Obligations and Contracts Provisions

8/2/2019 Obligations and Contracts Provisions

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Obligations and Contracts (Law 101)

LAWS AND PROVISIONS


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OBLIGATIONS.

1.

General provisions.

1.1.Concept.

1.1.1.

Definition.

Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n)

1.1.2.

Elements.

1.1.3.

Distinction between natural and civil obligations.

Art. 1423. Obligations are civil or natural. Civil obligations give a right of action to compel their performance.Natural obligations, not being based on positive law but on equity and natural law, do not grant a right ofaction to enforce their performance, but after voluntary fulfillment by the obligor, they authorize theretention of what has been delivered or rendered by reason thereof. Some natural obligations are set forthin the following articles.

1.2.Sources of obligations.

Art. 1157. Obligations arise from: (1) law, (2) contracts, (3) quasi-contracts, (4) acts or omissions punished by law,(5) quasi-delicts. (1089a)

1.2.1.

Law.

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code orin special laws are demandable, and shall be regulated by the precepts of the law which establishes them;

and as to what has not been foreseen, by the provisions of this Book. (1090)

1.2.2.

Contracts.

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties andshould be complied with in good faith. (1091a)

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect tothe other, to give something or to render some service. (1254a)

1.2.3.Quasi-contracts.

Art. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII,of this Book. (n)

Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract tothe end that no one shall be unjustly enriched or benefited at the expense of another. (n)

Art. 2144. Whoever voluntarily takes charge of the agency or management of the business or property ofanother, without any power from the latter, is obliged to continue the same until the termination of theaffair and its incidents, or to require the person concerned to substitute him, if the owner is in a position todo so. This juridical relation does not arise in either of these instances: (1) when the property or business isnot neglected or abandoned, (2) if in fact the manager has been tacitly authorized by the owner.In the first case, the provisions of Articles 1317, 1403, No. 1, and 1404 regarding unauthorized contracts shallgovern. In the second case, the rules on agency in Title X of this Book shall be applicable. (1888a)

Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered throughmistake, the obligation to return it arises. (1895)

Art. 2164. When, without the knowledge of the person obliged to give support, it is given by a stranger, thelatter shall have a right to claim the same from the former, unless it appears that he gave it out of piety andwithout intention of being repaid. (1894a)

Art. 2165. When funeral expenses are borne by a third person, without the knowledge of those relatives whowere obliged to give support to the deceased, said relatives shall reimburse the third person, should thelatter claim reimbursement. (1894a)

Art. 2166. When the person obliged to support an orphan, or an insane or other indigent person unjustlyrefuses to give support to the latter, any third person may furnish support to the needy individual, with rightof reimbursement from the person obliged to give support. The provisions of this article apply when thefather or mother of a child under eighteen years of age unjustly refuses to support him.

Art. 2167. When through an accident or other cause a person is injured or becomes seriously ill, and he istreated or helped while he is not in a condition to give consent to a contract, he shall be liable to pay for theservices of the physician or other person aiding him, unless the service has been rendered out of puregenerosity.


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Art. 2168. When during a fire, flood, storm, or other calamity, property is saved from destruction by anotherperson without the knowledge of the owner, the latter is bound to pay the former just compensation.

Art. 2169. When the government, upon the failure of any person to comply with health or safety regulationsconcerning property, undertakes to do the necessary work, even over his objection, he shall be liable to paythe expenses.

Art. 2170. When by accident or other fortuitous event, movables separately pertaining to two or morepersons are commingled or confused, the rules on co-ownership shall be applicable.

Art. 2171. The rights and obligations of the finder of lost personal property shall be governed by Articles 719and 720.

Art. 2172. The right of every possessor in good faith to reimbursement for necessary and useful expenses isgoverned by Article 546.

Art. 2173. When a third person, without the knowledge of the debtor, pays the debt, the rights of the formerare governed by Articles 1236 and 1237.

