OBLIGATIONS AND CONTRACTS - PRELIM REVIEWER Tuesday, December 07, 2010 2:56 PM Art. 1156.

OBLIGATION DEFINITION - An obligation is a juridical necessity to giv e, to do, or not to do. Elements of an Obligation: Active subject Obligee or Creditor Possessor of a right. Passive subject Cause Obligor or Debtor Vinculum or Juridical Tie Has the duty of gicing, doing or not doing. The reason why the obligation exist. Object or Prestatation Object to give, act to do or not to do Subject matter of the prestation Form Manner in the obligation. Art. 1157. SOURCES OF OBLIGATION - The following are the different sources of ob ligation: 1. 2. 3. 4. 5. Law Contracts Quasi-Contracts Acts or Ommissions Punish able by Law Quasi-delicts Law Contracts Quasi-contracts Ex Lege Ex contractu Ex quasi contractu Duty to pay the taxes or to support one's family. Duty to repay a loan. Duty to refund an "over change" of money. Crimes or Acts or Omissions punished by Law Ex malefici or ex delicto Quasi-deli cts or Torts Return a stolen carabao. Ex quasi-delicto or ex-quasi malefacio Repair a damage due to negligence. Art. 1158. LAW - Obligations derived from law are not presumed. Only those expre ssly determined in this Code or in special laws are demandable , and shall be re gulated by the precepts of the law which establishes them; and as to what has no t been foreseen, by the provisions of this Book. **Governed by the Law itself. **Agrements of the parties not necessary. **Only t hose expressly provided are enforceable. Art. 1159. CONTRACTS, EX-CONTRACTU, CUL PA-CONTACTUAL - Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. So-called In nominate Contracts ("contratos innominados") 1. Do ut des - I give that you may give. 2. Do ut facias - I give that you may do. 3. Facio ut des - i do that you may give. 4. Facio ut facias - I do that you may do. Art. 1160. QUASI-CONTRACTS, DELICTS, QUASI EX-DELICTO - Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of this Book. QUASI-CONTRACTS - Juridical relation resulting from a lawful, volunta ry, and unilateral act, and which has for its purpose the payment of indemnity t o the end that no one shall be unjustly enriched orr benefited at the expense of another. Kinds of Quasi-Contracts: 1. Negotiorun gestio (Officious Management) - A person voluntarily takes charge of another's abandoned business or property without the owner's authority. 2. Solutio Indebiti (Undue payment) - Something i s received when there is no right to demand it and it was unduly delivered thry mistake.

Art. 1161. CRIMES, ACTS OR OMISSIONS PUNISHABLE BY LAW, EX-DELICTU, EX, MALEFACI O, CULPA CRIMINAL - Civil onligations arising from the criminal offenses shall b e governed by the penal laws, subject to the provision of Article 2177, and of t he pertinent provisi ons of Chapter 2, Preliminary Title, on Human Relations, an d of the title XVIII of this book, regulating damages. Gen. Rule - Civil liabili ty is a necessary consequence of criminal liability (Art. 100, RPC) Exceptions: - Crimes without criminal liability: 1. Criminal Contempt 2. Gambling 3. Traffic violations - Offended party reserves the right to institute it separately. - Th e law so provides independent civil action: 1. Obligations arising acts or omiss ions claimed to be criminal; notes Page 1

1. 2. 3. 4. Obligations arising acts or omissions claimed to be criminal; Violation of const itutional rights and liberties of individuals; Defamation, fraud or physical inj uries; Refusal or failure of members of police force to render protection to lif e or property. RCP, Rule 111 - When a cirminal action is instituted, the civil action for the r ecovery of civil liability arising from the offense charged shall be deemed inst ituted with the criminal action UNLESS the offended party waives the civil actio n, reserves the right to institute it separately or institutes civil action prio r to criminal action. Extent of Civil liability (Art 104, RPC) 1. Restitution 2. Reparation of the damage caused 3. Indemnification for consequential damages. Art. 1162. QUASI-DELICTS, EX QUASI-MALEFACIO, CULPA AQUILIANA, TORTS - Obligatio ns derived from quasi-delicts shall be governed by the probisions of Chapter 2, Title XVII of this Book, and by special laws. New Sources of Obligation: 1. Unju st Enrichment (Quasi- contract) 2. Unilateral declaration of will 3. Abuse of ri ghts (Quasi-delict) Elements of Negligence 1. Duty on the part of the defendant to protect the plaintiff from injury of which the latter complains 2. Failure to perform such duty 3. An injury to the plaintiff through such failure. Kinds of Negligence 1. Culpa Aquiliana (a quasi-delict) - Negligence as a source of obligation 2. Culpa Contractual - Negligence in the performance of a contrac t 3. Culpa Criminal - Criminal negligence Distinctions between Culpa Aquiliana a nd Culpa Contractual CULPA AQUILIANA Negligence as a source of Obligation CULPA CONTRACTUAL Negligence in the performance of a contract Fault or negligence which constitute an indipendent source of obligation between the Fault or negligence of a debtor as an incident in the parties not previousl y bound fulfillment of a contract. Negligence should be the approximate cause of damage. Distinctions between Quasi -delicts and Crimes AS TO QUASI DELICT CRIMES Nature of the right violated Private rights; wrong against the individual Public rights, wrong against the state Criminal intent is necessary. Condition of the mind Criminal intent is not necessary. Possible that there will be no criminal charge but only civil liability. Legal basis of liability Actionable in any act or omissions wherein fault or neg ligence intervenes Not as broad as quasi-delict, there must be a law punishing i t. Liability for damages To the injured party Some do not have civil liability (whe n nobody is injured) Forms of redress Amount of evidence Compromise Reparation of the injury suffered by the injured party Preponderance of evidence Can be compromised as any other civil liability Fine and punishment Beyond reasonable doubt Can never be compromised. Requisites of Liability under Quasi-Delicts 1. Wrongful act 2. Damage or injury 3. Direct causal connection. Art. 1163. OBLIGATION TO GIVE - Every person oblige

d to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. Gen. Rule: Pending delivery, the debtor /pass ive subject has the obligation to take care of the object with the proper dilige nce of a good father of a family. Exception: a. Required by Law b. Stipulation o f the parties requiring another standard of care. notes Page 2

