OBLIGATIONS AND CONTRACTS In obligation, it is important to know the relationship of

Book IV: Civil Code of the Philippines the creditor and debtor, the dynamics and the SOURCE
OF OBLIGATION.
Midterm Reviewer (Limited only to Judge Fransisco’s
lectures)
The dynamics depends on the source of obligation
If there is no SOURCE OF OBLIGATION there can be NO
CHAPTER I: INTRODUCTION VALID DEMAND since Article 1423 of NCC states:
GENERAL PROVISIONS
“Obligations are civil and natural. Civil
Since Article 11561 of the NCC provides a definition that obligations give a right of action to compel
views the obligation on the side of the debtor. There is no their performance. Natural obligations, not
debt without a credit and the credit is an asset in the being based on positive law but on equity
patrimony of the creditor just as the debt is a liability of and natural law, do not grant a right of
the debtor (obligor). action to enforce their performance, but
after voluntary fulfillment by the obligor
OBLIGATION: A juridical relations whereby a person (a (debtor), they authorize the retention of what
creditor) may demand from another (a debtor) the has been delivered or rendered by reason
observance of a determinate conduct, and, in case of thereof.
breach or non-observance, demand the determinate
prestation and obtain relief. i. LAW (1158)
-Set of rules or rule of conduct observed by
ELEMENTS OF OBLIGATIONS: persons
-Need not to be accepted or agreed upon by the
(1) ACTIVE SUBJECT: The creditor. The power to parties (e,g TAX)
demand the prestation or to compel the debtor. -Not presumed, only those expressly provided
are enforceable because it would be a burden
(2) PASSIVE SUBJECT: The debtor. One that is duty to the obligor.
bound to perform the prestation and adjust conducts to
fulfill creditor’s wishes. ii. CONTRACTS (1159)

(3) VINCULUM JURIS: Found on Article 1156 as the NCC 1305 provides: “A contract is a meeting of minds
‘Juridical necessity. 2 ’ This is the legal or juridical tie between two persons whereby one binds himself with
between the parties. respect to the other, to give something or to render some
service.”
(4) PRESTATION OR OBJECT: A particular conduct of
debtor. This has three kinds also found in Article 1156 -Not superior to law. The law limits contracts.
and that is: Obligation TO GIVE, TO DO & NOT TO DO.
iii. QUASI-CONTRACT (1160)
(5) Form – Not an essential requisite to some obligation. NCC 2142: “Certain LAWFUL, VOLUNTARY and
This is where the obligation is manifested. (e.g: written UNILATERAL ACTS give rise to the juridical relation of
contracts) Quasi-Contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.”
SOURCES OF OBLIGATION
(L – C – Q – A – QD) -Also under the principle of unjust enrichment
(NCC Art 23).
Under Article 1157 of the NCC, the sources of the
obligation are: Hence, juridical relation arises from certain acts that
are:
(1) LAW (1) Lawful – against act or omissions unlawful
(2) CONTRACTS (2) Voluntary – against quasi-delict which is
(3) QUASI-CONTRACTS based on negligence.
(4) ACTS AND OMMISSIONS PUNISHABLE BY LAW (3) Unilateral – against contract in which there
(5) QUASI-DELICTS are two (2) parties.

CIVIL LAW DISTINGUSHED FROM NATURAL LAW: The concept of Quasi-Contract can be subdivided into
Civil law: Man-made laws/ by legislation two. These are:
Natural law: Conferred by God, nature or reason and not
by legislation. (1) NEGOTIORUM GESTIO (officious management)
NCC 2144: “voluntary management of property affair of
another without express authority of the owner”

1
Art 1156: An obligation is the juridical necessity to give to do or not to do.
(2) SOLUTIO INDEBITI (payment not due)
2
Defined as the LEGAL NECESSITY TO DO – That an act must be done because the law said so