Art. 2174. When in a small community a nationality of the inhabitants of age decide upon a measure forprotection against lawlessness, fire, flood, storm or other calamity, any one who objects to the plan andrefuses to contribute to the expenses but is benefited by the project as executed shall be liable to pay hisshare of said expenses.

Art. 2175. Any person who is constrained to pay the taxes of another shall be entitled to reimbursementfrom the latter.

1.2.4.

Acts or omissions punishable by law.Art. 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to theprovisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on HumanRelations, and of Title XVIII of this Book, regulating damages. (1092a)

Art. 100, RPC. Civil liability of a person guilty of felony. Every person criminally liable for a felony is alsocivilly liable.

Art. 104, RPC. What is included in civil liability.The civil liability established in Articles 100, 101, 102, and103 of this Code includes: (1) restitution, (2) reparation of damage caused, (3) indemnification forconsequential damages.

1.2.5.

Quasi-delicts.

Art. 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVIIof this Book, and by special laws. (1093a)

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obligedto pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relationbetween the parties, is called a quasi-delict and is governed by the provisions of this Chapter. (1902a)

Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions,but also for those of persons for whom one is responsible.The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by theminor children who live in their company.Guardians are liable for damages caused by the minors or incapacitated persons who are under theirauthority and live in their company.The owners and managers of an establishment or enterprise are likewise responsible for damages caused bytheir employees in the service of the branches in which the latter are employed or on the occasion of theirfunctions.Employers shall be liable for the damages caused by their employees and household helpers acting withinthe scope of their assigned tasks, even though the former are not engaged in any business or industry.

The State is responsible in like manner when it acts through a special agent; but not when the damage hasbeen caused by the official to whom the task done properly pertains, in which case what is provided inArticle 2176 shall be applicable.Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by theirpupils and students or apprentices, so long as they remain in their custody.The responsibility treated of in this article shall cease when the persons herein mentioned prove that theyobserved all the diligence of a good father of a family to prevent damage. (1903a)

Art. 218, FC. The school, its administrators and teachers, or the individual, entity or institution engaged inchild are shall have special parental authority and responsibility over the minor child while under theirsupervision, instruction or custody.Authority and responsibility shall apply to all authorized activities whether inside or outside the premises ofthe school, entity or institution. (349a)


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Art. 219, FC. Those given the authority and responsibility under the preceding Article shall be principally andsolidarily liable for damages caused by the acts or omissions of the unemancipated minor. The parents,judicial guardians or the persons exercising substitute parental authority over said minor shall be subsidiarilyliable.The respective liabilities of those referred to in the preceding paragraph shall not apply if it is proved thatthey exercised the proper diligence required under the particular circumstances.All other cases not covered by this and the preceding articles shall be governed by the provisions of the CivilCode on quasi-delicts. (n)

Art. 3, RPC. Definitions.

Acts and omissions punishable by law are felonies (delitos).Felonies are committed not only by means of deceit (dolo) but also by means of fault (culpa).There is deceit when the act is performed with deliberate intent and there is fault when the wrongful actresults from imprudence, negligence, lack of foresight, or lack of skill.

Art. 104, RPC. What is included in civil liability.The civil liability established in Articles 100, 101, 102, and103 of this Code includes: (1) restitution, (2) reparation of damage caused, (3) indemnification forconsequential damages.

2.

Nature and effects of obligations.

2.1.Kinds of prestation.

2.1.1.

Obligation to give.

2.1.1.1.Obligation to give a specific thing.

2.1.1.1.1.

To deliver the thing itself.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.In obligations to do or not to do, an act or forbearance cannot be substituted by anotheract or forbearance against the obligee's will. (1166a)

2.1.1.1.2.

To preserve the thing.