b. Stipulation of the parties requiring another standard of care. Art . 1164. RI GHT TO FRUITS - The creditor has a right to the fruits of the thing from the tim e the obligation to deliver it arises. However, he shall acqu ire no real right over it until the same has been delivered to him. ** Non nudis pactis , sed trad itione domina rerum trasferentum - Ownership of things is transferred not only b y mere agreements but ny delivery. REAL RIGHTS - to give - Power belonging to a person over a specific thing , with out a passive subject individually determined , against whom such right may be p ersonally exercised. - Gives a person a direct and immediate power over a thing, which is susceptible of being exercised not only against a determinate person b ut against the whole world. Examples Rights of Ownership Rights of Possession PE RSONAL RIGHTS - to do or not to do - Power belonging to one person to demand of another , as a definite passive subject, the fulfillment of a prestation. Art. 1165. DETERMINATE VS INDETERMINATE OBJECT - When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Arti cle 1170, may compel the debtor to make the delivery. If the thing is indetermin ate or generic, he may ask that the obligation be complied with at the expense o f the debtor. If the obligor delays, or has promised to deliver the same thing t o two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. DETERMINATE OBJECT - To compel specific performance - To recover damages , in case of breach of ob ligation, exclusive or in addition to specific performance . - Entitlement of fr uits, interests from the time obligation to deliver arises. GENERIC OBJECT/PREST ATION - To ask for performance of obligation - To ask that the obligation be omp lied with at the expense of the debtor. - To recover damages in case of breach o f contract. 1st Par: 2nd par: 3rd Par: Right to compel delivery (determinate/specific prestation) Action for substituted performance (creditor may ask compliance by 3rd person at debtor's expense ) Right to damages Art. 1166. RIGHT TO ACCESSORIES AND ACCESSIONS - The obligation to give a determ inate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. Gen. Rule - (DETERMINATE PRESTATION) - Obligation to deliver the object includes with it the accessories and accessions. Exception to the Rule: a. Required by l aw b. Exclusion is expressly stipulated by the parties ACCESSORIES - Those things which are used for the preservation of another thing or more important, have for their object the completion of the latter for which they are indispensable or convenient. ACCESSIONS - Includes everything which is produced by a thing, or which is incorporated or attached thereto, either natura lly or artificially . NOTE: Provide examples. Art. 1167. OBLIGATION TO DO - If a person obliged to do something fails to do it, the same shall be executed at hi s cost. This same rule shall be observed if he does it in contravention of the t enor of the obligation. Furthermore, it may be decree d that what has been poorl y done be undone. 1st Par Failure to do: May be executed by a 3rd person subject for reimbursement by the debtor. 2nd Par Contravention of the tenor of the obligation: action for damages 3rd Par Poorly Done: To undo what has been undone, action for damages??? ** No a ction for compliance because that would be involuntary servitude (unconstitution al) Art. 1168. OBLIGATION NOT TO DO - When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his ex pense. Duties of Obligor: 1. Not to do what should be done. 2. To shoulder the c ost to undo what should not have been undone. 3. To pay damages.

Art. 1169. CONCEPT OF DELAY/DEFAULT - Those obliged to deliver or to do somethin g incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the credi tor shall not be necessary in order that delay may exist: notes Page 3

However, the demand by the creditor shall not be necessary in order that delay m ay exist: (1) When the obligation or the law expressly so declare; or (2) When f rom the nature and the circumstances of the obligation it appears that the desig nation of the time when the thing i s to be delivered or the service is to be re ndered was a controlling motive for the establishment of the contract; or (3) Wh en 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 oth er does not comply or is not ready to comply in a proper m anner with what is in cumbent upon him. From the moment one of the parties fulfills his obligation, de lay by the other begins. DELAY (MORA) - Nonperformance of obligation as agreed t o time. Gen. Rule: Creditor should make demand before debtor incurs delay. UNILA TERAL OBLIGATION - there is no delay when there is no demand. RECIPROCAL OBLIGAT ION -The performance of one demands/____ the performance of the other. - When to determine the demand period for purposes of computing of payment of interests o f charges): a. If extrajudicial - date of demand b. If uncertain - date of filin g of complaint - Demand may ba in any form provided it can be proved. - Demand m ust refer to the prestation that is due and not another. - Even if without deman d, debtor incurs delay if he expressly acknowledges his delay. Exceptions to the Rule: 1. Law expressly so declares: a. Obligation itself indicates that there i s a period b. Law has a specific period for the performance 2. Express stipulati on by the parties - Insertion of the clause "without further notice" 3. Designat ion of time is the controlling motive. 4. Demand would be useless. a. Caused by some act or fault of the debtor b. Impossibility caused by some fortuitous event ** There can only be delay in POSITIVE Obligations and no delay in NEGATIVE and NATURAL OBLIGATIONS. KINDS OF MORA 1. MORA SOLVENDI - Delay on the part of the DEBTOR. Requisites of MORA SOLVENDI a) Prestation is demandable and already liquidated. b) The debtor delays perform ance (fault is on the debtor) c) That the creditor demands judicially or extraju dicially. - Mere reminder is not a demand because benevelonce and tolerance of t he creditor has ended. Effects of MORA SOLVENDI a) Determinate prestation - delay places the risk of the thing on the debtor b) Damages 2. MORA ACCIPIENDE - Delay on the part of the CREDITOR. Requisites of MORA ACCIPIENDE a) Offer of performance by the debtor who has the required capacity b) Offer must be to comply with the prestation as it should be performed c) Creditor refuses the performance without just cause Effects of MORA ACCIPIENDE a) Responsibility of the debtor of the thing is reduc ed or limited to fraud and gross negligence. b) Debtor is exempted from the risk of the loss of the thing, which automaticall pass to the creditor. c) All expen ses incurred by the debtor for the preservation of the thing after the delay wil l be chargeable to the creditor. d) The creditor becomes liable for the damages. e) The debtor may relieve himself of the obligation by the consignation of the thing. 3. COMPENSATIO MORAE - Parties to a bilateral contract can regulate the o rder in whch they shall comply with their reciprocal prestation. Effect of COMPENSATIO MORAE - One is not compelled to perform his prestation whe n the other contracting party is not yet prepared to perform his prestation . CESSATION OF EFFECTS OF MOR Default of one COMPENSATES the default of the other. A/INSTANCES WHERE THERE IS NO DELAY notes Page 4

