cannot be a condition
since the demandability of an obligation subject to a condition depends on the event happening or
not.

Past events can be considered as the basis of the contract. If the “event” has happened, the
obligation immediately exists purely and simply; if the same has not happened, there is no
obligation at all.

Indivisibility of Conditions

A persons’ fulfillment of an obligation is indivisible, even if the object or prestation of the

condition is a divisible thing

Plurality of Condition

The necessity of complying with the conditions depends upon the intention of the parties

Alternative or disjunctive = fulfillment of one of them is sufficient

Conjunctive = all of them must be complied with

When obligation demandable at once

(1) when it is pure (Art. 1179, par. 1.);

(2) when it is subject to a resolutory condition (par 1., par. 2.); or
(3) when it is subject to a resolutory period. (Art. 1193, par. 2.)

What is really contemplated by the law is the knowledge to be acquired in the future of a past event
which at the moment is unknown to the parties interested, for it is only in that sense that the event
can be deemed uncertain. This knowledge determines whether the obligation will arise or not.
 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. (n)

Period- a future and certain event upon the arrival of which the obligation subject to it either
arises or is extinguished

(1) The debtor promises to pay when his means permit him to do so.

(2) Other cases. — As when the debtor binds himself to pay:

(a) “little by little”
(b) “as soon as possible”
(c) “from time to time;”
(d) “as soon as I have the money”
(e) “at any time I have the money”
(f) “in partial payments”
(g) “when I am in a position to pay.”

ART. 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)

Effect of happening of condition

(1) Acquisition of rights

(2) Loss of rights already acquired

Effect of non-compliance with resolutory condition

Where a contract is subject to a resolutory condition, non-compliance with or non-fulfillment of the
condition resolves the contract by force of law without need of judicial intervention.
 ART. 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)

Classifications of conditions

(1) As to effect.
(a) Suspensive. — the happening of which gives rise to the obligation; and
(b) Resolutory. — the happening of which extinguishes the obligation.

(2) As to form.
(a) Express. — the condition is clearly stated; and
(b) Implied. — the condition is merely inferred.

(3) As to possibility.
(a) Possible. — the condition is capable of fulfillment, legally and physically; and
(b) Impossible. — the condition is not capable of fulfillment, legally or physically.

(4) As to cause or origin.

(a) Potestative. — the condition depends upon the will of one of the contracting parties;
(b) Casual. — the condition depends upon chance or upon the will of a third person; and
(c) Mixed. — the condition depends partly upon chance and partly upon the will of a third
person.

(5) As to mode.
(a) Positive. — the condition consists in the performance of an act; and
(b) Negative. — the condition consists in the omission of an act.

(6) As to number.
(a) Conjunctive. — there are several conditions and all must be fulfilled; and
(b) Disjunctive. — there are several conditions and only one or some of them must be
fulfilled.

(7) As to divisibility.
(a) Divisible. — the condition is susceptible of partial performance; and
 (b) Indivisible. — the condition is not susceptible of partial performance.

Potestative condition- a condition suspensive in nature and which depends upon the sole will of
one of the contracting parties

(1) Conditional obligation void. — Where the potestative condition depends solely upon the will of
the debtor, the conditional obligation shall be void because its validity and compliance is left to the
will of the debtor (Art. 1308.) and it cannot, therefore, be legally demanded.

(2) Only the condition void. — If the obligation is a pre-existing one, and, therefore, does not
depend for its existence upon the fulfillment by the debtor of the potestative condition, only the
condition is void leaving unaffected the obligation itself. Here, the condition is imposed not on the
birth of the obligation but on its fulfillment.

If the condition depends exclusively upon the will of the creditor, the obligation is valid.

If the condition is resolutory in nature, like the right to repurchase in a sale with pacto de retro, the
obligation is valid although its fulfillment depends upon the sole will of the debtor. The fulfillment of
the condition merely causes the extinguishment or loss of rights already acquired. (Art. 1181.) The
debtor is naturally interested in its fulfillment.

Casual condition

(1) If the suspensive condition depends upon chance or upon the will of a third person, the
obligation subject to it is valid.

(2) When the fulfillment of the condition does not depend on the will of the obligor, but that on a
third person who can in no way be compelled to carry it out, and it is found by the court that the
obligor has done all in his power to comply with his obligation, his part of the contract is deemed
complied with and he has a right to demand performance of the contract by the other party.

Mixed condition
The obligation is valid if the suspensive condition depends partly upon chance and partly upon the
will of a third person.
 ART. 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.
The condition not to do an impossible
thing shall be considered as not having
been agreed upon. (1116a)

Article 1183 refers to suspensive conditions. It applies only to cases where the impossibility already
existed at the time the obligation was constituted. If the impossibility arises after the creation of the
obligation, Article 1266 governs.