Art. 1163. Every person obliged to give something is also obliged to take care of it with theproper diligence of a good father of a family, unless the law or the stipulation of theparties requires another standard of care. (1094a)

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligencewhich is required by the nature of the obligation and corresponds with the circumstancesof the persons, of the time and of the place. When negligence shows bad faith, theprovisions of Articles 1171 and 2201, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in theperformance, that which is expected of a good father of a family shall be required. (1104a)

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declaredby stipulation, or when the nature of the obligation requires the assumption of risk, noperson shall be responsible for those events which could not be foreseen, or which, thoughforeseen, were inevitable. (1105a)

Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition tothe right granted him by Article 1170, may compel the debtor to make the delivery.If the thing is indeterminate or generic, he may ask that the obligation be complied with atthe expense of the debtor.If the obligor delays, or has promised to deliver the same thing to two or more personswho do not have the same interest, he shall be responsible for any fortuitous event untilhe has effected the delivery. (1096)

Art. 1306. The contracting parties may establish such stipulations, clauses, terms andconditions as they may deem convenient, provided they are not contrary to law, morals,good customs, public order, or public policy. (1255a)

Art. 1755. A common carrier is bound to carry the passengers safely as far as human careand foresight can provide, using the utmost diligence of very cautious persons, with a dueregard for all the circumstances.

2.1.1.1.3.To deliver accessions and accessories.

Art. 1166. The obligation to give a determinate thing includes that of delivering all itsaccessions and accessories, even though they may not have been mentioned. (1097a)


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Art. 445. Whatever is built, planted or sown on the land of another and the improvementsor repairs made thereon, belong to the owner of the land, subject to the provisions of thefollowing articles. (358)

Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion whichthey gradually receive from the effects of the current of the waters. (336)

Art. 459. Whenever the current of a river, creek or torrent segregates from an estate on itsbank a known portion of land and transfers it to another estate, the owner of the land towhich the segregated portion belonged retains the ownership of it, provided that he

removes the same within two years. (368a)

2.1.1.1.4.

To deliver the fruits.

Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation todeliver it arises. However, he shall acquire no real right over it until the same has beendelivered to him. (1095)

Art. 441. To the owner belongs: (1) the natural fruits, (2) the industrial fruits, (3) the civilfruits.

Art. 442. Natural fruits are the spontaneous products of the soil, and the young and otherproducts of animals.Industrial fruits are those produced by lands of any kind through cultivation or labor.Civil fruits are the rents of buildings, the price of leases of lands and other property andthe amount of perpetual or life annuities or other similar income. (355a)

Art. 443. He who receives the fruits has the obligation to pay the expenses made by a thirdperson in their production, gathering, and preservation. (356)

Art. 444. Only such as are manifest or born are considered as natural or industrial fruits.With respect to animals, it is sufficient that they are in the womb of the mother, althoughunborn. (357)

2.1.1.1.5.To answer for damages in case of non-performance or breach.

Art. 1169. Those obliged to deliver or to do something incur in delay from the time theobligee 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 andthe circumstances of the obligation it appears that the designation of the time when thething is to be delivered or the service is to be rendered was a controlling motive for theestablishment 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 notready to comply in a proper manner with what is incumbent upon him. From the momentone of the parties fulfills his obligation, delay by the other begins. (1100a)

Art. 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 liablefor damages. (1101)

Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver ofan action for future fraud is void. (1102a)

Art. 1172. Responsibility arising from negligence in the performance of every kind ofobligation is also demandable, but such liability may be regulated by the courts, accordingto the circumstances. (1103)

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligencewhich is required by the nature of the obligation and corresponds with the circumstancesof the persons, of the time and of the place. When negligence shows bad faith, theprovisions of Articles 1171 and 2201, paragraph 2, shall apply.If the law or contract does not state the diligence which is to be observed in theperformance, that which is expected of a good father of a family shall be required. (1104a)

2.1.1.2.Obligation to give a generic thing.

2.1.1.2.1.

To deliver a thing of the quality specified.

Art. 1246. When the obligation consists in the delivery of an indeterminate or genericthing, whose quality and circumstances have not been stated, the creditor cannot demanda thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The


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purpose of the obligation and other circumstances shall be taken into consideration.(1167a)

2.1.1.2.2.

To answer for damages in case of non-performance or breach, supra.

2.1.2.Obligation to do.