1. Renunciation by the creditor a. Express renunciation b. Implied renunciation a) Creditor grants the extension of the time b) Creditor agrees to a NOVATION of the obligation (replacement) 2. Prescription of action ** Natural delay - Equit y ** Legal delay - Agreement Art. 1170. - INSTANCES IN LIABILITY FOR DAMAGES - Those who in the performance o f their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. A. FRAUD (DOLO) - Voluntary execution of the wrongful act, or a willfull ommission, knowing and intending the effects which naturally and necessarily arise from such acts. - D eliberate and intentional evasion of the normal fulfillment of obligations. - Fr aud in the performance of pre-existing obligation - Cannot cover mistake and err ors of judgement made in good faith, ergo synonymous to bad faith (dishonest pur pose or some obliquity and conscious doing of wrong) Kinds of Fraud: 1. Fraud in the performance 2. Fraud in the execution/birth of the contract a. Dolo causant e b. Dolo incidente FRAUD WHEN PRESENT During the performance of a preexisting obligation DOLO CAUSANTE During the perfection of a contract DOLO INCIDENTE During the perfection of a contract PURPOSE RESULTS IN Evade the normal fulfillment of obligation Breach of the obligation Secure the consent of another to enter into a contract Vitiation of consent: voidable contract Secure the consent of another to enter into contract BUT fraud was not the princ ipal inducement in making the contract Does not result to vitiation of consent GIVES RISE TO Right in favor of creditor to recover damages Right of the innocent party to annul the contract Gives rise to to a right of the innocent party to claim for damages Art. 1171. DAMAGES ARISING FROM FRAUD - Responsibility arising from fraud is dem andable in all obligations. Any waiver of an action for future fraud is void. No te: Renunciation of future fraud is against public policy. Liability for fraud A . Time of Comission Fraud may be past or future. B. Meaning 1. Fraud in obtainin g consent 2. Fraud in performing a contract a) Dolo causante (causal fraud) b) D olo incidente (incidental fraud) Art. 1172. NEGLIGENCE - Responsibility arising from negligence in the performanc e of every kind of obligation is also demandable, but such liability may be regu lated by the courts, according to the circumstances. Distinction between Fraud and Negligence DOLO CULPA There is deliberate intention to cause damage or prejudice Liability arising can not be mitigated

Although voluntary, no deliberate intention Can be reduced Waiver of action to enforce liability due to future fraud is void. Waiver of act ion to enforce civil liability due to future culpa may be allowed. Art. 1173. DEGREES OF CULPA - The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligatio n and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad fai th, the provisions of Articles 1171 and 220 1, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a g ood f ather of a family shall be required. notes Page 5

**When negligence in bad faith, fault will apply. Gen. Rule: 1. Stipulated by th e parties, 2. If without 1, that required by law. 3. If without 2, deligence of a good father of a family. Art. 1174. FORTUITOUS EVENTS - Except in cases expres sly specified by the law, or when it is otherwise declared by stipulation, or wh en the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though f oreseen, were inevitable. Gen. Rule - No liability on the part of the debtor Exceptions: 1. Specified by law 2. Declaration/stipulation by the parties 3. Ass umption of risk Requisites of Fortuitous Events: 1. Cause of the unforeseen events and unexpecte d occurrence or the failure of the debtor to comply with his obligation must be independent of the human free will. 2. Impossible to foresee or impossible to av oid. 3. Occurrence must be such as to render it impossible for the debtor to ful fill his obligation in a normal manner. 4. Obligor must be free from any partici pation in the aggravation of the injury resulting to the creditor (no concurrent negligence). Effect of concurrent negligence: - When the effect is found to be partly resulti ng from the participation of man, whether due to his active intervention or negl ect or failure to act, the whole occurrence is then humanized and removed from t he rules applicable to the acts of God (NPC v CA) Art. 1175. USURIOUS TRANSACTIO NS - Usurious transactions shall be governed by special laws. Rate of interest Art. 1176. RESERVATION - The receipt of the principal by the creditor without re servation with respect to the interest, shall give rise to the presump tion that said interest has been paid. The receipt of a later installment of a debt witho ut reservation as to prior installments, shall likewise raise the presumpti on t hat such installments have been paid. Gen Rule - If the debt produces interests, payment of the principal shall not be deemed to have been made unless the interests have been covered. - Presumptions are rebuttable. Examples: Principal: P5,000.00 Interest: P50/month 1st Par C pa id P5,000 (Principal) in the month of January. Assumption is that INTEREST (P50. 00) is said to have been paid also 2nd Par C paid for P5,050 in the months Jan, Feb and April. Assumption is that March has also been paid. ** Reservation should be made: 1st Par Receipt should reveal that such payment d oes not include the interest. 2nd Par Receipt should reveal that payment made on April is for March parment. Art. 1177. SUCCESSIVE RIGHTS OF THE CREDITOR - The creditors, after having pursu ed the property in possession of the debtor to satisfy their claims, may exercis e all the rights and bring all the actions of the latter for the same purpose, s ave those which are inherent in hi s person; they may also impugn the acts which the debtor may have done to defraud them. SUCCESSIVE RIGHTS OF THE CREDITOR: 1. Demand for the fulfillment of the specific performance. 2. Right to attahment o f the properties which the debtor may own (writ of attachment) 3. Accion subroga toria 4. Accion pauliana ACCION SUBROGATORIA - Action the creditor may exercise in place of the negligent debtor in order to preserve or recover for the patrimony of the debtor the prod uct of such action, and then obtain therefrom the satisfaction of his own credit . Requisites of Accion Subrogatoria a. Insolvency of the debtor b. Malicious or ne gligent inaction of the debtor c. The credit of a person against the third perso n is certain, demandable and liquidated d. Debtor's right against the 3rd person must be patrimonial. (inheritable) ACCION PAULIANA - Creditors have the rights to revoke acts which the debtor may have done to defraud them.