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 NCC 2154: “If something is received when there is no
right to demand it,and it was unduly delivered through
mistake, the obligation to return it arises”
- Something is received when you have no right
to receive it.
- Delivered by mistake.
iv. ACTS OR OMMISSIONS PUNISHED BY LAW
(1161)
- Generally, a crime has a dual aspect: Civil and
Criminal.
- Civil Code: Human relations
RPC 100: Every person criminally liable for a felony is
also civilly liable.
RPC 104: Civil liability includes:
(1) Restitution
(2) Reparation of damage caused
(3)Indemnification for consequential damages
General Rule: Criminal action bars civil action for the
same offense.
- Civil action for recovery of civil liability arising
from the offense is impliedly instituted with the
criminal action.
XPT:
(1) Waives right to institute civil action
(2) Reserves the right to institute it
separately
(3) Instituted civil action prior to the
criminal action
//Independent civil action
v. QUASI-DELICT (1162) – Culpa-aquiliana
- All of the obligation which did not arise from
law, contract, quasi-contract and criminal
offenses.
- An act/ omission or by a person which has no
pre-existing contractual relations
2176: ‘Whoever by act/ omission causes damage to
another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if
there is no contractual relation between the parties is
called quasi-delict’
Requisites for Quasi-delict:
(1) There is a wrongful act or omission
imputable to the defendant by reason of his
fault/ negligence.
(2) There exists a damage or injury. Damage or
injury incurred by plaintiff.
(3) Direct casual relation
ARTICLE 31 NCC: When the civil action is based on
an obligation not arising from the act/omission
complained of as a felony, such civil action may
proceed independently of the criminal proceedings and
regardless of the result of the latter.
2
- Speaks of Law, Contract, Quasi-contract and
Quasi-delict.
ARTICLE 32, 33 and 34
Universally accepted kinds of prestation:
(1) Personal Obligation TO DO and NOT TO DO
(2) Real Obligation TO GIVE.
KINDS OF OBLIGATION
A. As to efficaciousness (Juridical quality or
nature)
(1) Natural – in accordance with natural law
(2) Civil- in accordance with civil or positive law
(3) Mixed – both natural and positive
B. As to the parties or diversity of relations
(1) Unilateral
-involves only one creditor and one debtor.
-two parties but only one is bound by the
prestation. (e.g Tax/ Act of giving – where A
lends the car gratuitously)
Be careful because there are certain situations wherein
there are two (2) prestations but are NOT mutually
dependent upon each other.
(2) Bilateral / Reciprocal
-Each party is the creditor or debtor of each
other or both are debtors or creditors with
respect to the other.
-Prestations are mutually dependent upon each
other
Example: Dependence: Ex: Contract of Sale
Two (2) Prestations
1. Lending of the car
2. Paying rental fee
One (1) Contract
Contract of Lease
- Mutuum – Lending of money / other
consumable
- Commodatum - Lending a thing / object
“pagpapahiram”
C. As to the number of parties
(1) Individual – one creditor, one debtor
(2) Collective – Plurality of debtors or creditors
-Two or more creditors / two or more
debtors
(2.1) JOINT – Fulfilled individually by debtors
(2.2) SOLIDARY – Each of creditors has a right
to demand; and each of debtor is bound to
render the entire compliance of obligation.
D. As to perfection / extinguishment
(1) Pure – no condition / term or period
 -immediately demandable
(2) Condition – Demand depends upon the condition.
Every future and uncertain event upon which an
obligation/provision is made to depend
Condition is either: Suspensive or Resolutory:
2.1 Suspensive – future and uncertain event
upon the happening or fulfillment will result in the
acquisition of rights out of the obligation.
2.2 Resolutory – future and uncertain event will
result to the extinguishment of an obligation.
(3) Term/ Period – There is a certain length of time
that has the effect of suspending the demandability or
extinguishes the obligation.
E. As to the prestations (obligation to be rendered)
(1) Individual (Simple) – Only one (1) undertaking
(2) Several (Plural or multiple) – several undertakings
It could either be:
2.1. Conjunctive – All of the objects or
prestation are due and demandable
2.2 Distributive – When only one of the
several prestations is demandable.
2.2.1 Alternative – complied with
the delivery of one of them
2.2.2 Facultative –one obligation
is due and can be substituted.
F. As to the qualities or by their object
 Performance of the obligation
(1) Positive – To do / to give
(2) Negative – Not to do – abstain from doing
something
 Object of the obligation
(1)Specific/determinate–particularly designated
or physically segregated from its class
(2) Generic / indeterminate – designated merely
by its class.
 (1) Principal – Can stand alone by itself
(2) Accessory – Cannot stand alone
 Whether the prestation could be partially
performed
(1) Divisible – susceptible of partial fulfillment
(2)Indivisible–not susceptible of partial
fulfillment
CHAPTER 2: NATURE AND EFFECT OF
OBLIGATION
I. SCOPE OF OBLIGATION
Scope of prestation.
Importance: The fulfilment of scope will result
to the fulfilment of the obligation
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a. To Give (Real Obligation)
b. To Do (Personal Obligation)
c. Not to Do (Personal Obligation)
Scope – Limitations up to where the obligation
will be performed;
Scope differs from each prestation. Any non-compliance
will result to breach.
A. Scope of Prestation/Obligation: To Give
What must be given?
To Give:
(1) Specific “determinate”
-individualized
-seperated from its kind/class to w/c it belongs
-There is nothing like it
(2) Generic
-Class of kind
-By its class “genus”
A1.Specific “determinate” – 1244(1)
1244: The debtor of a thing cannot compel the creditor
to receive a different one, although the latter may of
the same value or more valuable than that which is
due.
Duties of a debtor (Scope of Obligation of debtor to
deliver determinate thing)
(1) To preserve the thing/take care of the thing
with proper diligence of a good father of a
family.(1163)
(2) To deliver the thing which he has obligated
himself to give (1244)
1233 – Complete delivery
(3) Deliver the Accessions/Accessory/Fruits
Even not expressly agreed upon by the parties.
1164 – The creditor has a right to the fruits of
the thing from the time that the obligation to
deliver it arises.
However, he shall acquire no real right over it until the
same has been delivered to him.
1166 – The obligation to give a determinate
thing includes that of delivery of all of its
accessions and accessories even though they
may not have been mentioned.
ART 440: Accessions – all of those things
which are produced by the object of the
obligation and all of those which are
naturally/artificially altered thereto.
(Trees on a land)
 Accessories – all of those things which have
further object the embellishment, preservation
of the thing.
(Car keys, charger)
WHEN IS REAL RIGHT ACQUIRED?
At the time the thing has been delivered to him
Illustration:
Contracts Phases:
1. Preparatory Stage and Generation
2. Perfection
3. Consummation
•Perfection of contract gives birth to the
relationship of the debtor/creditor
•Upon demand – Obligations to deliver
arises
Example:Mutuum (Borrowed money) – when to pay
back?
1. There is obligation
2. Pay upon demand
Suspensive Condition – Does not retroact the
ownership of the fruits of the object.
Real Right – Right over thing where there is no
passive subject. However, your right over the
thing is enforceable against the whole world.
Example: Ownership/possession
Ownership is acquired by delivery
Personal Right - Right of a person to demand
from another a fulfilment of a definite
prestation
Example: A buys a pregnant dog to B.
Pure obligation, after demand, included the fruits. In
another situation where A buys a pregnant dog to B
and left it to the store because A has errands to run, A
tells B that he shall be back after some shopping. Two
(2) weeks have passed and A still didn’t go back to the
retrieve the dog – which already produced puppies.
To Whom does the puppies belong?
The puppies still belong to B as A didn’t acquire real
right over the dog as the same still is not delivered to
A.No real right yet.
A2.Generic/Indeterminate:
- no accessory obligation
-capable of substitution
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- Generic things cannot be perished “genus nun
quam perit”
-owner bears risks
Principle: Upon demand – obligations to deliver it arises
Delivery – does not mean passing/lending over the
thing to another
-Mode of acquiring ownership
-“tradicion” – delivery of the thing
Two (2) things to deliver:Corporal and
incorporal.
Kinds of delivery:
1.Actual – there is actual physical transfer of
the thing. For Corporal Thing
2.Constructive – To be effected in 6 ways:
2.1. Traditio Longa Manu (1499)
sellers points to the property without
need of actual delivery
2.2 Traditio Brevimanu (1499 P2)
- Before contract of sale, the “would be”
buyer was already in the possession of
the “would be” subject matter of sale.
(rent-to-own/lessee)
2.3.Symbolic Delivery (1498)
-as to movables: delivery of the keys of
the place.
2.4.Constitutum Possessarium (1500)
- at the time of the perfection of
contract, seller continues to hold
possession on merely as holder.
- Opposite of Brevimanu
2.5.Execution on a Public Instrument
(1498)
- unless there is stipulation to contrary
2.6. Placed in the hands of the buyer
(1497)
3.Delivery of intangible/Incorporeal thing
EG: Intellectual Property
Delivery is thru: “Quasi-tradicio”
-Execution on a public instrument
Duties of a debtor (Scope of Debtors obligation to
deliver generic thing)
ART 1246 – “When obligation consists in the
delivery of an indeterminate thing/generic,
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.”
(1) To deliver the things due
 (2) Debtor cannot deliver a thing superior/inferior
quality.
B. Scope of Prestation/Obligation: To Do
What must be done?
(1) Only that which was agreed upon by parties
(2) To perform an act/service
1244(2):an act of forbearance cannot be
substituted by another act or forbearance
against the creditors will.
(3) Hence, no substitution unless agreed by the
creditor.
C. Scope of Prestation/Obligation: Not To Do
-debtor himself must abstain from the act.
The importance of knowing the scope of each
prestations in an obligation:
(1) the fulfilment of the scope will result to the
fulfilment of the obligation
(2) basically in order to know if there is a
fulfillment of the obligations
(3) and the non-fulfillment of obligation may
result to Breach of Obligation
II. Breach of Obligation:
Breach – basically is the failure to do what is required
by a law/an agreement.
Infraction or violation of a law, obligation/agreement
Requisite of Breach of obligation:
(1)Pre-existing Obligation – there must a pre-
existing obligation
(2)The act done resulted in the contravention of
the tenor due to either: FRAUD, NEGLIGENCE
or DELAY
(3)There must be an injury –substantial injury
A.FRAUD – Awareness of one’s conduct is improper
violates the right of another person, and yet there is
persistence.
DOLO CAUSANTE – ANNULMENT
DOLO INCIDENTE – DAMAGES
Two (2) types of fraud:
(1) Dolo Causante
(2) Dolo Incidente
1.Dolo Causante: (only applies to contract)
-Causes another person to enter into contract
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Vitiation of consent
-Illicity consent
-Fraud in order to gain the consent of another
to enter into a contract
-Causes for annulment
2. Dolo Incidente:(Fraud in the performance of
obligation)
-fraud in the execution of obligation
-after the consummation phase of contract, “at
the last minute”
-or when obligation to deliver arose
-result to action for damages
B. NEGLIGENCE – Failure to observe the degree of
care.
(Important to know the degree of care required)
-Standard of care required by law
Debtor/person must know the required degree
of care:
1. Law – in general/default degree of care is a:
“Good father of a family”. (1173)
-Under the principle of Pater Familias of
the Roman Law.
-It is the ordinary care/that diligence
which an average or reasonably prudent
man/person exercised over his own
property.
-Proper diligence
2. According to Circumstance
-in conjuction
1172: “Responsibility arising from negligence in
the performance of every kind of obligations also
demandable but such liability may be regulated
by the courts, according to circumstances.”
*Such damages in conjunction with 2176.
Example: Taxi Driver A, driving recklessly, killed a
pedestrian B and his passenger C.
*Under RPC the liability of A is direct and primary
against the heirs of B and C.
A is culpa-criminally liable.
*Under CC: the heirs of the pedestrian B may proceed
against both A and his employer.
A and his employer by Quasi-Delict (culpa-aquillana)
A’s employer can be released on such liability if he can
prove that he observed the required diligence and
supervision in choosing his employees.
On the other hand, C can proceed against A’s
employer via culpa-contractual.
Review: Independent Civil Action
 3. According to the stipulation of the
parties.
The liability of the debtor in breach of Obligation
through negligence lies on how much the debtor
departed from the degree of care, because any
departure from any degree of care required will result
to negligence.
How to prove negligence?
(1)Identify the standard of care required.
-How much did he depart from it
(2) Acts/omission tending to show that the care
required by law was not observed.
(3)The injury resulted.
The degree of care can be defined by:
1.Law
2.Parties – parties may vary the diligence
required
- can modify by agreement to the degree of
care. (E.G: 1.Inn keepers, 2.Common Carriers)
Concept of negligence – Negligence could be so
severe that it would amount or could be deemed as
fraud. Depends on how it impacts the characterization
of negligence.
Hence, severe negligence: FRAUD (rpc 365)
C.DELAY – not to be understood with its common
parlance
-In layman’s term there is
ORDINARY/FACTUAL delay.
-failure to perform an obligation on time.
Legal Delay and Default/mora:
-the failure to perform on obligation on time
which failure constitutes a breach of the
obligation.
-in this kind of breach, there is performance.
However, the performance is not within the
period required.
-beyond the period wherein performance is
required.
ART 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 as may under the circumstances have
been probably contemplated by the parties.
One fixed by the courts, the period cannot be
changed by them.
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Rules:
1.Parties fixed the period, through their
stipulation
2.Law fixes period
3.Fixed by the court, cannot be changed by the
parties
*in delay, it’s not enough that the prestation
was performed, not done in DUE TIME.
Period (Three [3] types)
1. Legal -Period Fixed by law
2. Judicial Period – Fixed by the courts
3. Conventional Period - Stipulated by the parties,
agreed upon by the parties
a. Implied
b. Expressed
How do we know if the obligation is with a period?
First, the law – look into the law, second, the
agreement – if still none
Judicial Period – Courts will fix the period
GR: Courts cannot fix a period
How do we infer?:
-Period @ 1197
-if no period stipulated on the
contact/agreement, courts may fix the period
-Creditor will file an “action to fix period”
-Judicial period – cannot be changed.
Illustration:
Period if not stipulated:
1. If the law prescribes a period
2. Under the stipulation/agreement
3. Judicial Period – fixed by the courts
How?
1197: 1.Circumstaces and nature; example:
seller is in need of medical expense/there are
lots of buyer
2.Depends upon the will of the debtor, again,
once fix by the court, it cannot be changed.
IMPORTANT: You have to know when the obligation is
due.
-there cannot be delay without a period.
DELAY: REQUISITES (delay on the part of the debtor)
1. Obligation requires a positive act
- To do/to give
2. There must be a period contemplated to perform
obligation – look at the effect of period
3. Obligation should be due and demandable
4. Debtor fails to perform obligation in due time.
5. There must be a demand from the creditor
 When is obligation due and demandable?
1.Period can either be suspensive– Suspends the
demandability on a certain period and the obligation
arise only from the arrival of a certain period.
-from a day certain, one that must lapse
before the performance of the obligation can
be demanded.
Example:
I will pay you 30days from today
2. or Resolutory – Results to the extinguishment of
the obligation. (babalik at babalik sayo yung rights,
unlike suspensive hindi na babalik sayo, nganga!)
To a day certain, is a period after which the
performance must terminate.
Example: “I will give you 100php per month until the
end of the year.”
commodatum – pagpapahiram
There must be a DEMAND from the creditor
Extrajudicially/judicially
-When the demand was made there is no performance.
-No justification/brought about the absence of an
excuse.
1169 – provides that there must be a demand
judicial/extrajudicial.
Basis also for the three (3) exceptions.
The arrival of the period has nothing to do with the
debtor, but to the creditor since the arrival of the period,
results to the right of the creditor to demand.
-creditor must make a demand(1169(1))
-creditor must make a demand because as an Active
subject of the obligation, he has the power to set the
things in motion.
EXCEPTION THAT A CREDITOR MUST MAKE A
DEMAND: 1169(2)
1. When the obligation or the law expressly so declares
E.G A clause on the stipulation/agreement that states:
“there is no need for a demand, in order delay may
exist”
2. When time is of the essence: 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 established of the contract;
E.G: Wedding cakes, dress, parties.
3.When the demand would be useless, as when the
obligor has rendered it beyond his powers to perform.
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4.When the performance by a party in a reciprocal
obligations.
-Reciprocal obligation – performance of which
is sufficient to hold the other party in delay.
Cause of Action
- A violation of a right which produces injury
-very reason that allows you to sue.
Requisites:
1. Existence of right
2. Violation of a right which produces an
injury
Part of assembling a Cause of Action:
1. Right
2. Breach – demand
3. Injury
Effects of delay:
(in delay period must arrive)
1. Mora Solvendi, delay by the debtor
2. MoraAccipiendi, delay by the creditor
3. Compensatio morae, both in delay
1.Mora Solvendi: (point of view of debtor)
Effects:
a.The debtor must indemnify the creditor
because of delay.(Becomes liable for damages
1170)
b.The debtor is liable for the loss and
deterioration of the thing even if lost in a
fortuitous event.
*Fortuitous event – 1174, those event which could not
be foreseen, or which though foreseen were inevitable.
GR: Free the debtor from the liability qualified by
1165(3),1174.
2.Mora Accipiendi (creditor in delay)
Requisites:
1. Fulfillment requires the act of cooperation
on the part of creditor.
2.The debtor must make a tender payment or
perform the obligation.
Tender of Payment: Declaration of intention by a debtor
or manifestation made by the debtor to the creditor to
immediately comply with the obligation.
3. Creditor is obliged by the debtor to do something
and that is to accept payment.
-Creditor refuses, without just cause.
Effects:
a. Cancels out the delay of the debtor +
compensation morae
(Limited to negligence /fraud)
 b. Transfers the risk to the creditor for
fortuitous event which belongs to the debtor.
(creditor liable for damages)
c. Debtor can obtain freedom from the
obligation by consignation
Brief discussion on Fortuitous event:1174
Requisites:
1.Independent of human will
2.Impossible to foresee
3.Render it impossible for the debtor to perform
4.Must be free from participation
GR:Effects of 1174: No person shall be responsible
for fortuitous event.
XPTs:
1. 1174(1)
1.Care is expressly specified by law
2.Declared by stipulation
3. The nature of the obligation requires
assumption of risk
2.1165(3):
1.Of the obligor delays
2.Or has promised to deliver the same thing
to 2 or more persons who do not have the
same interest (he shall be responsible for
fortuitous event until he has effect the
delivery)
3.1268: A debt of a thing certain and determinate
proceeds from criminal offense
4.Other exceptions:
1. when the debtor is guilty of
fraud/negligence
2.Did not comply with any of the requisites
for the extinguishment of liability due to
fortuitous event.
III. The injury or damages incase of breach:
- Injury sustained must be substantial or
significant if not, 1234 (article for substantial
performance will govern)
Hence, if injury is not substantial or significant 1234
(substantial performance in good faith) shall be
applied.
Substantial fulfillment of the obligation, at what point
was there breach?
Damages: M E N T A L
1.Moral Damages
2.Exemplary damages
3.Nominal Damages
4,Temperate Damages
5.Actual Damages
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6.Liquidated Damages
REMEDIES IN CASE OF BREACH
Remedies are not inclusive but cumulative.
- Cumulative – can avail of one and can still
avail of the other.
- Can stand side by side
- Remedies not exclusive because the law does
not say so.
I. Primary Remedies – directed towards debtor himself
II. Secondary / Subsidiary Remedies – not directed on
the debtor.
I. Primary Remedies
A. Remedies of the creditor in case of breach by
the debtor
i. The remedies in an obligation: to deliver a
specific/determinate thing:
REMEDIES:
(1) Action to compel / specific performance
(1165 P1)
(2) Action for damages (1170)
-in addition for action for damages,
creditor may compel debtor to make the
delivery – basis (1165): the word “may” in
addition to the right granted to him by 1170.
An act or omission that would result in breach will
necessarily involve the failure to deliver the thing.
E.G: You bought a specific car, but the car is
smashed. Will you still accept the smashed
car? Or are you going to file an action for
damages / specific performance?
1165 (P1): When what is to be delivered is a
determinate thing the creditor, in addition to
the right granted to him by 1170, may compel
the debtor to make the delivery (Specific
Perfomance).
Should the creditor choose SPECIFIC PERFORMANCE,
in reality the remedy is ACTION FOR DAMAGES in
addition to Specific Performance.
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”
ii. The remedies in an obligation: to deliver a generic
thing (1165 P2 & 1170):
NCC 1165 (2) – “If the thing is indeterminate or
generic he may ask that the obligation be
complied with at the expense of the debtor.”
‘Genus Nunquam Perit’
 REMEDIES:
(1) Action for substituted performance (1165 P2)
(Similar to deliver a specific thing or specific
performance)
- Creditor may ask to be complied with by a
third (3rd) party (person), chargeable with
the expense of the debtor.
(2) Action for damages (1170)
Can the creditor ask for performance?
Yes. 1165 (P1): Can extend to generic things as
well.
- Gives the creditor the additional option of a
third (3rd) party performance.
iii. The remedies in an obligation: to do (1167 1170):
1167 Situations:
(1) If a person obliged to do something fails to
do it, the same shall be executed at his cost.
- complete failure of performance
(2) Act was done in contravention of tenor
(3) Act was done but poorly executed.
REMEDIES:
(1) Action for damages (1170)
(2)Action for Substituted Performance
(3) If poorly done, undoing of poor work.
iv. The remedies to deliver a Not to Do:
(1) Action for damages (1170)
(2) Undone at the debtor expense (1168)
v. Reciprocal Obligations
Remedies not cumulative but alternative! Meaning,
ONLY one remedy can be resorted by the creditor in
case of breach in a Reciprocal Obligation and that is
Action for Fulfillment or Action for Rescission with
damages (1170) in either case.
Article 1169: Demand not necessary. Once there is
performance by one of the parties delay by the other
begins.
REMEDIES:
(1) Action for Fulfillment (1191 & 1170)
- Debtor must perform the prestation.
- Essentially an Action for Performance.
- If chosen by creditor.
(2) Action for Rescission (Cancellation 1191 P 1-2)
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 fulfillment and the rescission of the
obligation, with the payment of damages in
9
either case. He may also seek rescission, even
after he has chosen fulfillment, if the latter
should become impossible.”
1191 P3: There must be an order of judgment
granting or confirming the rescission.
Hence, rescission cannot be made extra-
judicially. The court will determine if the rescission was
proper under the circumstances.
Must be asked from the court = JUDICIAL ACTION.
- Cannot ask for partial fulfillment and partial
rescission.
The court has to confirm if the obligation is a
reciprocal one.
The court can deny the complaint for rescission.
WHEN:
(1)Slight or Casual breach only
1234: There is substantial performance or
compliance.
(2)When there is JUST CAUSE authoring the
fixing of a period (1191).
- Gives time to perform the obligation.
Effect of rescission:
-The parties must surrender whatever they may
have received from the other, in other words, the
parties must be placed as far as practicable in their
ORIGINAL SITUATION.
Difference between rescission in 1380 and 1191:
1380 1191
Rescissble Contracts Resolution
A valid contract Not the same with 1380.
A contract is being The reason for rescission
cancelled by reason of or resolution is BREACH
Economic Injury. of obligation.
Additional remedies:
(3) Action for Damages (1170)
When he who DEMANDS it is NO
LONGER in a position to return whatever he
may be obliged to restore; neither can it be
demanded when the thing which is the
OBJECT of the obligation or contract is already
legally in the possession of a third (3rd) person
who did not act in bad faith
The only remedy of the injured party
is to proceed against the party responsible
for the transfer or conveyance for damages.