2.1.2.1.

To perform as promised.

Art. 1244. The debtor of a thing cannot compel the creditor to receive a different one, although thelatter may be of the same value as, or more valuable than that which is due.

In obligations to do or not to do, an act or forbearance cannot be substituted by another act orforbearance against the obligee's will. (1166a)

2.1.2.2.

To shoulder the cost if someone else does it/in case of contravention.

Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.This same rule shall be observed if he does it in contravention of the tenor of the obligation.Furthermore, it may be decreed that what has been poorly done be undone. (1098)

2.1.2.3.To undo what has been poorly done.


2.1.2.4.To answer for damages in case of non-performance or breach, supra.

2.1.3.

Obligation not to do.2.1.3.1.Not to do as promised.

2.1.3.2.

To shoulder the expense to undo what should not have been done.

Art. 1168. When the obligation consists in not doing, and the obligor does what has been forbiddenhim, it shall also be undone at his expense. (1099a)

2.1.3.3.

To answer for damages in case of non-performance or breach, supra.

2.2.Breach of obligation.

2.2.1.

Concept and distinction between substantial and slight breach.

2.2.2.Modes of breach.

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, andthose who in any manner contravene the tenor thereof, are liable for damages. (1101)

2.2.2.1.Fraud.

Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an actionfor future fraud is void. (1102a)

2.2.2.2.Negligence.

Art. 1172. Responsibility arising from negligence in the performance of every kind of obligation isalso demandable, but such liability may be regulated by the courts, according to the circumstances.(1103)

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which isrequired by the nature of the obligation and corresponds with the circumstances of the persons, ofthe time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and2201, paragraph 2, shall apply.If the law or contract does not state the diligence which is to be observed in the performance, thatwhich is expected of a good father of a family shall be required. (1104a)

2.2.2.3.Delay.

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligeejudicially 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) whenthe obligation or the law expressly so declare, or (2) when from the nature and the circumstances ofthe obligation it appears that the designation of the time when the thing is to be delivered or theservice is to be rendered was a controlling motive for the establishment of the contract, or (3) whendemand would be useless, as when the obligor has rendered it beyond his power to perform.


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In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready tocomply in a proper manner with what is incumbent upon him. From the moment one of the partiesfulfills his obligation, delay by the other begins. (1100a)

2.2.2.4.

Contravention of the tenor.

2.3.Remedies in case of breach.

2.3.1.

Action for performance.

2.3.1.1.Action for specific performance (in obligation to give a specific thing).

Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the rightgranted him by Article 1170, may compel the debtor to make the delivery.If the thing is indeterminate or generic, he may ask that the obligation be complied with at theexpense of the debtor.If the obligor delays, or has promised to deliver the same thing to two or more persons who do nothave the same interest, he shall be responsible for any fortuitous event until he has effected thedelivery. (1096)

2.3.1.2.

Action for substituted performance (in obligation to give a generic thing) or undoing of poorwork (in obligation to do).

Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the rightgranted him by Article 1170, may compel the debtor to make the delivery.If the thing is indeterminate or generic, he may ask that the obligation be complied with at theexpense of the debtor.

If the obligor delays, or has promised to deliver the same thing to two or more persons who do nothave the same interest, he shall be responsible for any fortuitous event until he has effected thedelivery. (1096)


2.3.1.3.

Action for undoing (in obligation not to do).

Art. 1168. When the obligation consists in not doing, and the obligor does what has been forbiddenhim, it shall also be undone at his expense. (1099a)

2.3.2.

Action for damages.

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, andthose who in any manner contravene the tenor thereof, are liable for damages. (1101)

2.3.3.

Action for rescission.

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors shouldnot comply with what is incumbent upon him.The injured party may choose between the fulfillment and the rescission of the obligation, with the paymentof damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the lattershould 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, inaccordance with Articles 1385 and 1388 and the Mortgage Law. (1124)

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

2.4.

Subsidiary remedies.

2.4.1.Accion subrogatoria.