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Requisites of Accion Pauliana 1. Credit should be prior to the alienation 2. Deb tor has a subsequent contract giving advantage to a third person 3. Fraudelent a ct 4. 3rd person who received is an accomplice Distinction of Accion subrogatori a versus Pauliana ACCION SUBROGATORIA Intent to defraud creditors is required No period of prescription ACCION PAULIANA If contract rescinded is onerous, there must be fraudelent intent Period of pres cription is 4 years. Not essential that credit is prior to the alienation Credit should be prior to t he alienation Art. 1178. TRANSMISSIBILITY OF RIGHTS - Subject to the laws, all in virtue of an obligation are transmissible, if there has been to the contrary. Gen Rule - All rights acquired by virture of an transmissible Exception 1. Express stipulation 2. Nontransmissibility by their ransmissbility by law rights acquired no stipulation obligation are nature 3. Non t I

Example: A- debtor; B-creditor If A dies, B can claim against the estate of A. f B dies, B's right to claim is transmissible to his heirs. CHAPTER III: DIFFERENT KINDS OF CIVIL OBLIGATIONS PRIMARY OBLIGATION SECONDARY OBLIGATION Pure, with a term, alternative and facultative, joint and solidary, divisible an d indisible, with a penal clause. Unilateral and bilateral, real and personal, d eterminate & generic, positive and negative, legal, conventional and penal, indi vidual and collective, accessory and principal, simple or multiple, possible and impossible. Art. 1179. PURE VS CONDITIONAL OBLIGATION - Every obligation whose performance d oes 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 resolutor y condition shall also be demandable, without prejudice to the effects of the ha pp ening of the event. PURE - Performance does not depent on anything. CONDITION AL - Aquisition of rights/extinguishment of right depends on the event which con situtes condition. 2 KINDS OF CONDITION a) Suspensive - Obligation arises by the happening of the event b) Resolutory - Obligation is extinguished by the happen ing of the event Gen. Rule - PURE obligation is DEMANDABLE AT ONCE. - Resolutory is DEMANDABLE AT ONCE. Conditions: 1. Future and Uncertain event 2. Possible 3. Unknown past 4. Term - not certain but must necessarily happen. Art. 1180. OBLIGATION DEPENDENT ON TIME - When the debtor binds himself to pay w hen 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. ** Creditor has to ask the court to fix a period. **Court can not force the debtor to comply. **Both parti es can still agree to change the period fixed by the court. **Correlate with Art . 1197. notes Page 7

Art. 1181. CONDITIONAL OBLIGATION - In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shal l depend upon the happening of the event which constitutes the condition. ** Cor relate with 1179. Art. 1182. KINDS OF CONDITION (cause or origin)- When the fulfillment of the con dition depends upon the sole will of the debtor, the conditional obligation shal l be void. If it depends upon chance or upon the will of a third person, the obl igation shall take effect in c onformity with the provisions of this Code. Kinds of Condition as to cause or origin: 1. POTESTATIVE - Depends upon the will of o ne of the parties. ** If fulfillment depends solely on the will of the DEBTOR VOID ** If fulfillment depends solely on the will of the CREDITOR - VALID **Reso lutory Potestative (Facultative) - VALID 2. CASUAL - Depends exclusively upon ch ance or will of the third person or other factors and not upon the contracting p arties. ** Always valid 3. MIXED - Depends upon the will of the contracting part ies and other circumstance. Art. 1183. IMPOSSIBLE CONDITIONS - 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 whic h is not affected by the impossible or unlawful condition shall be valid. The co ndition not to do an impossible thing shall be considered as not having been agr eed upon. Gen Rule - Obligations are extinguished. Exceptions: 1. Pre-existing obligation 2. Divisible obligation 3. Simple and renumentary obligation 4. Testamentary dis position 5. Negative impossible things Impossibility may either be: 1. Physical 2. Juridical - contrary to law, morals, good customs, and public policy,and thos e which restricts constitutional rights. Art. 1184. POSITIVE OBLIGATIONS - The condition that some event happen at a dete rminate time shall extinguish the obligation as soon as the time expires or if i t has become indubitable that the event will not take place. ** Effective for a determinate time. ** Obligation expires when the time has lap sed or if it has become indubitable that the event will not take place. ** If th ere is no perio, rule on PAR 2 of ART 1185 is controlling. Art. 1185. NEGATIVE C ONDITIONS - The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has ela psed, or if it has become evident that the event cannot occur. If no time has be en fixed, the condition shall be deemed fulfilled at such time as may have proba bly been contemplated, beari ng in mind the nature of the obligation. 2nd Par Ta king into account the nature of the obligation, the time which the parties conte mplated is controlling. Art. 1186. CONSTRUCTIVE OR PRESUMED FULFILLMENT - The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Constructive Fulfillment - With intention of the obligor/creditor to prevent ful fillment of the condition with actual prevention of the compliance. Reason: One must not be made to be excused by his own fault. Art. 1187. RECIPROCAL OBLIGATIONS - The effects of a conditional obligation to g ive, once the condition has been fulfilled, shall retroact to the day of the con stitution of the obligation. Nevertheless, when the obligation imposes reciproca l prestations upon the parties, the fr uits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligat ion is unilateral, the debtor shal l appropriate the fruits and interests receiv ed, unless from the nature and circumstances of the obligation it should be infe rred that the intention o f the person constituting the same was different. In o bligations to do and not to do, the courts shall determine, in each case, the re troactive effect of the condition that ha s been complied with. Gen Rule: Retroa cts to the DAY the OBLIGATION was CONSTITUTED.

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PAR. 1 1. RECIPROCAL Example: A will sell the car to B if A passes the Bar Exam - Fruits and interests shall retain in each possession. (This will be deemed con stituted. 2. UNILATERAL OBLIGATION: Example: A will give B 100K if A passes the Bar Exam Fruits and interests should be with A. Art. 1188. ACTION TO PRESERVE AND RECOVE R - The creditor may, before the fulfillment of the condition, bring the appropr iate actions for the preservation of his right. The debtor may recover what duri ng the same time he has paid by mistake in case of a suspensive condition. 1st Par Action to preserve creditors rights Ex. Ask for security if the debtor is about to be insolvent; ask the court to pr event alienation or concealment pendente conditionae. Note: if payment was not by mistake: 1. If the condition is fulfilled, no recove ry because of retroactivity 2. If the condition is not fulfilled, there should b e a recovery unless a pure donation was intended. 2nd Par Right to debtor to recover what was paid by mistake Art. 1189. EFFECT OF OBLIGATION - When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following ru les shall be observed in case of the improvement, loss or deterioration of the t hing during the pendency of the c ondition: (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 impairmen t is to be borne by the creditor; (4) If it deteriorates through the fault of th e debtor, the creditor may choose between the rescission of the obligation and i ts fulfillment, with indemnity for damages in either case; (5) If the thing is i mproved 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. WITHOUT FAULT LOSS Obligation is extinguished WITH FAULT Value of the thing + da mages (Art. 1170) DETERIORATION Creditor bears the impairment Creditor can demand in two ways: 1. Fulfillment + damages; OR 2. Rescision + dam ages (by the debtor) - Usufructory Rights, the debtor can: 1. take away the impr ovement provided this will not cause destruction to the pricipal object. 2. usuf ruct IMPROVEMENT (by nature) Benefits the creditor (retroactivity of conditional obli gations Gen Rule - where the improvement is not susceptible of being taken away, usufruc t (together with accessories). There should be consent by both parties. Art. 1190. RESOLUTORY CONDITION - When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of s aid conditions, shall return to each other what they have received. In case of t he loss, deterioration or improvement of the thing, the provisions which, with r espect to the debtor, are laid do wn in the preceding article shall be applied t o 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 rega r ds the effect of the extinguishment of the obligation.