(1) Physically impossible conditions. — when they, in the nature of things, cannot exist or cannot
be done; and

(2) Legally impossible conditions. — when they are contrary to law, morals, good customs,
public order, or public policy.

Effect of impossible conditions

(1) Conditional obligation void. — Impossible conditions annul the obligation which depends upon
them. Both the obligation and the condition are void.

(2) Conditional obligation valid. — If the condition is negative, that is, not to do an impossible
thing, it is disregarded and the obligation is rendered pure and valid. (par. 2.) Actually, the
condition is always fulfilled when it is not to do an impossible thing so that it is the same as if
there were no condition. The negative condition may be not to give an impossible thing.

(3) Only the affected obligation void. — If the obligation is divisible, the part thereof not affected by
the impossible condition shall be valid.

(4) Only the condition void. — If the obligation is a pre-existing obligation, and, therefore, does not
depend upon the fulfillment of the condition which is impossible, for its existence, only the
condition is void.
 ART. 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)

Positive (suspensive) condition - the happening of an event at a determinate time. The obligation
is extinguished:
(1) as soon as the time expires without the event taking place; or
(2) as soon as it has become indubitable that the event will not take place although the time
specified has not yet expired.

ART. 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)

Negative condition- an event will not happen at a determinate time. The obligation shall become
effective and binding:

(1) from the moment the time indicated has elapsed without the event taking place; or

(2) from the moment it has become evident that the event cannot occur, although the time
indicated has not yet elapsed. If no time is fi xed, the circumstances shall be considered to
determine the intention of the parties. This rule may also be applied to a positive condition.

ART. 1186. The condition shall be

deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
(1119)

Constructive fulfillment of suspensive condition

Three (3) requisites:
 (1) The condition is suspensive;
(2) The obligor actually prevents the fulfi llment of the condition; and
(3) He acts voluntarily.

The law does not require that the obligor acts with malice or fraud as long as his purpose is to
prevent the fulfillment of the condition.
He should not be allowed to profi t from his own fault or bad faith to the prejudice of the obligee. In a
reciprocal obligation like a contract of sale, both parties are mutually obligors and also obligees. (see
Art.1167.)

Constructive fulfillment of resolutory condition

Article 1186 applies also to an obligation subject to a resolutory condition with respect to the debtor
who is bound to return what he has received upon the fulfillment of the condition.

ART. 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.
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)

Retroactive effects of fulfillment of suspensive condition

(1) In obligations to give. — An obligation to give subject to a suspensive condition becomes

demandable only upon the fulfillment of the condition. However, once the condition is fulfilled, its
effects shall retroact to the day when the obligation was constituted.
(2) In obligations to do or not to do. — With respect to the retroactive effect of the fulfillment of a
suspensive condition in obligations to do or not to do, no fixed rule is provided. This does not
mean, however, that in these obligations the principle of retroactivity is not applicable.
The courts are empowered by the use of sound discretion and bearing in mind the intent of the
parties, to determine, in each case, the retroactive effect of the suspensive condition that has been
complied with. It includes the power to decide that the fulfillment of the condition shall have no
retroactive effect or from what date such retroactive effect shall be reckoned.

Retroactive effects as to fruits and interests in obligations to give

(1) In reciprocal obligations. — There is no retroactivity because the fruits and interests received
during the pendency of the condition are deemed to have been mutually compensated. This rule is
necessary for purposes of convenience since the parties would not have to render mutual
accounting of what they have received. Fruits here may be natural, industrial, or civil fruits.

(2) In unilateral obligations. — There is usually no retroactive effect because they are gratuitous.
The debtor receives nothing from the creditor. Thus, fruits and interests belong to the debtor
unless from the nature and other circumstances it should be inferred that the intention of the
person constituting the same was different.

ART. 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)

Rights pending fulfillment of suspensive

Condition

(1) Rights of creditor. — He may take or bring appropriate actions for the preservation of his right,
as the debtor may render nugatory the obligation upon the happening of the condition. Thus, he
may go to court to prevent the alienation or concealment of the property of the debtor or to have
his right annotated in the registry of property. The rule in paragraph one applies by analogy to
obligations subject to a resolutory condition.

(2) Rights of debtor. — He is entitled to recover what he has paid by mistake prior to the
happening of the suspensive condition. This right is granted to the debtor because the creditor
may or may not be able to fulfill the condition imposed and hence, it is not certain that the
obligation will arise. This is a case of solutio indebiti which is based on the principle that no one
shall enrich himself at the expense of another.