Art. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy theirclaims, may exercise all the rights and bring all the actions of the latter for the same purpose, save thosewhich are inherent in his person; they may also impugn the acts which the debtor may have done to defraudthem. (1111)

2.4.2.Accion pauliana.

Art. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy theirclaims, may exercise all the rights and bring all the actions of the latter for the same purpose, save thosewhich are inherent in his person; they may also impugn the acts which the debtor may have done to defraudthem. (1111)


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Art. 1381. The following contracts are rescissible: (1) those which are entered into by guardians wheneverthe wards whom they represent suffer lesion by more than one-fourth of the value of the things which arethe object thereof, (2) those agreed upon in representation of absentees, if the latter suffer the lesionstated in the preceding number, (3) those undertaken in fraud of creditors when the latter cannot in anyother manner collect the claims due them, (4) those which refer to things under litigation if they have beenentered into by the defendant without the knowledge and approval of the litigants or of competent judicialauthority, (5) all other contracts specially declared by law to be subject to rescission. (1291a)

2.4.3.Other specific remedies.

Art. 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, thesublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms ofthe sublease, at the time of the extrajudicial demand by the lessor.Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor'sclaim is concerned, unless said payments were effected in virtue of the custom of the place. (1552a)

Art. 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by thecontractor have an action against the owner up to the amount owing from the latter to the contractor at thetime the claim is made. However, the following shall not prejudice the laborers, employees and furnishers ofmaterials: (1) payments made by the owner to the contractor before they are due, (2) renunciation by thecontractor of any amount due him from the owner.This article is subject to the provisions of special laws. (1597a)

Art. 1608. The vendor may bring his action against every possessor whose right is derived from the vendee,even if in the second contract no mention should have been made of the right to repurchase, without

prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to thirdpersons. (1510)

Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermorebring an action against the substitute with respect to the obligations which the latter has contracted underthe substitution. (1722a)

2.5.Effect of fortuitous event.

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or whenthe nature of the obligation requires the assumption of risk, no person shall be responsible for those events whichcould not be foreseen, or which, though foreseen, were inevitable. (1105a)

Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him byArticle 1170, may compel the debtor to make the delivery.If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of thedebtor.If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the sameinterest, he shall be responsible for any fortuitous event until he has effected the delivery. (1096)

Art. 552. A possessor in good faith shall not be liable for the deterioration or loss of the thing possessed, except incases in which it is proved that he has acted with fraudulent intent or negligence, after the judicial summons.A possessor in bad faith shall be liable for deterioration or loss in every case, even if caused by a fortuitous event.(457a)

Art. 1942. The bailee is liable for the loss of the thing, even if it should be through a fortuitous event: (1) if hedevotes the thing to any purpose different from that for which it has been loaned, (2) if he keeps it longer than theperiod stipulated, or after the accomplishment of the use for which the commodatum has been constituted, (3) ifthe thing loaned has been delivered with appraisal of its value, unless there is a stipulation exemption the baileefrom responsibility in case of a fortuitous event, (4) if he lends or leases the thing to a third person, who is not amember of his household, (5) if, being able to save either the thing borrowed or his own thing, he chose to save thelatter. (1744a and 1745)

Art. 1979. The depositary is liable for the loss of the thing through a fortuitous event: (1) if it is so stipulated, (2) ifhe uses the thing without the depositor's permission, (3) if he delays its return, (4) If he allows others to use it,even though he himself may have been authorized to use the same. (n)

Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is donewith the use of arms or through an irresistible force. (n)

Art. 2147. The officious manager shall be liable for any fortuitous event: (1) if he undertakes risky operations whichthe owner was not accustomed to embark upon, (2) if he has preferred his own interest to that of the owner, (3) ifhe fails to return the property or business after demand by the owner, (4) if he assumed the management in badfaith. (1891a)


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Art. 1717. If the contractor bound himself to furnish the material, he shall suffer the loss if the work should bedestroyed before its delivery, save when there has been delay in receiving it. (1589)

Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, inconformity with plans and specifications agreed upon with the land-owner, can neither withdraw from the contractnor demand an increase in the price on account of the higher cost of labor or materials, save when there has been achange in the plans and specifications, provided: (1) such change has been authorized by the proprietor in writing,and (2) the additional price to be paid to the contractor has been determined in writing by both parties. (1593a)

Art. 1268. When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not

be exempted from the payment of its price, whatever may be the cause for the loss, unless the thing having beenoffered by him to the person who should receive it, the latter refused without justification to accept it. (1185)

2.6.