If both parties are in default:
1192: Where BOTH PARTIES are in default, their
respective liability for damages shall be offset equitably.
B. Remedies of the debtor in case of breach by the
creditor
In case of unjust non-acceptance by the
creditor, the remedy is consignation etc (See modes of
extinguishment of obligation)
II. Secondary / Subsidiary Remedies
- Not directed to the debtor but to third (3rd)
party.
- The law has foreseen the instances where
the debtor becomes insolvent.
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 (ACCION
SUBROGATORIA); theymay also impugn the acts which
the debtor may have done to defraud them (ACCION
PAULIANA).”
i. Accion Subrogatoria:
-Creditor may exercise all the rights and
actions of debtor.
-Bring all the action of the debtor to satisfy the
creditor’s claim
-subrogated rights
Illustration: Pedro owes Maria a sum of money. Pedro
became insolvent. Maria after pursuing the property in
possession of the Pedro to satisfy her claim may collect
the debts owed by XYZ to Pedro.
Is the defense of no privity of contracts against XYZ
and Maria tenable?
NO. Even though there is no contract relation
between Maria and XYZ. Maria may exe-rcise a remedy
found in 1170, 1165 – AccionSubrogatoria– suing as if
she is Pedro because 1177 expressly gives the creditor
the right to exercise an action.
You should not confuse ACCION SUBROGATORIA with
the instances when the law allows direct action against
a debtor’s debtor found in four (4) provisions of the Civil
Code. They do not require prior exhaustion of the
property.
The following allows the creditor to sue the
debtor’s debtor by way of direct action (ACCION
DIRECTA):
(1) ART 1652 – “Without prejudice to his
obligation toward the sublessor, the sublessee is
bound to the lessor for all acts which refer to the
use and preservation of the thing leased in the
10
manner stipulated between the lessor and the
lessee.”
(2) ART 1729 – “Those who put their labor upon
or furnish materials for a piece of work
undertaken by the contractor have an action
against the owner up to the amount owing from
the latter to the contractor at the time the claim
is made.”
(3) ART1893 – “…the principal may furthermore
bring an action against the substitute with
respect to the obligations which the latter has
contracted under the substitution.”
(4) ART1608 – “The vendor may bring his action
against every possessor whose right is derived
from the vendee.”
In ACCION SUBROGATORIA, once the creditor has
exhausted the property of debtor, he can step into the
shoes of the debtor and sue the debtor’s debtor.
The requirement is that, there must be a prior
exhaustion of property.
ii. Accion Pauliana:
-impugn the acts which the debtor may have
done to defraud them (1177)
- This has the same concept as Art1381 P3
(Rescissible Contracts): “Those undertaken in
fraud of creditors when the latter cannot in any
other manner collect the claims due them.”
This allows the creditor to attack contracts contracted
by a debtor towards another:
Significance: (1) If the debtor has no property
(2) but, saw transactions by the debtor as
regards the sale of his property.
CHAPTER III: KINDS OF OBLIGATION
A. PURE AND CONDITIONAL OBLIGATIONS
1.Pure Obligation: 1179: when the obligation is not
subject to term/period/condition.
-demandable at once
-immediately demandable
*Term/period – an interval of time which
influences the obligation as a consequence of a
juridical act, either suspends its demandability or
produces its extinguishment.
- Those whose demandability/extinguishment is
subject to the expiration of a term/period.
1193:a day certain
-future, but will surely come
1180: “when means permit him to do so” 1197