ART. 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) If the thing is lost without the
fault of the debtor, the obligation shall
be extinguished;
(2) If the thing is lost through the
fault of the debtor, he shall be obliged
to pay damages; it is understood that
the thing is lost when it perishes, or
goes out of commerce, or disappears in
such a way that its existence is
unknown or it cannot be recovered;
(3) When the thing deteriorates
without the fault of the debtor, the
impairment is to be borne by the
creditor;

(4) If it deteriorates through the

fault of the debtor, the creditor may
choose between the rescission of the
obligation and its fulfillment, with
indemnity for damages in either case;
(5) If the thing is improved by its
nature, or by time, the improvement
shall inure to the benefit of the creditor;
(6) If it is improved at the
expense of the debtor, he shall have no
other right than that granted to the
usufructuary. (1122)

Requisites for application of Article 1189

(1) The obligation is a real obligation;

(2) The object is a specific or determinate thing;
(3) The obligation is subject to a suspensive condition;
(4) The condition is fulfilled; and
(5) There is loss, deterioration, or improvement of the thing during the pendency of the
happening on one condition.
Kinds of loss

(1) Physical loss. — when a thing perishes as when a house is burned and reduced to ashes; or
(2) Legal loss. — when a thing goes out of commerce or when a thing heretofore legal becomes
illegal
(3) Civil loss. — when a thing disappears in such a way that its existence is unknown or even if
known, it cannot be recovered whether as a matter of fact or of law

Rules in case of loss, etc. of thing during pendency of suspensive condition

(1) Loss of thing without debtor’s fault.

(2) Loss of thing through debtor’s fault.
(3) Deterioration of thing without debtor’s fault. — A thing deteriorates when its value is reduced
or impaired with or without the fault of the debtor.
(4) Deterioration of thing through debtor’s fault.
(5) Improvement of thing by nature or by time.
(6) Improvement of thing at expense of debtor.

ART. 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.
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 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)

Effects of fulfillment of resolutory condition

(1) In obligations to give. — When the resolutory condition in an obligation to give is fulfilled, the
obligation is and the parties are obliged to return to each other what they have received under the
obligation.
(2) In obligations to do or not to do. — In some obligations, the courts shall determine the
retroactive effect of the fulfillment of the resolutory condition (par. 2.) as in the case where the
condition is suspensive.
The courts in the exercise of discretion may even disallow retroactivity taking into account the
circumstances of each case.

ART. 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 rescission7 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.8 (1124)

Kinds of obligation according to the person obliged

(1) Unilateral. — when only one party is obliged to comply with a prestation.

(2) Bilateral. — when both parties are mutually bound to each other. In other words, both parties
are debtors and creditors of each other.

Bilateral obligations may be reciprocal or non-reciprocal.

(a) Reciprocal obligations- those which arise from the same cause and in which each party
is a debtor and creditor of the other, such that the performance of one is designed to be the
equivalent and the condition for the performance of the other.

(b) Non-reciprocal obligations- those which do not impose simultaneous and correlative
performance on both parties. In other words, the performance of one party is not
dependent upon the simultaneous performance by the other.
Remedies in reciprocal obligations

Article 1191 is the general provision on rescission of reciprocal obligations. It speaks of the right of
the “injured party’’ to choose between rescission or fulfillment of the obligation, with the right to
claim damages in either case. It governs where there is non-compliance by one of the contracting
parties in case of reciprocal obligations. The remedy granted is predicated on a breach of obligation
by the other party that violates the reciprocity between them. The breach contemplated is the
obligor’s failure to comply with an existing obligation, not a failure of a condition to render binding
that obligation.

Choice of remedy by injured party

(1) action for specific performance (fulfillment) of the obligation with damages; or
(2) action for rescission of the obligation also with damages.

Breach of obligation on part of plaintiff

Breach of an obligation- when there is a failure or refusal, by a party without legal reason or
excuse to perform, in whole or in part the obligation or undertaking which is incumbent upon him

Under the rule of exceptio non adimpleti contractus, the party who has not performed his part of the
agreement is not entitled to sue.

Effect of rescission
Generally, to rescind a contract is not merely to terminate it, but to abrogate and undo it from the
beginning, that is, not merely to release the parties from further obligations to each other in
respect to the subject of the contract, but to annul the contract and restore the parties to the
relative positions which they would have occupied as if no such contract had ever been made.

In case of rescission of contract based on Article 1191, mutual restitution is required to bring back
the parties, as far as practicable, to their original situation prior to the inception of the contract.
Rescission creates the obligation to return the object of the contract. It requires a mutual
restitution of the benefits each party may have received as a result of the contract. It can be
carried out only when the one who demands rescission can return whatever he may be obliged to
restore.
To rescind is to declare a contract void and to abrogate it from its inception.

Court may grant guilty party term for performance.

The court shall decree the rescission claimed unless there should be just cause for granting the
party in default a term for the performance of his obligation. Obviously, this exception applies only
where the guilty party is willing to comply with his obligation but needs time to do so and not
where he refuses to perform.