1st Par Fulfillment of condition: return to each 2nd Par Loss, deterioration, improvement (Art 1191) 3rd Par Obligations to do an d not to do (1187) : REVERSAL OF PERSONALITY Art. 1191. RIGHT TO RESCIND - The power to rescind obligations is implied in rec iprocal ones, in case one of the obligors should not comply with what is incumbe nt upon him. The injured party may choose between the fulfillment and the rescis sion of the obligation, with the payment of damages in eit her case. He may also seek rescission, even after he has chosen fulfillment, if the latter should bec ome impossible. The court shall decree the rescission claimed, unless there be j ust cause authorizing the fixing of a period. This is understood to be without p rejudice to the rights of third persons who have acquired the thing, in accordan ce with Art icles 1385 and 1388 and the Mortgage Law. RIGHT TO RESCIND - Right t o cancel or resolve the contract or reciprocal obligation in ase of non-fulfillm ent on the part of one. Given to the injurred party who may choose to demand Ful fillment or Rescision. notes Page 9

- Given to the injurred party who may choose to demand Fulfillment or Rescision. Gen. Rule: POWER TO RESCIND is IMPLIED in RECIPROCAL ones. 1. This right is not absolute, the injurred party should apply to the court a decree of rescision. Ex ceptions: 1. If the obligation has NOT BEEN PERFORMED yet, extrajudicial declara tion of the party willing to perform would suffice, can refuse to perform if the other party is not yet ready to comply. 2. If the INJURED PARTY has already PER FORMED, CANNOT extrajudicially rescind IF the other party OPPOSES the RESCISION. In this case, the court may: a. Fix a date for the debtor to perform b. Rule fo r rescision. Art. 1192. BREACH OF BOTH PARTIES - In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably temp ered by the courts. If it cannot be determined which of the parties first violat ed the contract, the same shall be deemed extinguished, and each shall bear his own damages. 1. Liability of first infractor 2. If it can't be determined, court will leave them as they are. Art. 1193. OBLIGATIONS WITH A PERIOD - Obligations for whose fulfillment a day c ertain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to be that which must necessarily come , although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated b y the rules of the preceding Section. Requisites of a Period: 1. Future 2. Certain 3. Possible A DAY CERTAIN - a day which will necessarily come. Ex. Dying Difference between period and condition: AS TO CONDITION PERIOD Fulfillment Influence on the obligation Event is uncertain future, unknown past, must be possible Gives rise or extinguishes the obligation. Event is Certain, future and possible. No effect on existence but only in their demadability or performance. (Does not carry with it retoractive effect. Time Will of the debtor May refer to unknown past It depends on the will of the debtor. Always to the future If dependent on the debtor, this merely impowers the court to fix a period. Kinds of Period: 1. Sources: a. Legal b. Conditional/Stipulated by the parties c . Judicial - fixed by court 2. Effects: - same with conditional a. Resolutory b. Suspensive 3. Definiteness a. Definite - fixed date or time b. Indefinite 4. Ex pression a. Express b. Implied - when parties "intended to" ** Phrases as "As so on as" - Period, while "IF" - conditional Art. 1194. LOSS, DETERIORATION, IMROVEMENT - In case of loss, deterioration or i mprovement of the thing before the arrival of the day certain, the rules in Arti cle 1189 shall be observed. Art. 1195. PAYMENT BEFORE MATURITY - Anything paid or delivered before the arriv

al of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests. UNJUST PAYMENT (Solutio indebiti) - Sought to be avoided thus this ar ticle is applied. JUST PREPAYMENT Apply the Doctrine of Estoppel notes Page 10

- Apply the Doctrine of Estoppel - With knowledge on the period. When to recover : - Before the debt matures (principal) - After debt matures (interest) - if cre ditor is in bad faith. - right prescribes 5 years after premature payment. Art. 1196. BENEFIT OF THE DESIGNATION OF THE PERIOD - Whenever in an obligation a per iod is designated, it is presumed to have been established for the benefit of bo th the creditor and the debtor, unless from the tenor of the same or other circu mstances it should appea r that the period has been established in favor of one or of the other. Gen Rule - Benefit of both parties. Exception - Tenor of the ob ligation as to who will be favored. ** Note: On or Before Definite date Debtor benefited Both Upon demand Creditor benefited Art. 1197. INSTANCES WHERE THE COURT FIXES THE PERIOD - If the obligation does n ot fix a period, but from its nature and the circumstances it can be inferred th at a period was intended, the courts may fix the duration thereof. The courts sh all also fix the duration of the period when it depends upon the will of the deb tor. In every case, the courts shall determine such period as may under the circ umstances have been probably contemplated by the p arties. Once fixed by the cou rts, the period cannot be changed by them. Instances where the court fixes the period: 1. No period fixed in the obligation . 2. If it depends upon the will of the debtor Instances where the Courts cannot fix a period: 1. When period is fixed by law 2. Obligation is payable on demand 3. Term is specified by parties ** Correlate this article with Art. 1180. Art. 1198. INSTANCES WHERE THE DEBTOR LOSE THE RIGHT TO MAKE USE OF THE PERIOD 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 guarant y or security for the debt; (2) When he does not furnish to the creditor the gua ranties or securities which he has promised; (3) When by his own acts he has imp aired said guaranties or securities after their establishment, and when through a fortuito us 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 abscon d. Instances where the debtor loses the right to make use of the period: 1. Inso lvency - EXCEPTION: guarantee or security 2. Failure to furnish the guarantee or security 3. Impairment of guarantee by his own acts or by FE - EXCEPTION: prese nt a new one equally satisfactory. 4. Violation of any undertaking 5. Attempt to abscond. Art. 1199. ALTERNATIVE OBLIGATIONS - A person alternatively bound by different p restations shall completely perform one of them. The creditor cannot be compelle d to receive part of one and part of the other undertaking. Gen Rule: - Presumption is ALTERNATIVE. DISJUNCTIVE - 2 or more prestations the debtor may choose from among. - Use of OR. A. ALTERNATIVE - Only one must be per formed among the choices B. FACULTATIVE - One principal prestation but 2 or more substitute. CONJUNCTIVE 2 or more prestations must be performed. notes Page 11