*Condition – every future and uncertain event upon
which an obligation/provision is made to depend
How do you know if the obligation is pure?
1. Is there a period/condition?
-must rule out the existence of a condition or
period
2. Is there a period/condition that will affect the
obligation?
-look for modifier
2.Conditional obligation, 1181: in conditional
obligations, the acquisition of rights, as well as the
extinguishment or loss of the already acquired, shall
depend upon the happening of the event which
constitutes the condition.
-future and uncertain
Types of conditional obligation:
(1) Suspensive condition – when the fulfilment of the
condition results in the extinguishment of right arising
out of the obligation.
1181: acquisition of rights
(As to their classification)
Before the happening of condition, obligation is not yet
demandable
(2) Resolutory condition – when the fulfilment of the
condition results in the extinguishment of rights
arising out of the obligations.
1190: when the conditions have for their purpose the
extinguishment of an obligation to give, the parties
upon the fulfilment of said conditions, shall return to
each other what they have received.
-demandable at once
Difference:
1. If suspensive condition is fulfilled, the
obligation arises or becomes effective; if resolutory is
fulfilled the obligation is extinguished
2. If suspensive condition is not fulfilled, not
juridical relation is created; if resolutory is not
fulfilled, the juridical relation is consolidated.
3. If suspensive condition, right are not yet
acquired; in resolutory, rights are already acquired but
subject to threat of extinguishment.
Remedygranted to the creditor for the preservations of
his rights:
1188: Certain rights belonging to the creditor
even before the event/condition happens
-creditor already has rights as to his
“preservation of rights”
Paragraph 1: The creditor may, before the fulfilment of
the condition, bring the appropriate actions for the
preservation of his right
Remedy granted to the debtor:
11
1182(2): rights of the debtor, the debtor may
recover what during the same thing he has paid by
mistake in case of suspensive condition
- If the payment was of determinate thing, and
it still exist in the hands of the creditor,
AccionReinvindicatoriawill apply, otherwise, the
provisions of solution indebitiwill govern.
Other types of conditions:
(1) Potestative: When the fulfilment of the
condition depends upon the will of a party to the
obligation.
1182 – When the fulfillment of the conditions
depends upon the will of the debtor, the conditional
obligation shall be void.
-public policy dictates
-morally the creditor is interested in the
fulfilment of the obligation because it is for his
benefit
-becomes illusory
-only the condition is void, the obligation/pre-
existing obligation itself is not void
XPT:
Resolutory/potestative condition – VALID since the
rights are immediately contended/ acquired.
*Suspensivepotestative condition – VOID
Resolutory/potestative condition – VALID since the
rights are immediately contended.
It shall be noted that when there is a pre-existing
obligation and it is subject to a void potestative
condition (will of the debtor), the condition shall be
void but the obligation will still be valid.
1182: only applies to suspensive condition.
-delays the acquisition of rights
(2)Casual – when the fulfilment of the
condition depends upon chance and/or upon the will
of a 3rd person.
(3) Mixed – when the fulfilment of the
condition depends partly upon the will of a party to the
obligation and partly upon chance and/or will of a 3rd
person.
(4) Impossible – when the condition is NOT
capable of realization according to nature, law, public
policy or good customs.
(5) Possible - when the condition is capable of
realization according to nature, law, public policy or
good customs.
(6) Positive – when the creditor involves the
performance of an act.
 (7)Negative – when the condition involves the
non-performance of an act
Rules as to the retroactivity of the fruits in an
obligation subject to a condition:
Retroactivity applies to:
Suspensive condition: 1187: retroactivity applies to
the right of the creditor towards the object of the
contract.
-does not apply to fruits/interest
Reciprocal Fruits: mutually compensated
Unilateral: debtor shall keep the fruits
-act of liberality
1186: Prevention and Fulfillment
-The condition shall be deemed fulfilled when
the obligor (debtor) voluntarily prevents its fulfillment
Two (2) requisites:
(1) Intent of the obligor to prevent fulfilment of the
condition
(2) Actual prevention of compliance
As to the loss and deterioration of the thing:
When the thing is lost:
1189(2):
1.When it perishes
2.Goes out of commerce
3.Disappear in such a way that it goes out of
existence or it cannot be recovered
Fault – With liability
Without fault – extinguishes the obligation
Deterioration without fault of debtor –
damages will be borne by creditor.
Deterioration with fault of debtor –
rescission/fulfilment or indemnity for damages
As to improvement of things: anything added to,
incorporated or attached to the thing due is an
improvement.
If by nature, the thing is improved – for the benefit of
the creditor under the principle of RETROACTIVITY in
conditional obligation.
If through expense of debtor - right of usufructuary,
under 579 and 680.
-This means if the improvement, whether
useful or for mere pleasure, can be removed by the
debtor without damage to thing due.
-If it cannot be removed, the improvement
must be delivered together with the thing due.
-If the debtor cures the deterioration of the
thing but those improved at his expense, value of
improved set off – deterioration
-NO rights to indemnification
In Resolutory, does the rule also apply?
12
1188/1189 shall apply because of1190 (2)which
states: 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.
B. OBLIGATIONS WITH A PERIOD
Period: 1193: Obligations for whose fulfillment a day
certain has been fixed, shall be demandable only when
that day comes.
-A Day certain- must necessarily come
although it may not be known when
-SUSPENDS DEMANDABILITY
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.
Inferred to: 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.
Implied Period: When no period is fixed
-Indefiniteness
Express Period: Specified in the obligation
GR: Courts cannot fix the period
Rules as to Judicial Period:
XPTs:
(1) 1197 (P1): 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.
(2) 1197 (P2): The courts shall also fix the duration of
the period when it depends upon the will of the debtor
(3) 1191 (P3): The court shall decree the rescission
claimed, unless there be just cause authorizing the
fixing of a period.
(4) 1687:If the period for the lease has not been fixed,
it is understood to be from year to year, if the rent
agreed upon is annual; from month to month, if it is
monthly; from week to week, if the rent is weekly; and
from day to day, if the rent is to be paid daily.
However, even though a monthly rent is paid, and no
period for the lease has been set, the courts may fix a
 longer term for the lease after the lessee has occupied
the premises for over one year. If the rent is weekly,
the courts may likewise determine a longer period after
the lessee has been in possession for over six months.
In case of daily rent, the courts may also fix a longer
period after the lessee has stayed in the place for over
one month.
Group the following provisions:
(1) 1182 (P1): Potestative
(2) 1180: Period  Point of Overlap1197 (P2)
Remedy – not 100% dependent upon the will of
debtor. Although is a mixed condition, the law
treats it as if it is with a period.
Period could be:
(1) Legal – fixed by law;
(2) Conventional – fixed by parties;
(3) Judicial – fixed by courts
1191: Reciprocal Obligation
-The rescission must be decreed by the courts!
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.
NO RESCISSION if there is SUBSTANTIAL
PERFORMANCE or JUST CAUSE: This is so provided
under 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 oblige
(creditor).
How will the court fix the period?
STEPS:
1. The court will receive evidence
2. Period is fixed – 1197 (P3) 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.
3. Render a decision
Illustration: An obligation to build a ‘Bungalow’ no
period was specified or fixed by the parties. After ten
(10) years, the Bungalow is still not built.
What would be the creditor’s remedy?
a. Specific Performance
b. Substituted Performance
13
c. Rescission
NONE OF THE ABOVE! Remedy is to ask the court to
FIX the period.
Fixing of a period – courts can still make a new
agreement by mutual agreement of the perties.
To whose benefit is the Period?
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.
Hence, for benefit of BOTH parties; this simple
means that when the period has NOT yet arrived,
creditor cannot ask for the payment or to compel a
specific performance before the period and the debtor
cannot compel the creditor to receive the payment
UNLESS he accepts – 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.
When is the right to make use of the period lost?
Memorize 1198:
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.
Effect of losing the rights to make use of the period:
The obligation becomes demandable.
Kinds of Period:
(1) Suspensive- when the obligation becomes
demandable only upon the arrival of a day
certain
(2) Resolutory- when the obligation is
demandable at once, although it is
 terminates upon the arrival of a day
certain.
Difference between CONDITION and
TERM/PERIOD:
1. In general, Condition refers to an event, while a
Term/Period refers to an interval of time.
2. As to the requisites: Condition requires futurity
and uncertainty whereas Term or Period
requires futurity and certainty.
3. As to the fulfillment: a Condition may or may
not happen, while a Term or Period will surely
come to pass although it may not be known
when.
4. As to the influence upon the obligation:
Condition affects or influences the EXISTENCE
OF AN OBLIGATION whereas, Term or Period
only affects the DEMANDABILITY.
5. As to the retroactivity of effects: Condition has
retroactivity whereas, in Term or Period does
not have retroactivity unless there is an
agreement.
6. As to the will of the debtor: When a condition is
left exclusively to the will of the debtor, the very
validity of the obligation is affected; when the
duration of a Term or Period is left to the will of
the debtor, the obligation is STILL valid.
C. ALTERNATIVE OBLIGATIONS
1199: A person alternatively bond by different
prestations shall completely perform one of them
-Must be complete (1233)
-Cannot pay half- must be full
Obligations with several objects:
Multiple obligation, classified into:
1. Conjunctive – when all of the objects or
prestation are demandable at the same time
2. Alternative – several objects, but it may be
complied with the delivery or performance of only one
(1) of them.
Concentrating – process in alternative
obligation in choosing an object of obligation
3. Facultative – only one object is due, but it
may be complied by the delivery of another object or
performance of another prestations by substitution.
(1206)
GR: Debtor has the right to choose. 1200(1)
XPT:
1.Expressly granted to the creditor
2.1309: Made or left to a 3rd person
When is the election of the object of the obligation on
an alternative obligation operative?
14
1201: the choice shall produce no effect except
from the time it has been communicated.
1. The choice DOES NOT REQUIRE CONSENT.
-communicated only!
2. Once choice is made, it is irrevocable
3. Obligation becomes a simple obligation
Can a debtor change his mind?
-YES, provided that the choice is not yet
communicated, the obligation remains alternative. But
once the communication becomes effective, alternative
obligations becomes a SIMPLE OBLIGATION.
Special Instances/rules:
1.1205: 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.
2.Delay in MAKING A CHOICE:
Debtor may be compelled by the court to
choose:
-1200(1)- expressly granted to the
creditor through the courts.
-This is a circumstance where JUSTICE
AND EQUITY may justify the grant to the
debtor of a period in which to make his choice
before the creditor is allowed to choose.
3. Loss or impracticability
1202: choose from what remains.
*MemorizeArt. 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) 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;
(2) 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;
(3) 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.
Before choice is made:
1204: through the fault of the debtor, all are
lost or the compliance of the obligation has become
impossible
 -creditor right to indemnity for damages there are creditors or debtors. The credits or debts
considered distinct from each other.
XPT: Generic Things
Illustration:
1203: If through the creditor's acts the debtor
cannot make a choice according to the terms of the Creditor Prestation Debtor
obligation, the latter may rescind the contract with TO GIVE
damages. TO DO
Basis of value: NOT TO DO

1204(2) – last to be lost

After the choice has been made:

1263: in an obligation to deliver a generic

thing. The loss or destruction of anything of the same
kind does not extinguish the obligation.
Effect of loss of a generic thing

It then becomes simple obligation

FACULTATIVE:

*Note: Fortuitous event does not extinguish the

liability of the debtor on obligations to deliver a generic
thing.

