OBLIGATIONS

CONTRACTS

Pure and Conditional Obligations Obligations with a Period Alternative Obligations Joint and Solidary Obligations Divisible and Indivisible Obligations Obligations with a Penal Clause

Kinds of Obligations

Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once.

Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. 

Pure & Conditional

PURE OBLIGATION: one without a condition or a term.

CONDITIONAL OBLIGATION: when there is a condition

Condition: an uncertain event which wields an influence on a legal relationship. (Manresa)

Term or a Period: that which necessarily must come whether the parties know when it will happen or not.

OBLIGATIONS DEMANDABLE AT ONCE:(1)Pure Obligations(2)Obligations with Resolutory Condition

(a) suspensive: the happening of the condition

gives rise to the obligation. (b) resolutory: happening of the condition extinguishes the obligation.

(a) potestative: depends on the will of the debtor. (b) casual: depends on chance or hazard or the will of a third person (c) mixed: depends partly on the will of one of the parties and partly on chance or the will of a 3rd person.

Classification of Conditions

(Book IV, The New Civil Code, E. Paras)

(a) divisible: capable of partial performance (b) indivisible: not capable of partial performance because of the nature of the thing or intent of the parties.

(a) positive: an act is to be performed. (b) negative: something will be omitted.

(a) express: condition is stated. (b) implied: condition is merely inferred.

(Book IV, The New Civil Code, E. Paras)

Classification of Conditions

(a) possible: capable of fulfillment in nature and in

law (b) impossible: not capable of fulfillment due to nature, or operation of law or morals or public policy.

(a) conjunctive: if all conditions must be performed.

(b) alternative: if only a few of the conditions have to be performed.

(Book IV, The New Civil Code, E. Paras)

Classification of Conditions

Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197.

Similar Phrases:“when my means permit to do so”“when I can afford it”“when I am able to”“when I have money”

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

Suspensive & Resolutory

(a) suspensive: the happening of the condition gives rise to the obligation.

(b) resolutory: happening of the condition extinguishes the obligation.

Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code.  (a)potestative: depends on the will of one of the parties.(b) casual: depends on chance or hazard or the will of a third person(c) mixed: depends partly on the will of one of the parties and partly on chance or the will of a 3rd person.

Potestative & Casual

Potestative on the part of the DEBTOR:

1. Suspensive => both condition and obligation are VOID, for being sham

Ex. I will give you my car next year if I don’t want it anymore.

2. Resolutory => VALIDEx. I am hiring you now as the manager of the restaurant I am establishing, but if all the furniture I ordered from abroad do not arrive by next month, your employment is terminated.

A condition both potestative and resolutory may be valid even if the condition is made to depend upon the will of the obligor. (Taylor vs Tieng 43 Phil 873)

Potestative

Potestative on the part of the CREDITOR: =>

VALIDEx. I will give you my notes, if you want them.

“I will give you my P500 if I can sell my iPhone.” Is it valid?

Potestative

Article 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid.

The condition not to do an impossible thing shall be considered as not having been agreed upon.

Impossible: can either be physical or logicalIllegal: prohibited by good customs, public policy and law

Impossible & Illegal

Effects:If the condition is to do an impossible or illegal thing, both condition and obligation are void.

Ex. I will give you P300 if you kill X. Both condition (kill X) and obligation (give P300) are void.

If the condition is negative, or NOT TO DO the IMPOSSIBLE, the condition is disregarded but the obligation is valid.

Ex. I will give you P300 if you jump over the moon. Disregard the condition (jump over the moon), but the obligation (give P300 ) is still valid.

Impossible & Illegal

If the condition is negative, or NOT TO DO an ILLEGAL act, both condition and obligation are valid.

Ex. I will give you P300 if you neither do nor sell drugs. The condition (neither do nor sell drugs) and the obligation (give P300 ) are valid. If you sell or do drugs, you would not be entitled to P300.

Impossible & Illegal

Article 1184. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place.

Note: Time or term must be indicated. Otherwise, the courts will fix the time.

Ex. I will give you a ring if you join a marathon by the end of the year.

Positive Condition

Article 1185. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur. If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated, bearing in mind the nature of the obligation.