- 2 or more prestations must be performed. - Use of AND Art. 1200. RIGHT OF CHOI CE - The right of choice belongs to the debtor, unless it has been expressly gra nted to the creditor. The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the ob ject of the obligation. Gen Rule - Debtor has the right to choose Exception - Express stipulation Limitations to the Rule: 1. Not impossible 2. Not unlawful 3. Should be the obje ct of the obligation Effects of Notice of Choice: 1. Limit the obligation to the object selected. 2. Becomes SIMPLE/PURE OBLIGATION 3. Becomes IRREVOCABLE. Art. 1201. CHOICE - The choice shall produce no effect except from the time it h as been communicated. ** Notice may be in any form. **Unliateral declaration of will - the other party need not consent on the choice made by one. **Right to choose is not lost by th e mere fact that the party entitled to choose delays in making his choice. **If the debtor is unable to choose, there are two instances that may arise: 1. SUBST ITUTED PERFORMANCE - when the debtor does not want to make a choice, the credito r may ask the court for a 3rd party to choose. 2. Right to choose goes to the cr editor because this constitutes a waiver of the right of the debtor. EXCEPTION t o the RULES above: - Debtor has chosen a prestation which could not have been th e object of the obligation, creditor's consent thereto would bring about a NOVAT ION of the obligation. For Plurality: Joint all of them must guve their consent. Solidary The choice of one is the choice of the rest. Art. 1202. ALTERNATIVE - SIMPLE OBLIGATION. The debtor shall lose the right of c hoice when among the prestations whereby he is alternatively bound, only one is practicable. **If all prestations are impossible or unlawful, obligation is VOID. ** If only one is praticable, obligation is converted to simple/pure obligation. Example: A - water from Mars, B - 1 kilo of shabu, C- car Art. 1203. CREDITOR IS AT FAULT - If through the creditor's acts the debtor cann ot make a choice according to the terms of the obligation, the latter may rescin d the contract with damages. Logic: Because the debtor has been deprived of the right to choose. Art. 1204. RIGHT TO INDEMNITY FOR DAMAGES - The creditor shall have a right to i ndemnity for damages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the complianc e of the obligation has become im possible. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service which la st became impossible. Damages other than the value of the last thing o r service may also be awarded. 1st Par 1. All objects have been lost 2. Complian ce has become impossible 2nd Par Indemnity: VALUE of the LAST thing lost + DAMAGES 3rd Par Damages other than the value of the last thing or service may also be aw arded ** Apllies only to cases where the debtor has the right to choose. ** FE c auses the loss of the thing communicated, obligation is extinguished. Art. 1205. CREDITOR HAS THE RIGHT OF CHOICE - When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the da y when the selection has been communicated to the debtor. Until then the respons ibility of the debtor shall be governed by the following rules: notes Page 12

Until then the responsibility of the debtor shall be governed by the following r ules: (1) If one of the things is lost through a fortuitous event, he shall perf orm the obligation by delivering that which the cre ditor should choose from amo ng 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 clai m 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 o ne of them, also with indemnity for damages. The same rules shal l be applied to obligations to do or not to do in case one, some or all of the p restations should become i mpossible. Pending selection by creditor, the object is still at the possession of the debtor, the debtor MUST preserve all prestatio ns. IF: 1. One is lost due to FE, obligation still subsists, the creditor may ch oose on the remaining 2; 2. If loss is due to FAULT of the debtor, creditor may: a. Choose from among the remaining + damages b. Value of the object lost + dama ges 3. If ALL are lost through the fault of the debtor, the creditor may choose for the value of any object + damages. Art. 1206. FACULTATIVE - When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative . The loss or deterioration of the thing intended as a substitute, through the n egligence of the obligor, does not render him l iable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud . **Only one prestation bu allows for substitution. Gen Rule: - If the inteded substitute is lost, it doesn't matter Exception: - If the debtor chose to deliver the substitute which was subsequently lost, debtor is still liable. - If loss is due to FE, extinguished. Distinction between Alternative and Facultative Obligations: AS TO ALTERNATIVE F ACULTATIVE Contents of the obligation Nullity of prestations Variuos prestations all of which constitute parts of the obligation Only the principal constitutes the obligation, the accessory being only the mean s to facilitate payment Nullity of one prestation does not invalidate the obligation Nullity of the prin cipal invalidates the obligation. which is still in force in respect to those wh ich have no vice Creditor can choose from the remainder Obligation is extinguish ed. Creditor can't demand substitute. Only the DEBTOR Extinguishment: Impossibil ity of the PRINCIPAL, and when the substitution has been made and the substitute object was lost. Choice Debtor, BUT may be given to the creditor Effect of loss Extinguishment: Impossibility of ALL (fortuitous events) Effect of loss (fault Debtor is not liable if there are still available of debto r) If choice belongs to creditor, loss of one alternative gives rise to liabilit y. Debtor is liable for loss of PRINCIPAL. Art. 1207. SOLIDARY OBLIGATION - The concurrence of two or more creditors or of

two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability onl y when the obligation expressly so states, or when the law or the nature of the obligation requires sol idarity. Gen Rule: - JOINT Concurrence of several debtor s/creditors does not necessarily assume that all of them an demand to fulfill. E xceptions: 1. Law 2. Stipulated by the parties 3. Nature of the obligation 4. Ch arge of condition is imposed upon heirs 5. Imputed by final judgement upon sever al litigants SOLIDARY - Compliance of the obligation an be done in its entirety. (right to re imbursement) JOINT - Compliance is in parts, proportionate. Words used to indicate Joint obligation: 1. Mancomunada 2. Mancomunada simple 3. Pro rata 4. "we promise to pay" used by two or more signers Art. 1208. JOINT OBLIGATION - If from the law, or the nature or the wording of t he obligations to which the preceding article refers the contrary does notes Page 13