Facultative: 1206: when only one (1)prestation has As contrasted to SIMPLE OBLIGATION:
been agreed upon, but the obligor may render another
in substitution.

Substitution – always rest exclusively at the debtor’s

option.
-Cannot be compelled against the will of the
No obstacle.
debtor
ART 1207: Concurrence of parties (both exist)
-Substitution cannot be refused by the creditor.
- Does not imply solidarity
Once the substitution has been made, the obligor is
liable for the loss of the substitute on account of his The presumption is against Solidarity.
delay, negligence or fraud. (1206) ART 1208: In favor of JOINT OBLIGATION.
- There are as many credits/ debts as
D. JOINT AND SOLIDARY OBLIGATIONS there are creditor or debtor
When there is concurrence of two (2) or more Illustration:
creditors or of two (2) or more debtors in one and the
same obligation, the obligation which affects the A. Plurality of Debtors
relationship of creditor and debtor, it may either be,
Joint or Solidary.

ART 1207: SOLIDARY – where each one of the

creditors has a right to demand or that each one of the
debtors is bound to render, entire compliance with the
prestation.

There is Solidarity when the obligation:
(1) Expressly so stated by the law
(2) When the law or the nature of the obligation
requires Solidarity. (EG NCC ARTS 19- 22 – by reason
that bad faith cannot be divided)
(3) Agreement of the parties
ART 1208: JOINT – The credit or debt shall be
presumed to be divided into as many equal shares as
15
If the obligation is SILENT about the SOLIDARITY 1208
shall govern = EQUAL SHARES as there are
DEBTORS; each debt is separate and distinct from the
other.
1208 has two (2) parts:
(1) Equal division of shares
(2) Credit or Debts share separate and distinct
from each other.
 B. Plurality of Creditor
More examples:
Plurality of JOINT CREDITORS & JOINT DEBTORS.
POINT OF VIEW OF THE DEBTORS:
1208: Debt is presumed to be divided into as many equal
shares as there are debtors. The EXTENT of each debtor’s
share of the debt is only 1,000php with respect to each
creditor.
POINT OF VIEW OF THE CREDITORS:
Joint Creditors CANNOT act in representation of
the other creditors, while a Joint Debtor CANNOT
be compelled to answer for the acts or liability of
the other debtors.
16
JOINT INDIVISBLE OBLIGATION (1209 - 1210)
Joint as to the relationship of the debtors or
creditors.Indivisible as to the object or performance of
the obligation.
Unique feature of Joint Indivisible Obligation - Debt
can only be enforced by proceeding against ALL of
them (ART 1209: The debt may be enforced only by
proceeding against all the debtors)
IMPORTANT: ART 1210: The indivisibility of AN
OBLIGATION DOES NOT NECESSARILY give rise to
SOLIDARITY nor does SOLIDARITY imply
INDIVISIBILITY.
Forms of Indivisibility:
(1) Conventional – even though the object or
the prestation is by nature divisible but the
agreement of the parties it is made indivisible.
(2) Legal – Law treats the obligation as
indivisible.
Illustration:
Prestation: TO DELIVER A CAR worth Php500K
If, for instance, Seller 2for reasons only known to him
is not ready to deliver the car or does not want to
comply with the prestation to deliver the car, the
obligation will be converted into one for indemnity for
damages (ART1124).
Hence, as converted to the price of the thing to
be delivered, the car is worth 500,000Php, applying
ART 1208 that the debt shall be divided as to many
equal shares as there are debtors, each seller shall be
made to pay 250,000 php to creditor-buyer. In
addition to that, Seller 2, the one who was not ready to
comply with the obligation or is in breach of the
 obligation shall pay the corresponding damages. For  An instance where the debtors, although
instance, creditor-buyer suffered moral damages worth solidarily bound in the same prestation but
100,000, only the debtor or seller in breach will pay are not subject to the same term/s and
the amount of damages suffered by the creditor-buyer. condition/s.

ART 1209 (The debt may be enforced only by
proceeding against all the debtors) must be read in
connection with ART 1224 which states:
“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.”
Therefore, same as the example given above, if
one of the debtor is not ready to comply with the
performance of the obligation, the obligation is
converted into one for indemnity for damages plus the
price of the thing or value of the thing due to be
delivered.
This implies that before the fulfillment of the
condition, or the arrival of the term which affects a
particular debtor, an action may be brought against
such debtor or any other solidary debtor for the
recovery of the ENTIRE obligation MINUS the
PORTION corresponding to the debtor affected by the
condition or term; but this latter portion CANNOT BE
DEMANDED from ANYONE until the condition
happens or the term arrives.
Upon the happening of the condition, or
arrival of the term, the creditor may claim the
remaining portion from ANY of the debtor.
Illustration:

Illustration:
Debtor 1 and Debtor 2 owe Creditor a sum of
money worth 500,000php. Their written contract
states that the whole amount of money worth 500php
will be paid on March 23, 2015 without the need for
demand. In the absence of the stipulation that the
obligation is a solidary one, the obligation is joint but
since their agreement stipulates the object’s
indivisibility, the obligation became a Joint
indivisible Obligation.

On March 23, 2015, if Debtor 1 is ready but

Debtor 2 is not:

The following will be converted as:

Debtor 1 and Debtor 2 owe = 500,000php to Creditor

Applying the rules in joint obligation
1. Debtor 1 owes 250,000php to Creditor
2. Debtor 2 owes 250,000php to Creditor
But since debtor 2 is the one in breach, he will be made
to pay the value of damages suffered by the creditor
Plus + damages 100,000php for moral damages. The
total amount that will be paid by Debtor 2 to Creditor
is 350,000php.
Offending debtor (one who is not ready to comply) is
solely liable to pay for damages under ART 1224.
As to the effect of TERMS & CONDITIONS:
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.
SOLIDARY(Solidary Obligation)
ART 1207: SOLIDARY – where each one of the
creditors has a right to demand or that each one of the
debtors is bound to render, entire compliance with the
prestation.
When the CREDITORS are solidary, there is
power of representation to collect or demand the entire
obligation or performance of the prestation from the
debtor.
When the DEBTORS are bound solidarily, they
are all bound to render the entire compliance of the
obligation.
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.