Ex. I will give you a ring if by the end of the year, you have not smoked a cigarette. The obligation (to give the ring) shall take effect at the end of the year if you have not smoked. What if the law prohibited cigarettes effective today. When shall the obligation take effect?

Negative Condition

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Elements:

1. Intent – debtor wants to prevent fulfillment.2. Action – debtor caused the actual prevention

Note: If there is a lawful cause to prevent the fulfillment, this provision does not apply.

Constructive Fulfillment

Example:

Paula promised Nicole that she will give her an iPad if Pauline sings inside the classroom on Wednesday. On Tuesday night, Paula gave Pauline a bucket of peanuts, knowing that the latter is allergic to it. What happens if Pauline was not able to perform in class because of her allergies?

Constructive Fulfillment

Article 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different.

In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with.

Fulfillment of Suspensive Condition

On the OBLIGATION, it becomes effective from the day it was instituted.

Ex. In 2010, Joshua promised Alvin that he will sell his car for P100 if Chris becomes the Student Council President on School Year 2012-2013. In July 2012, Chris became the SC President. Therefore, Alvin’s right to compel Joshua to sell the car began in 2010.

Effects of Fulfillment of Suspensive Condition

On the FRUITS AND INTERESTS:

(a) RECIPROCAL: those acquired or earned pending the condition shall be deemed to compensate each other even though it might be unequal in reality.

(b) UNILATERAL: debtor shall retain the fruits and interests unless otherwise stated.

Effects of Fulfillment of Suspensive Condition

Art. 1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right.

“Appropriate actions” refer to judicial and extra-judicial actions available to the creditor to preserve his right.

PRESERVATION OF CREDITOR’S RIGHT

The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition.

The debtor is also entitled to the fruits or legal interest if the creditor was in BAD FAITH, or he knew that the debtor was paying prior to the fulfillment of the condition.

Right to Recovery of Debtor

Art. 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition:(1) If the thing is lost without the fault of the debtor, the obligation shall be

extinguished;(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay

damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered;

(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;

(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;

(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. 

Loss, Deterioration, and Improvement during Pendency of Conditions

Elements:(1)It is a real obligation;(2)With a suspensive condition;(3)The object is specific;(4)Loss, deterioration or improvement happened

to the object pending fulfillment of the condition; and

(5)The suspensive condition has been fulfilled.

Loss, Deterioration, and Improvement during Pendency of Conditions

When it perishes

When it goes out of commerce

When it disappears in such a way that its existence is unknown

When it disappears in usch a way that it cannot be recovered

Loss

Effects:

Without the fault of the debtor, the obligation is EXTINGUISHED.

With fault of the debtor, he will pay DAMAGES.

Loss

Effects:

Without fault of the debtor, the impairment is to be borne by the creditor

With fault of the debtor, the creditor may choose either of the following, and indemnity for damages:1. Rescission, or2. Specific Performance (Fulfillment of obligation)

Deterioration

Effects:

By nature or time, the creditor shall benefit.

Through the expense of the debtor, the debtor gets usufructuary rights.

Usufruct: the right to the enjoyment of use and fruits.

Improvement

Art. 1190. When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received.

In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return.

As for the obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the extinguishment of the obligation. 

Resolutory Condition

Effects when fulfilled: The obligation is extinguished. Parties should restore to each other what they

have received. Fruits and interests thereon should be

returned after deducting the necessary expenses

Resolutory Condition

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. 

Rescission

It is the cancellation (or resolution) of the contract or reciprocal obligations in case of non-fulfillment on the part of one.

Remedy of Rescission/Resolution:(1)To reciprocal obligations; and(2)The injured party is ready, willing and able to

comply his own obligation.(3)The breach is substantial, not slight.

Rescission

The right to rescind:

Needs court intervention when the object has been delivered;

Does not need court intervention when the object has not been delivered yet.

Rescission

1. Rescission, or2. Fulfillment of the Obligation

The choices are alternative. The injured party can ask either, but not both. However, if he chooses fulfillment, but it became impossible, he may resort to rescission.

Choice of Injured Party

Art. 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. 

Breach by Both Parties