not appear, the credit or debt shall be presumed to be divided into as many shar es as there are creditors or debtors, the cre dits or debts being considered dis tinct from one another, subject to the Rules of Court governing the multiplicity of suits. **Refer above Words used to indicate JOINT Obligations 1. Mancomunada solidaria 2. Joint and several 3. In solidum 4. "I promise to pay" ... Followed by the sig nature of two or more persons. 5. Individually and collectively Effects of Joint Obligations 1. Extent of liability of the debtor a. Only with respect to his pa rticular share b. Defect of one debtor does not affect the obligation or the oth ers c. Insolvency of one does not increase the responsibility of the others nor does it authorize a creditor demand anything from his codebtors d. Joint divisib le obligation - defense res judicata does is not extended to the others 2. Exten t of the Right of the Creditor a. Demand by one creditor upon one debtor produce s the effects of default only with respect to the creditor who demanded and the debtor on whom the demand was made. b. Interruption of prescription of the judic ial demand of one creditor upon the debtor does not benefit the other creditors nor interrupt the prescription as to the other debtors. Art. 1209. INDIVISIBLE JOINT OBLIGATION - If the division is impossible, the rig ht of the creditors may be prejudiced only by their collective acts, and the deb t can be enforced only by proceeding against all the debtors. If one of the latt er should be insolvent, the others shall n ot be liable for his share. **To each his own. 1. Demand must be made upon all creditors. - Creditor must proceed to all the de btors. 2. If one is insolvent, the other is not liable. Effects of Joint Indivis ible Obligation: 1. Creditors prejudiced only by their collective acts 2. Co-deb tors bot liable for the share of the insolvent debtor. 3. Creditors must proceed against all the joint debtors. 4. If one does not comple, obligation is convert ed to MONETARY Consideration. One will be liable for his proportionate share. 5. Debtor must deliver to all creditors. Art. 1210. INDIVISIBLIT - SOLIDARITY - The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply ind ivisibility. Divisible vs Indivisible - object of the obligation Joint vs Solida ry - juridical tie that binds the obligation May be: 1. Joint Divisible 2. Joint Indivisible 3. Solidary Divisible 4. Solidar y Indivisible Art. 1211. SOLIDARY DESPITE DIFFERENT TERMS AND CONDITIONS - Solidarity may exis t although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. Example: A- Pay P5,000 on Dec 21, 2010 B- Pay P5,000 on Dec 21, 2011 C- Pay P10, 000 on Dec 21, 2012 If X demands on Jan 1, 2013, A, B, or C must pay P20,000 + damages for the delay . A/B/C may pay the whole P20,000 subject for reimbursement of the other co-debt or who did not pay. If X demands on Jan. 1, 2011, A will only If X demands on Ja n 1, 2012, A and B must pay pay P5,000 + damages for the delay. P10,000 plus dam ages for the delay. If A is insolvent, B/C may pay, subject of A/B may pay the whole P10,000 subject for reimbursement by A. reimbursement of the other co-debtor who did not pay Art. 1212. SOLIDARY CREDITORS - Each one of the solidary creditors may do whatev er may be useful to the others, but not anything which may be prejudicial to the latter. Example: D1 and D2 are debtors of C1, C2 and C3 who are solidary credit ors (P30,000) notes Page 14

Prejudicial Act - Prohibited. - Valid as to the debtor but bot with respect to t he co-creditors whose rights subsists and can be enforced against the creditor w ho performed prejudicial acts - Example: - Remission, novation, compensation, me rger/confusion ** Correlate with Art 1215. Art. 1213. ASSIGNMENT OF RIGHT - A solidary creditor cannot assign his rights wi thout the consent of the others. Gen. Rule - Solidary creditor cannot assign his rights. Exceptions - If with CON SENT of the other co-creditors, he can assign his rights to a Third Party - Assi gnee is the co-creditor Example: - C1 assigned his right to X (TP). - Assignment should be with the cons ent of C2, C3 and C4 for it to be valid. Art. 1214. DEMAND OF CREDITOR - The debtor may pay any one of the solidary credi tors; but if any demand, judicial or extrajudicial, has been made by one of them , payment should be made to him. Gen rule - The debtor may pay any one of the so lidary creditors. Exception - If there is demand, payment must be made to solida ry creditor who made the demand (judicial or extrajudicial). **payment to any ot her will not extinguish the obligation except insofar as the payee's share is co ncerned. Art. 1215. EXTINGUISHMENT - Novation, compensation, confusion or remission of th e debt, made by any of the solidary creditors or with any of the solidary debtor s, shall extinguish the obligation, without prejudice to the provisions of Artic le 1219. The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligatio n corresponding to them. - Will be discussed on the Chapter on Extinguishment. Art. 1216. CREDITOR TO DEBTOR - The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. Art. 1217. EFFECTS OF PAYMENT - Payment made by one of the solidary debtors exti nguishes the obligation. If two or more solidary debtors offer to pay, the credi tor may choose which offer to accept. He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. When one of the solidary debtors ca nnot, because of his insolvency, reimburse his share to the debtor paying the ob ligation, such share shall be borne by all his co-debtors, in proportion to the debt of each. 1st Par Anyone of the solidary debtor can pay; extinguishment of the obligation 2nd Par Reimbursement by the other co-debtors; share + interest from the time of maturity of obligation) 3rd Par By insolvency of one debtor he can not reimburs e his share, converted into joint obligation as to co-debtors. Art. 1218. PRESCRIPTIVE PERIOD - Payment by a solidary debtor shall not entitle him to reimbursement from his co -debtors if such payment is made after the obli gation has prescribed or become illegal. Period of Prescription is: Written 10 years Verbal 6 years Art. 1219. REMISSION OR CONDONATION - 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 pa

id by anyone of them before the remission was effected. ** If remission or condonation is prior to payment, it brings abour the desired effect. Example: D1, D2, and D3 owes C1 P3,000. C1 condoned/remitted the liabili ty of D1. D2 paid P2,000. - D2 cannot ask for reimbursement from D1. If D3 is in solvent, D1 will bear half the share of D3, thus D1 must pay P500. notes Page 15