17
 There is Solidarity when the obligation (1207):
(1) Expressly so stated by the law
(2) When the law or the nature of the obligation
requires Solidarity.
(3) Agreement of the parties
Examples:
(1) By LAW:
(1.1) NCC ART 1911: AGENT. Principal is
solidarily liable with the accessory.
Agent exceeded with his authority. If the
principal allowed such agent to act as though
he had full powers.
(1.2)NCC ARTs 1822 & 1824: Contracts of
Partnership.
Perfection of partnership – a life of its own, has
its own personality.
(1.3)1945: Commo Datum (Act of Borrowing)
(1.4)2194 – Bacolod Case – 365, 2176 & 31 –
public policy so dictates.
(1.5)RPC 110 – Conspiracy is committed in
furtherance of the crime.
Among ALL Principals
Among ALL Accessories
(2) By NATURE:
EG: Globe Mackay case: Bullied employee.
Employers and other co-workers violated Arts
19-21 of the NCC. The said laws were in nature
of Solidarity since bad faith cannot be divided
into parts.
Springs from rights, morals and good customs.
Solidary Obligation
Illustration:
18
Suppose the debt is 1,500php
Elaborately,
STEP 1: 1216: So long as the payment has not been
made. Proceed against anyone, some or all.
1217 P1: Any debtor, who pays will extinguish
the obligations
STEP 2: 1217 P2: The debtor who paid will now claim
the share which corresponds to each.
Hence, the example given above, debtor 1 will now
claim the debt that corresponds to debtor 2 and debtor
3.
In the process of reimbursement corresponding to the
other debtors correlate 1217 P2 to 1208 which
provides that the obligation is divided into many equal
shares as there are debtors.
Illustration (taken from the abovementioned example)
If Debtor 1 paid the obligation – which is 1,500php to
Creditor, Debtor 1 can now claim reimbursement, and in
the absence of express stipulation regarding how much
corresponds to each and a modification for Solidary, the
process would be that of joint obligation found in 1208.
As regards INTEREST: 1217 P2:
General Rule: With INTEREST
XPTs: (1) When payment is made before the debt is
due. No Interest.
Rules as to reimbursement:
Instances where reimbursement is not entitled:
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.
1220: The remission of the whole obligation,
obtained by one of the solidary debtors, does
 not entitle him to reimbursement from his co-
debtors.
(1) Prescribed / Becomes Illegal (1218)
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.
Concept of Prescription
1139: Action prescribed by the mere lapse of time:
(2) Remission (1220)
Remission – Gratuitous / Act of liberality
It is really a donation where the whole
obligation is remitted.
1220: The remission of the whole obligation,
obtained by one of the solidary debtors, does not
entitle him to reimbursement from his co-debtors.
Article 1220 speaks of whole or entire / complete
remission of the obligation by the creditor, thus,
resulting to the extinguishment of obligation.
XPT: ART 1219: PARTIAL REMISSION 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.
The abovementioned article-exception depicts a
situation wherein although there is remission in favor
of only one of the debtors pertaining to his share of the
debt, the latter can be compelled to give his share of
the debt.
Illustration:
Three (3) debtors A, B and C owe D (Creditor)
3,000php. A obtained partial remission from D as
regards his share from the debt worth 1,000php. We
assume that his share of the debt is 1,000php applying
1208 (equal shares as there are debtors)
HOWEVER, debtor C paid the debt in full before the
remission or prior to the condonation.
The right of debtor C can be found in 1217 (He who
made the payment may claim from his co-debtors only
19
the share which corresponds to each, with the interest
for the payment already made) and 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.)
A was condoned after the debt was paid in full
by C. From the total debt of 3,000php, one of the
debtors is condoned; the effect is that the debt has now
reduced in the amount of share of the condoned debtor.
HENCE, debt becomes 2,000php.
However, under the foregoing circumstances, C paid
the debt in full, amounting to 3,000php. The creditor
has now the obligation to give back the amount he
condoned from A (the one condoned) to C (the one who
paid in full) under the principle of 2154
(solutioindebiti) or unjust enrichment.
When a creditor partially condoned or remitted one of
the solidary debtors, in effect, he relinquished his right
of that part of the share which, in this case, worth
1,000php.
Under the Quasi-Contract (solutioindebiti) the creditor
must now return what he has unjustly received.
***Article 1221 (P2):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.
BREACH OF ONE, IS BREACH OF ALL!!
Solidary Obligation explained further by Judge
Fransisco:
Solidary Obligation:
STAGE 1: Anyone of the Solidary debtors pays the
debt to creditor (1216)
- (1217) Effect of the payment extinguishes the debt /
obligation. -
STAGE 2: After paying the entire debt. (1208) divided
into equal shares (as to debtors corresponding share of
the debt)
Effects/ steps after one of the solidary
debtors pay the debt:
(1) 1217 P1: Payment made by one of the
Solidary debtor extinguishes the obligation.
(2) 1217 P2: Claiming the shares of the other
debtors that correspond to each.
GR: With interest
 XPT: When payment made before the debt is
due (No interest may be claimed at the
intervening period)
***Is the defense of PRIOR DEMAND made by the
creditor towards one of the Solidary Debtors is tenable?
NO. 1216: The demand made against one of
them shall not be an obstacle to those which
may subsequently de directed against the
others, so long as the debt has not been paid in
full.
Illustration on Solidary Obligation:
1207: Solidary Obligation:
As to the LOSS:
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.
Solidary among creditors:
When creditors are solidary, anyone can demand from
the debtors the payment of the entire obligation.
20
ART 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.
ART 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.
ART 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….
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.
(1) NOVATION – Substitution or
alteration of an obligation through a
subsequent one which cancels the
existing obligation.
EG: Instead of paying in cash –
paid through property (Substitution
of the object of the obligation)
(2) COMPENSATION – Amount of one
is covered by the amount of the
other.
-Aligning two (2) obligations in order
to extinguish the obligation.
(3) CONFUSION- Refers to the merger of the qualities
of creditor and debtor on one and the same person
with respect to one and the same obligation.
Illustration:
How does it differ from Compensation?
There is a MERGER OF RIGHTS of the qualities
as a debtor or creditor in one of the same person with
respect to one and the same obligation.
In conclusion, the creditor cannot, under
1212, do acts prejudicial to the other creditors, but if
the creditor do so through any of the acts stated under
1215, the latter shall be liable to the other creditors’
 share of the credit. It shall be noted that according to
1213, Solidary Creditor cannot assign his rights to
another without the consent of the other.
***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.
Defenses available to a Solidary Debtor:
1222: A Solidary Debtor may, in actions filed by the
creditor, avail himself of ALL the defenses which are
derived from:
(1) NATURE of the obligation and of those
which are
(2) PERSONAL to him
(3) 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.
Defense; Definition: Grounds to avoid the obligation
- Grounds why a debtor should not pay the creditor.
- Sufficient to defeat the creditor’s demand
Defenses:
(1) Nature of the Obligation:
- From the object or obligation itself.
EG: Payment in complete / has been made / or
through prescription and obligation becomes
illegal etc.
Defenses pertaining to his share.
If payment is partial – Partial Performance
= Partial Defense only same to novation etc
(1215)
(2) Personal to the parties themselves /
debtor himself
EG: INSANITY / MINORITY – cannot give
consent / as if there’s no consent at all.
(3) Those personally belonging to the other
debtors
- The debtor can only avail himself of a
defense thereof only as regards that part of
the debt for which the other co-debtor are
responsible.
Note: Nothing in 1222 to tell you if the defense is
partial or complete. Think of the defense pertaining to
you first then the other debtors.
E. DIVISIBLE AND INDIVISIBLE
Indivisible: something/object that cannot be
performed in part
21
Reasons:
1. By nature the thing is physically
incapable of being divisible/partial fulfilment
2.Legal divisibility: law says so
(1223)
3. Conventional Indivisibility –
parties agreed that the object is indivisible.
-intended by the parties. (1223)
*Check notes in JOINT INDIVISIBLE
OBLIGATION
F. OBLIGATIONS WITH A PENAL CLAUSE
Penal Clause: An accessory obligation
attached to a principal obligation whereby a
debtor promises to pay the creditor damages
in case of breach.
-stipulated indemnity
1. Principal obligation: can stand on its own,
does not depend upon the existence of
another obligation
EG: 1933: Contract of loans: By the
contract of loan, one of the parties delivers to
another, either something not consumable so
that the latter may use the same for a certain
time and return it, in which case the contract
is called a commodatum; or money or other
consumable thing, upon the condition that
the same amount of the same kind and
quality shall be paid, in which case the
contract is simply called a loan or mutuum.
Illustration:
2. Accessory obligation – attached to a
principal obligations
-cannot stand alone
*Penal clause – contain a promise on the part
of the debtor to pay the creditor damages in
case of breach
EG: Undertaking, construction of a house on
the span of twelve (12)months.
If without penal clause, although there
would still be breach when on the arrival of
 period, there was still no house, and the
creditor now will file an action as part of his
remedies in case of breach.
Characteristic of Penal Clause:
1. Accessory ALWAYS follow the PRINCIPAL:
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.
PRIN. OBLI VOID (X) PENAL CLAUSE (X)
PRIN OBLI VALID (ok) PENAL CLAUSE (ok)
PENAL CLAUSE (X)PRIN OBLI VALID (ok)
2. Simplifies the breach or action for
damages
3. Means or ways to compel the debtorin
advance
4. In effect, penal clause substitutes the
indemnity for damages in case of breach.
PROMISING IN ADVANCE TO PAY FOR
DAMAGES IN CASE OF BREACH.
-Penal clause is intended as a SUBSTITUTE
for damages. After that, proceed to the
remedies, should the creditor need to sue.
-Prior agreement in case of breach
-There is no more damages payable except
those stipulated in the penal clause
INSTANCES WHERE CREDITOR MAY
DELIVER DAMAGES IN ADDITION TO THE
PENAL CLAUSE:
ART 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.
1. When debtor refuses to pay penalty (1226)
2. Debtor is guilty of fraud (1226).
IMPLICATIONS OF A PENAL CLAUSE:
1. Penalty takes place for damages – proof
not necessary
2. 1227: The debtor cannot exempt himself
from the performance of the obligation by
paying the penalty, save in the case where
22
this right has been expressly reserved for
him.
- Debtor cannot exempt himself from
the principal obligation undertaking
by simply paying the penalty
XPT: expressly granted that he may
choose to do so
Penal clause means to compel debtor to
perform
3. 1227(2):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.
-Neither can creditor demand the
fulfilment of the obligation and the
satisfaction of the penalty at the same
time.
XPT: Expressly granted to him and if
after compelling debtor to perform,
performance becomes impossible,
penalty enforced (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).
4. 1229: penalty equitably reduced bby the
judge, two (2) instances:
1. Obligation was partly or
irregularly complied with the debtor
GR: 1233: Payment must be complete
XPT:
(1) 1234: Partly performed,
substantial compliance in good faith
(2)1235: irregularity, creditor accepted
the payment despite irregularity
-Court considers justice and equity.Therefore,
in the following cases, the court will equitably
reduce the penalty.
-Lessen the damages
2. INQUITOUS or
UNCONSIONABLEPENATLY
- Even without performance, the court
may reduce the penalty if it is doubtful or
unreasonable.
*Penalty is a substitute that a creditor
may take in case of breach – no proof/fact of
breachPROVIDED that there is no ground to
equitably reduce it.
EXTINGUISHMENT OF OBLIGATION
 Art. 1231: Obligations are extinguished:
Duly authorized representative shall be differentiated
(1) By payment or performance: from third (3rd) person who pays.
(2) By the loss of the thing due:
(3) By the condonation or remission of the debt; Third (3rd) Person Who Duly Authorized Person
(4) By the confusion or merger of the rights of Pays
creditor and debtor; Not duly authorized Extension of your persona
(5) By compensation; representative
(6) By novation. You may not know that You are certain that
the payment has been payment has been made
Other causes of extinguishment of obligations, such as made by him by him
annulment, rescission, fulfillment of a resolutory
condition, and prescription, are governed elsewhere in Illustration: A (debtor) ---- Bank (creditor)
this Code. (Credit card)

Other modes include: Parents (Third 3rd Person) pay the debt --- Bank
• Annulment (Out of love and concern)
• Rescission
• Fulfillment of a resolutory condition If creditor accepts = / (VALID PAYMENT)
• Prescription If creditor refuses = X (NO VALID PAYMENT)
• Renunciation or waiver by the creditor
• Compromise GR: 1236 P1: The creditor is not bound to accept
• Expiration of the resolutory term or condition payment or performance by a third (3rd) person.
• Death of one of the contracting parties provided
that the obligation is a personal one. Three (3) concepts of third person who can
• Will of one of the contracting parties pay PROVIDED that the creditor accepted the
• Mutual assent or dissent payment:

PAYMENT: A valid payment answers all questions of Third (3rd) Third (3rd) Person NOT Third (3rd)
who, what, where, when, and how correctly. Person interested in the Person who
interested fulfillment of the does NOT
I. WHO (Who can pay? To WHOM payment in the obligation intend to be
shall be made?) fulfillment reimbursed
of the (1238)
A. WHO CAN PAY? obligation
Third Person
ART 1240: Payment shall be made to the pays for
person in whose favor the obligation has been another one’s
constituted, or his successor in interest, or any ***One interested: Shall not be understood debt without
person authorized to receive it. in layman’s term! intent to
reimburse
(1) Debtor or his agent (duly authorized agent – ***Legal Definition of ‘One Interested’: By
simply a representative of the debtor) (1240) law is a person who may be held liable or
(2) Debtor heir or successor in interest(1240) called upon to pay the obligation if debtor
- Obligations are transmissible fails to pay (EG: Guarantor, surety etc.)
(XPT: These are personal and non-
transmissible) 1303 (P3) 1. With Consent or 1238: Deemed
(3) When, Approval: as donation
- Successor’s interest – agencies
even without 1302 P(2):When a third (+725: act of
capacity as a debtor the person, not interested in the liberality; and it
(3) A third (3rd) person (1236, 1237 and 1238) knowledge of obligation, pays with the requires the
Who is a third (3rd) person? Normally in the debtor, a express or tacit approval of debtor’s
an obligation/ agreement there is a person the debtor; acceptance or
debtor and a creditor. Any person who interested in consent to the
is not a debtor and not the creditor is the fulfillment Effect: donation)
third (3rd) person. of the 1. Legal Subrogation:
- Basically has NO participation. obligation 1303: Subrogation Two scenarios:
pays, without transfers to the persons 1. Debtor
prejudice to subrogated the credit with consents or
Illustration: A (debtor) borrowed money from B the effects of all the rights thereto accepts the
(creditor). Due to the hectic schedule of A, A confusion as appertaining, either against donation =
asked his duly representative to pay B. to the latter's the debtor or against third VALID donation.
Payment is valid. Payment here is made by a share. person, be they guarantors
duly authorized representative. or possessors of mortgages, 2. Debtor does