Remedies are alternative.

The remedies of the injured or aggrieved party are alternative and not cumulative, that is, he is
privileged to choose only one of the remedies, and not both, subject only to the exception in
paragraph 2, to wit: he may also seek rescission even after he has chosen fulfillment if the latter
should become impossible. But after choosing rescission of the obligation, he cannot thereafter
demand its compliance, nor seek partial fulfillment under the guise of recovering damages. (Siy vs.
Court of Appeals, 138 SCRA 536 [1985])

Limitations on right to demand Rescission

(1) Resort to the courts. — The rescission contemplated by Article 1191 is a judicial rescission.

(2) Power of court to fix period. — The court has discretionary power to allow a period within
which a person in default may be permitted to perform his obligation if there is a just cause for
giving time to the debtor

(3) Compliance by aggrieved party with his obligation. — A party to a contract cannot demand
performance of the other party’s obligation unless he is in a position to comply with his own
obligations. Similarly, the right to rescind a contract can be demanded only if a party thereto is
ready, willing, and able to comply with his own obligations thereunder.

(4) Right of third persons. — Rescission creates the obligation of mutual restitution. However, if
the thing, subject matter of the obligation, is in the hands of a third person who acted in good faith,
rescission is not available as a remedy.

(5) Slight or substantial violation. — The general rule is that rescission will not be granted for
slight or casual breaches of contract. The violation should be substantial and fundamental as to
defeat the object of the parties in making the agreement.

(6) Waiver of right. — The right to rescind may be waived, expressly or impliedly.
(7) Contract to sell. — In a contract to sell, the payment of the purchase price is a positive
suspensive condition the failure of which is not a breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring an obligatory force. The
breach contemplated in Article 1191 is the obligor’s failure to comply with an obligation already
extant, not a failure of a condition to render binding that obligation.

(8) Sales of real property and of personal property in installments. — In sales of real property,
Article 1592,16 as impliedly amended by R.A. No. 6552, governs the exercise of the right of
rescission. Article 1191 is subordinated to the provision of Article 1592 which speaks of
nonpayment of the purchase price as a resolutory condition, when applied to sales of immovable
property.

(9) Judicial compromise. — Article 1191 applies only to reciprocal obligations in general and not to
obligations arising from a judicial compromise. Judgment upon agreement of the parties is more
than
a mere contract binding upon them.

(10) Arbitration clause in a contract. — The act of treating a contract as rescinded on account of
infractions by the other contracting party is valid albeit provisional as it can be judicially assailed.
The right cannot be exercised where there is a valid stipulation on arbitration.

Rescission of contract without previous judicial decree

(1) Where automatic rescission expressly stipulated. — The parties, may validly enter into an
agreement that violation of the terms of the contract would cause cancellation thereof even
without judicial intervention or permission or termination. This stipulation is in the nature of a
resolutory condition.
(2) Where contract still executory. — In the absence of stipulation to the contrary, the right to
rescind a contract must be invoked judicially; it cannot be exercised solely on a party’s own
judgment that the other has committed a breach of the obligation.

Action for rescission not required upon breach of compromise agreement

Compromise- an agreement between two or more persons who, for preventing or putting an end to
a lawsuit, adjust their respective positions by mutual consent in the way they feel they can live
with.

Rescission distinguished from termination

Rescission has likewise been defi ned as the “unmaking of a contract, or its undoing from the
beginning, and not merely its termination.”
Rescission may be effected by both parties by mutual agreement; or unilaterally by one of them
declaring a rescission of contract without the consent of the other, if a legally sufficient ground
exists or if a decree of rescission is applied for before the courts.

On the other hand, termination refers to an “end in time or existence; a close, cessation or
conclusion.” When an agreement is rescinded, it is deemed inexistent, and the parties are returned
to their status quo ante. Hence there is mutual restitution of benefi ts received.
However, when it is terminated, it is deemed valid at its inception.
Prior to termination the contract binds the parties who are thus obliged to observe its provisions.
The consequences of termination may be anticipated and provided by the contract. As long as the
terms of the contract are not contrary to law, morals, good customs, public order or public policy
they shall be respected by the courts

ART. 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
fi rst violated the contract, the same shall
be deemed extinguished, and each shall
bear his own damages. (n)

Where both parties guilty of breach

(1) First infractor known. — One party violated his obligation; subsequently, the other also
violated his part of the obligation. In this case, the liability of the first infractor should be equitably
reduced.

(2) First infractor cannot be determined. — One party violated his obligation followed by the other,
but it cannot be determined which of them was the first infractor. The rule is that the contract
shall be deemed extinguished and each shall bear his own damages.