- If D3 is insolvent, D1 will bear half the share of D3, thus D1 must pay P500. Art. 1220. EFFECT OF REMISSION - The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors. **Correlate with Art 1219. Art. 1221. EFFECT OF LOSS OR IMPOSSIBLITY - 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 n egligent debtor. If through a fortuitous event, the thing is lost or the perform ance has become impossible after one of the solidary debtors h as incurred in de lay through the judicial or extrajudicial demand upon him by the creditor, the p rovisions of the preceding paragraph shall apply. (1147a) If without fault (FE o r FM) No liability: obligation is extinguished If without fault but after default/delay With liability: value, damages and inte rest Co-debtors have right against the guilty debtor If with fault Liability: value, damages and interest Co-debtors have right against the guilty debtor Art. 1222. DEFENSES AVAILABLE TO SOLIDARY DEBTORS - A solidary debtor may, in ac tions filed by the creditor, avail himself of all defenses which are derived fro m the nature of the obligation and of those which are personal to him, or pertai n to his own share. With respect t o those which personally belong to the others , he may avail himself thereof only as regards that part of the debt for which t he latter are responsible . (1148a) Defenses Available to the Solidary Debtors a Vices of consent Cause of obl re: 1. Nature of the Obligation - Complete defense igation has prescribed Entire obligation is void Voidable 2. Personal to the Deb tor - Complete defense (GEN RULE) Minority Insanity Fraud - Partial Defense Spec ial terms or conditions affecting his part of the obligation Non-fulfillment of condition imposed regarding his share 3. Personal to the Creditor - Avail himself thereof only as regards that part of the debt for which the latter is responsible. Example: the co-debtor's share is not yet due, so you can only compel me to give my share. Effects of the Defense s: 1. If from Nature: all co-debtors will be benefited 2. If personal to the deb tor: only him will be benefited 3. If personal to the co-creditor: partial defen se Art. 1223. DIVISIBLE/INDIVISIBLE OBLIGATION - The divisibility or indivisibility of the things that are the object of obligations in which there is only one deb tor and only one creditor does not alter or modify the provisions of Chapter 2 o f this Title. Divisible - One capable of partial performance Indivisible - Deliv er in its entirety Kinds of Indivisibility 1. Conventional - Common agreement Ex ample: Payment of P10,000 in a lumpsum basis - Becomes indivisible 2. Natural or absolute - Nature of the object Example: car 3. Legal - Law so provides ** A de bt shall not be be understood to have been paid unless the thing or service in w hich the obligation consists has been completely delivered or rendered as the ca se may be. Exceptions: a. Obligation has been substantially performed in good fa ith (Art. 1234) notes Page 16

Exceptions: a. Obligation has been substantially performed in good faith (Art. 1 234) b. When the creditor accepts performance, knowing its completeness, and wit hout protest, the obligation is deemed fully performed. (Art.1234) Art. 1224. INDIVISIBLE JOINT OBLIGATION - A joint indivisible obligation gives r ise 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 prom ises shall not contribute to the in demnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation co nsists. **Correlate with Art. 1209. **Debtors ready to fulfill shall not be liab le. Art. 1225. PRESUMPTIONS OF INDIVISIBLE OBLIGATIONS - For the purposes of the pre ceding articles, obligations to give definite things and those which are not sus ceptible of partial performance shall be deemed to be indivisible. When the obli gation has for its object the execution of a certain number of days of work, the accomplishment of work by metri cal units, or analogous things which by their n ature are susceptible of partial performance, it shall be divisible. However, ev en though the object or service may be physically divisible, an obligation is in divisible if so provided by law or intended by the parties. In obligations not t o do, divisibility or indivisibility shall be determined by the character of the prestation in each parti cular case. (1151a) 1st Par Indivisible Definite and not susceptible to partial performance Ex. Singing 1. Execute work for a # of days 2. Accomplishment by metrical units 3. Purpose is to pay a certa in amount Determined by the character of the prestation 2nd Par Divisible Ex. 3rd Par From Divisible - Indivisible IF: provided by law or stipulated by the pa rties 4th Par To do and not to do Ex. P5000 to be paid in lumpsum basis Ex. Art. 1226. PENAL OBLIGATIONS - In obligations with a penal clause, the penalty s hall substitute the indemnity for damages and the payment of interests in case o f noncompliance, if there is no stipulation to the contrary. Nevertheless, damag es shall be paid if the obligor refu ses to pay the penalty or is guilty of frau d in the fulfillment of the obligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. (1152a) PENAL CLAUSE - Is an accessory undertaking to assume greater responsibility in c ase of breach. - Mere non-performance of the principal obligation gives rise to damages. Gen Rule: - Penalty takes the palce of indemnity for damages and paymen t of interest Exceptions: 1. Express stipulation despite the presence of the pen alty clause. 2. Debtor refuses to pay the penalty imposed. 3. Debtor is guilty o f fraus in the fulfillment of the obligation. REASONS FOR IMPOSING PENAL CLAUSE 1. To ensure compliance - Makes heavier the ob ligation 2. Serve as a substitute - For indemnity and payment of interest 3. Ser ve as a punishment - Serve as a punishment for non-fulfillment

Kinds of Penalty 1. First Classification: a. Legal Penal Clause - Imposed by law b. Conventional Penal Clause - Agreed by the parties 2. Second Classification a . Subsidiary - Only the penalty may be asked. b. Joint - When both the principal contract and the penal clause may be enforced in non-performance. Art. 1227. RULE ON PENALTY AND PRINCIPAL - The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligat ion and the satisfaction of the penalty at the s ame time, unless this right has been clearly granted him. However, if after the creditor has decided to r equire the fulfillment of the obligation, the performa nce thereof should become impossible without his fault, the penalty may be enfor ced. Gen. Rule: - The debtore can not exempt himself from performance Exceptions : Express stipulation by the parties. (Fulfillment becomes Alternative) notes Page 17

Exceptions: - Express stipulation by the parties. (Fulfillment becomes Alternati ve) Gen Rule: - Creditor cannot demand both fulfillment and the penalty. Exception: - Express grant of such right. Art. 1228. PROVING ACTUAL DAMAGES NOT NEEDED - Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. Art. 1229. REDUCTION OF THE PENALTY BY THE COURTS - The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly compli ed with by the debtor. Even if there has been no performance, the penalty may al so be reduced by the courts if it is iniquitous or unconscionable. Reasons for R eduction of Penalty: 1. When the obligation has been partly complied with by the debtor. 2. Obligation is irregularly complies 3. Penalty is iniquitous or uncon scionable, even if htere has been no performance at all. Art. 1230. NULLITY OF P ENAL CLAUSE - The nullity of the penal clause does not carry with it that of the principal obligation. The nullity of the principal obligation carries with it t hat of the penal clause. - If Principal is Null, Penalty is void - If Penalty is Void, Principal still exist. notes Page 18