23
 With or subject to stipulation in a
without conventional subrogation.
approval =
there would Kinds of Subrogation:
still be (1) ObjectiveNovation –
subrogation change in the object or
under Art principal condition and
1303. (2) Personal Novation–
subrogating a 3rd person in
the rights of the creditor.
2.Without Consent or
Approval:
1302 (P1):When a creditor
pays another creditor who is
preferred, even without the
debtor's knowledge;
Preference of Credits
In the above given example,
obviously, BPI has the
preferred credit because of
the mortgage debt. If BDO
paid the mortgage debt of
the debtor from BPI, in
effect, BDO will be
subrogated in the rights of
BPI and therefore acquiring
the preference with respect
to credits.
As to the recovery or
reimbursement:
1236 P(2): 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.;
Extent of recovery: Only to
the extent the debtor was
benefited.
Additional Requirement of a person who can pay:
Payment can be invalidated if the person who pays is
incapacitated.
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.
CONCURRENCE OF BOTH Free Disposal of the Thing
Due and Capacity to Alienate!!
24
not consent or Free disposal of the thing due: The thing to be
accepts the delivered must not be subject to any claim of lien or
donation = encumbrance of a third (3rd) person.
INEFFECTIVE
Capacity to Alienate: That the person is NOT
In either cases/
scenarios, if the incapacitated to enter into contracts and for that
creditor accepts matter, to make a disposition of the thing due.
the payment
from the third Payment is still NOT VALID even if the creditor accepts
person (donor), the payment from the person incapacitated to pay; it
there’s a VALID can be annulled by a proper action in court or at the
payment. But as instance of the payor or legal representative.
to the recovery of
the debt paid. In
B. TO WHOM PAYMENT SHALL BE MADE?
the first
scenario, donor
cannot Art 1240: Payment shall be made to the person in
reimburse what whose favor the obligation has been
he had paid constituted(creditor), or his successor in interest, or
because there’s a any person authorized to receive it(agent).
valid or effective
donation. On the (1) Creditor
second scenario, (2) Successor in interest
the donor is
(3) Agent
entitled to a
reimbursement
(4) Third (3rd) Person (1241 P2: Payment made
since the to a third person shall also be valid insofar as it
donation is has redounded to the benefit of the creditor.)
ineffective or void GR: Payment to a person not capacitated to
(745: The donee administer his property is not valid
must accept the XPT: 1. Kept the thing delivered, or
donation 2. insofar as the payment has been
personally, or beneficial to him (Art. 1241)
through an
authorized
person with a
*Risk of paying to a person you don’t know. The
special power for payment may not reach the creditor.
the purpose, or
with a general 1241 P2: Payment made to a third person shall
and sufficient also be valid insofar as it has redounded to the
power; benefit of the creditor.
otherwise, the In this case, that the creditor was
donation shall benefited by the payment is NOT
be void.)
PRESUMED and it must be proved.
Burden of proof – debtor! GOOD FAITH
is not a defense.
(1241 P2): 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.
Illustration:
Basic Premise: A owes B money worth 5,000php. A
wants to pay B the money he owes, hence he went to
 the house of B. But B wasn’t there, instead he left the
money to the helper.
The helper who received the payment kept it
and accepted it as a payment for her two months
delayed salary from B.
In this case, the payment to a third (3rd) person
redounded to the benefit of the creditor B.
II. WHAT (What must be paid?)
- The principal obligation or object of the payment.
-Depends on the nature of the obligation:
a. To Give
-Specific / determinate thing
Art. 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.
-Generic or Indeterminate thing
Art. 1246 (P1)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.
b. To do / Not to do
Art. 1244 (P2): 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.
***Review the scope of the nature of obligation***
Special Rules in the delivery of MONEY:
1. PAYMENTS IN CASH:
1249 (P1): 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.
Payment of money must be made on the legal tender
specified and currency stipulated.
In case of extraordinary inflation:
Can you refuse to accept a payment in check?
1250: In case an extraordinary inflation or deflation of
YES, because a check is not a LEGAL
the currency stipulated should supervene, the value of
TENDER.
the currency at the time of the establishment of the
obligation shall be the basis of payment, unless there
III.
is an agreement to the contrary
1251 P (1): Payment shall be made in the place
Extraordinary Inflation: Unusual or beyond
designated in the obligation.
the common fluctuations in the value of
25
currency, which the parties could not have
reasonably foreseen or which was manifestly
beyond their contemplation at the time when
the obligation was constituted.
Debts in money, in case of inflation, or
devaluation of currency, are considered as
debts of value, except when the load refers to
particular coins.
Illustration:
When the obligation is for P100, for instance,
the substance of the debt is in reality the value
represented by that amount, or its purchasing
power in the market, and not its quantitative or
nominal value. When the currency is devalued
in terms beyond what could have been
reasonably foreseen by the parties, the doctrine
of unforeseen risks can be applied, and the
effect of devaluation should not be borne by the
creditor alone.
The revaluation of the credit in such cases
must be made, according to the principles of
good faith and in view of the circumstances of
each particular case, recognizing the real value
of the credit as in consonance with the intent
of the parties.
Results in an equitable situation!
2. PAYMENTS IN FORM OF MERCANTILE
DOCUMENTS ETC:
1249 (P2): 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.
There are two (2) ways on how a payment
through the delivery of promissory notes
payable to order, or bills of exchange or other
mercantile documents will be effective:
(1) When the said documents have been
cashed and;
(2) When through the fault of the
creditor they have been impaired.
WHERE (Where payment must be made?)

Place designated in the obligation. Hence, in
order to know where to pay, look into the source of
obligation.
If the obligation is silent:
1252 P (2): 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.
If the debtor changes his domicile in bad faith or
after he has incurred in delay, the additional expenses
shall be borne by him.
RULES:
1. The place stipulated / expressly stipulated /
designation
2. If the obligation is to deliver a specific thing:
- Where the thing might be at the
time the obligation was constituted.
3. If the obligation is to deliver a generic thing
- Payment shall be made at the
domicile of the debtor.
If creditor refuses as to the place of the payment, will
the creditor be held in default or breach (mora
accipiendi)?
Yes and the remedy of the debtor is Tender of
Payment.
4. As to the extrajudicial expenses – in the
absence of an express stipulation of who will
pay the extrajudicial expenses (e.g: travel fee),
the debtor shall pay for such expenses.
By default, debtor pays or bears the
extrajudicial expenses.
IV. WHEN
UPON DEMAND: JUDICIAL OR EXTRAJUDICAL.
XPT:
Art. 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.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so
declare; or
(2) 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
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the service is to be rendered was a controlling
motive for the establishment of the contract; or
(3) When demand would be useless, as when
the obligor has rendered it beyond his power to
perform.
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.
V. HOW (Manner of payment – must be
reviewed with “WHAT”)
1. Identity- Only the prestation agreed upon and
no other must be paid or complied with.
2. Integrity – The thing or service in which the
obligation consists must be completely
delivered/ rendered.
1233: Complete delivery!
XPTs: (1)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.
(2) 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.
3. Indivisibility – Payment must not be partial.
Payment or performance must be indivisible.
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.
XPTs: (1) 1248 (P2): 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.
(2) 1290: Compensation of offsetting of
debts: “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…”
SPECIAL FORMS OF PAYMENT
(1) Application of Payment
 (2) Payment by Cession 1. 500
(3) Dation in Payment 2. 1000
(4) Tender of Payment 3. 1500
(5) Consignation
However, D only has P1500. To which debts
APPLICATION OF PAYMENT shall the 1,500php be applied?

Application of Payment – Designation of the debt to GR: To debts 1 and 2 since no partial payment is
which the payment must be applied when the debtor allowed.
has several obligations of the same kind in favor of the
same creditor.
- Happens when there are several debts PAYMENT BY CESSION
- There is payment, but incomplete.
- Debts must be of the same kind 1255: The debtor may cede or assign his
- Debts must be ALL due. property to his creditors in payment of his debts.
This cession, unless there is stipulation to the
Requisites: contrary, shall only release the debtor from
(1) There must be one debtor and one creditor responsibility for the net proceeds of the thing
(2) There must be two or more debts assigned. The agreements which, on the effect
(3) The debtor must be of the same kind of the cession, are made between the debtor and
(4) The debtor to which payment made by the his creditors shall be governed by special laws.
debtor has been applied is already due
(5) The payment made must not be sufficient Definition: Payment by cession is a special form of
to cover all the debts. payment. It is the assignment/ abandonment /
possession of all the property of the debtor for the
RULES: benefit of the creditor in order that the latter may sell
the same and apply the proceeds thereof to the
1. 1252 P(1): He who has various debts of the satisfactions of their credits.
same kind in favor of one and the same creditor,
may declare at the time of making the payment, REQUSITES:
to which of them the same must be applied. 1. Plurality of debts
2. Partial or relative insolvency of the debtor
The debtor shall choose which debt shall be 3. Acceptance of the payment by cession of
paid to which debt shall payment shall be the creditor
applied.
Payment by Cession Dation in Payment
2. MOST ONEROUS (Secured debt, Debt with (Abandonment) (Alienation)
interest or debt with guarantor) debt shall be Creditors are authorized to Debtor transfers
satisfied first. (1254). Payment of principal sell the property ownership of the property
cannot be made unless the interest has been as payment of debt
paid (1253) Governed by the rules of Governed by the rules of
Obligations and Contracts sales
ART 1253: If the debt produces interest, Only extinguishes the Totally extinguishes the
payment of the principal shall not be deemed to credits to the extent of the obligation and releases the
have been made until the interests have been amount realized from the debtor
covered. properties assigned,
unless otherwise agreed
ART 1254: When the payment cannot be upon
applied in accordance with the preceding rules, Assignment involves all Cession of only some
or if application can not be inferred from other the property of the debtor. specific thing
circumstances, the debt which is most onerous
to the debtor, among those due, shall be deemed What if in Cession:
to have been satisfied.
1.5 Million Php 3 Million Php
3. 1254 (P2) If debts are of the same nature and NET PROCEEDS less than LOAN
burden, the payment shall be applied to all
proportionately. There is a balance of 1.5 million Php. Debtor shall pay
the balance.
Illustration:
XPT: Stipulation to the contrary.
D has several debts, described as follows:
DATION IN PAYMENT

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Dation in Payment – Transmission of the ownership
of a thing by the debtor to the creditor as an accepted
equivalent of the performance of the obligation.
Art. 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
Indeed, pursuant to Article 1232, an obligation
is extinguished by payment or performance. There is
payment when there is delivery of money or
performance of an obligation. Article 1245 of the Civil
Code provides for a special mode of payment called
dation in payment (dación en pago). There is dation in
payment when property is alienated to the creditor in
satisfaction of a debt in money. Here, the debtor
delivers and transmits to the creditor the former’s
ownership over a thing as an accepted equivalent of
the payment or performance of an outstanding debt. In
such cases, Article 1245 provides that the law on
sales shall apply, since the undertaking really
partakes – in one sense – of the nature of sale; that is,
the creditor is really buying the thing or property of
the debtor, the payment for which is to be charged
against the debtor’s obligation.
Dation in payment extinguishes the obligation
to the extent of the value of the thing delivered, either
as agreed upon by the parties or as may be proved,
unless the parties by agreement – express or implied,
or by their silence – consider the thing as equivalent to
the obligation, in which case the obligation is totally
extinguished.
Illustration: Suppose the debt is worth P1M and the
land value is P900K. If through novation, the creditor
agreed to receive the land as payment of debt, the
balance of P100K will no longer be paid.
If a debtor offered his property in payment of the debt,
however, it turned out that the property is already
owned by another. In this case, the creditor is evicted.
1548: Eviction shall take place whenever by a
final judgment based on a right prior to the sale
or an act imputable to the vendor, the vendee is
deprived of the whole or of a part of the thing
purchased.
TENDER OF PAYMENT & CONSIGNATION
Remedy of the debtor in case of breach on the part of
the creditor.
Tender of Payment: Manifestation made by the
debtor to the creditor of his desire to comply with his
obligation with the offer of immediate performance.
Consignation: Deposit of the object of the obligation
in a competent court in accordance with the rule
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prescribed by law after refusal or inability of the
creditor to accept the tender of payment.
Tender of Payment Consignation
Preparatory Act Principal Act
Extrajudicial in character Judicial in character
ART 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) When the creditor is absent or unknown, or
does not appear at the place of payment;
(2) When he is incapacitated to receive the
payment at the time it is due;
(3) When, without just cause, he refuses to give
a receipt;
(4) When two or more persons claim the same
right to collect;
(5) When the title of the obligation has been lost.
Requisites for Consignation:
The debtor must show:
1. There was a debt due
2. The consignation of the obligation was made
because of some legal cause provided in the
present article;
3. That previous notice of the consignation has
been given to the persons interested in the
performance of the obligation;
4. The amount or thing due was placed at the
disposal of the court; and
5. After the consignation had been made the
persons interested were notified thereof.
Requisites for the procedure for Consignation:
1258 (P1). 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.
In summary:
1. Valid tender of payment
2. Unjust refusal of the Creditor
3. Notice has been given to the persons interested
4. Debtor filed a lawsuit against the creditor / A
complaint filed by the debtor
5. Actual deposit or delivery of the thing due to
the competent court
 6. Second notification: After the consignation has
been made, the persons interested in the
fulfillment of the obligation had been notified
thereof.
1258 (P2). The consignation having been
made, the interested parties shall also be
notified thereof.
Can consignation be disapproved by the court?
YES. The reasons could be (1) problem on the
part of the debtor (eg: invalid payment) or (2) no valid
tender of payment.
Instance where debtor withdrew the thing deposited in
the proper court that will interrupt the procedure in
Consignation:
1260 (P2): 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.
If this happens, the process is interrupted and the
obligation will remain in force.
UNLESS: 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.
LOSS OF THE THING DUE:
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.
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.
Concept of Loss of the thing due: Is not limited to
obligations “to give” but extends to those which are
personal, embracing therefore all causes which may
render impossible the performance of the prestation.
Impossibility of compliance with the obligation
through any cause – impossibility of performance
• Perishes
• Goes out of commerce
• Disappears
The impossibility of performance must be subsequent
to the execution of the contract in order to extinguish
the obligation, if the impossibility already existed
when the contract was made, the result is not
extinguishment, but inefficacy of the obligation.
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1262: Effect of loss in obligation to give a
determinate thing: extinguishment of the obligation
Requisites:
1. Thing lost must be determinate
2. The thing was lost without the fault of the debtor
(if it is lost through the fault of the debtor, the
obligation is converted into an obligation to indemnify
the creditor for damages.)
3. The thing lost before the debtor has incurred in
delay (if it is lost after the debtor has incurred in
delay, the debtor will be held liable for indemnity for
damages)
Effect of fortuitous event:
GR: Extinguish the obligation:
XPTs: (1189, 1265, 1263)
1. When by law, the debtor is still liable even for
fortuitous events
2. When stipulated by the parties
3. When the nature of the obligation requires the
assumption of risk
4. When the loss of the 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 (2) or more persons who do not have the
same interest
7. When the obligation arises from a criminal offense
8. When the obligation is generic (1263: Loss of a
generic thing does not extinguish the obligation
because generic things do not perish. (genus
nunquam peruit)
Effect of loss in reciprocal obligation:
If one of the reciprocal obligation is extinguished the
other must also be extinguished.
(Art. 1264)
Court granted discretion to determine whether a
partial loss or destruction of the thing is important
as to extinguish the obligation
1265
Presumption of fault on the part of the debtor if the
thing is lost while in his possession. In such case,
the obligation is NOT extinguished. Such
presumption does not apply in case of earthquake,
flood, storm, or other calamity.
(Art. 1266) Impossibility of performance in
obligations to do extinguishes the obligation.
***Same requisites provided in Art. 1262
***Legal and physical impossibility must have
Two (2) causes of impossibility
(1) Legal impossibility- (direct) when the law
prohibits the performance or execution of the
work agreed upon (immoral or dangerous)
 - (indirect) the law imposes duties of a
superior character upon the obligor which are
incompatible with the work agreed upon.
(2) Physical impossibility – arises principally
from the death of the obligor, when the act
to be performed requires his personal
qualifications, or from the death of the
obligee, when the act can be of possible
benefit only to him.
- it can also arise from mere accident, or from
the acts of the debtor himself in which there
is no fault, or from the acts of third (3rd)
person affecting the debtor's capacity.
Difficulty in the Prestation:
Art. 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.
Requisites:
1. The event or change in circumstance could
not have been foreseen at the time of the
execution of the contract;
2. It makes the performance of the contract
extremely difficult but not impossible;
3. The event must not be due to the act of any of
the parties; and
4. The contract is for a future prestation.
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.
***All the rights of action which the debtor may have
against 3rd persons by reason of the loss of the thing
are transmitted by operation of law to the creditor.
Transmission made from the moment the obligation
is extinguished.
Illustration:
A bought a car from B. On the day of the
delivery, A parked the recently bought car of B in
front of the latter’s house. Consequently and most
unfortunately, the car was robbed. In this case, the
delivery was complete and the loss of the thing and
the rights of action against the 3rd person (the thief)
was transmitted to the creditor.
CONDONATION OR REMISSION OF THE DEBT
Condonation/ Remission- 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, the obligation is extinguished totally or
partially
– Gratuitous abandonment by the creditor of his
rights.
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Requisites:
1. It must be gratuitous
2. Must be accepted by the obligor
3. The obligation must be demandable
***See discussion on condonation or remission of
debt (pp 18-21)***
CONFUSION OR MERGER OF RIGHTS
1275. The obligation is extinguished from the time
the characters of creditor and debtor are merged in
the same person.
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.
***See Illustration and discussion at page 20***
COMPENSATION
Requisites of Compensation:
Art. 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.
***See Illustration and discussion at page 20***
Compensation cannot be refused because this mode
of extinguishment of obligation is actually an
operation of law.
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.
 NOVATION
Concept of Novation: Novation is the
extinguishment of an obligation by substitution or
change of the obligation by a subsequent one which
extinguishes or modifies the first, either by:
(1) Changing their object or principal
conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of
the creditor. (1291)
Art. 1291. Obligations may be modified by:
(1) Changing their object or principal
conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of
the creditor.
Classification of Novation
As to essence 1. Objective/Real – change
either in the cause, object,
or principal conditions or
objects of the obligation.
2. Subjective/Personal –
substitution of the person of
the debtor (passive) or to the
subrogation of a 3rd person
in the rights of the creditor
(active).
3. Mixed – combination of
objective and subjective
novation.
As to form or 1. Express – declared in
constitution unequivocal terms that the
old obligation is
extinguished by a new one
which substitutes the same.
2. Tacit- old and new
obligations are
incompatible with each
other on every point
As to extent or effect 1. Total – absolute
extinguishment
2. Partial – mere
modification
Requisites of Novation (Applied to all kinds of
Novation):
(1) A previous valid obligation
(2) The agreement of the parties to a new
contract.
(3) The extinguishment of the old contract;
(4) The validity of the new one
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
31
old and the new obligations be on every point
incompatible with each other.
NOVATION NOT PRESUMED.
Art. 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.
Two (2) forms of substitution of debtor:
1. Expromision
2. Delegacion
Expromision:
Art. 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.
Expromision – effected with the consent of the
creditor at the instance of the new debtor even
without the knowledge or against the will of the old
debtor.
Requisites:
(1) The initiative for the substitution
must emanate from the new debtor.
(2) Consent of the creditor to the
substitution
Delegacion:
Art. 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.
Delegacion – Effected with the consent of the creditor
at the instance of the old debtor with the concurrence
of the new debtor, refers to the substitution of
debtors affected when the original debtor offers and
the creditor accepts a third (3rd) person who consents
to the substitution.
Requisities:
(1) Initiative for the substitution must
emanate from the old debtor
(2) Consent of the new debtor
(3) Acceptance by the creditor
Expromision Delegacion
Initiative for the change Initiative for the change
does not emanate from emanates from the debtor
the debtor
May be made without the Must be made with the
 consent of the debtor concurrence of the
since it consists in a original debtor since it is
third (3rd) person he who offers the
assuming his obligation substitution
Substitution may be Consent of the debtor,
effected even without the creditor and third (3rd)
consent of the original person to be substituted
debtor is necessary.

Payment by the new debtor gives him the rights

mentioned in Articles 1236 and 1237:

(1) 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.

(2) 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.

Novation by Subrogation:

1. Conventional subrogation – takes place by

agreement of the original creditor, the third (3rd)
person, and the debtor

2. Legal subrogation – takes place by force of

law.

32