Usurious transactions.

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, theindemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreedupon, and in the absence of stipulation, the legal interest, which is six per cent per annum. (1108)

2.7.Fulfillment of obligations.

Art. 1176. The receipt of the principal by the creditor without reservation with respect to the interest, shall giverise to the presumption that said interest has been paid.The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise thepresumption that such installments have been paid. (1110a)

2.8.Transmissibility of rights.

Art. 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been nostipulation to the contrary. (1112)

3. Kinds of obligations.

3.1.

Pure and conditional obligations.

3.1.1.Pure obligations.

Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon apast event unknown to the parties, is demandable at once.Every obligation which contains a resolutory condition shall also be demandable, without prejudice to theeffects of the happening of the event. (1113)

3.1.2.

Conditional obligations.

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those

already acquired, shall depend upon the happening of the event which constitutes the condition. (1114)

3.1.2.1.

Kinds of conditions.

3.1.2.1.1.

As to the effect on the obligation.

Art. 1181. In conditional obligations, the acquisition of rights, as well as theextinguishment or loss of those already acquired, shall depend upon the happening of theevent which constitutes the condition. (1114)

3.1.2.1.1.1.Suspensive (condition precedent).

Art. 1887. In the execution of the agency, the agent shall act in accordance withthe instructions of the principal.In default thereof, he shall do all that a good father of a family would do, asrequired by the nature of the business. (1719)

Art. 1888. An agent shall not carry out an agency if its execution wouldmanifestly result in loss or damage to the principal. (n)

3.1.2.1.1.2.

Resolutory (condition subsequent).

3.1.2.1.2.By the cause of their happening.

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 athird person, the obligation shall take effect in conformity with the provisions of this Code.(1115)

3.1.2.1.2.1.

Potestative.

3.1.2.1.2.2.

Casual.


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3.1.2.1.2.3.

Mixed.

3.1.2.1.3.By the manner of the happening.

3.1.2.1.3.1.

Positive.

3.1.2.1.3.2.Negative.

3.1.2.1.4.

By their validity or legality.

Art. 1183. Impossible conditions, those contrary to good customs or public policy and

those prohibited by law shall annul the obligation which depends upon them. If theobligation is divisible, that part thereof which is not affected by the impossible or unlawfulcondition shall be valid.The condition not to do an impossible thing shall be considered as not having been agreedupon. (1116a)

Art. 873. Impossible conditions and those contrary to law or good customs shall beconsidered as not imposed and shall in no manner prejudice the heir, even if the testatorshould otherwise provide. (792a)

Art. 727. Illegal or impossible conditions in simple and remuneratory donations shall beconsidered as not imposed. (n)

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 athird person, the obligation shall take effect in conformity with the provisions of this Code.

(1115)

3.1.2.1.4.1.

Licit or illicit.

3.1.2.1.4.2.Moral or immoral.

3.1.2.1.4.3.

Possible or impossible.

3.1.2.2.Rules on the fulfillment of the condition.

3.1.2.2.1.

Time.

Art. 1184. The condition that some event happen at a determinate time shall extinguishthe obligation as soon as the time expires or if it has become indubitable that the eventwill not take place. (1117)

Art. 1185. The condition that some event will not happen at a determinate time shallrender 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 haveprobably been contemplated, bearing in mind the nature of the obligation. (1118)

3.1.2.2.2.Prevention of fulfillment.

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents itsfulfillment. (1119)

3.1.2.3.

Retroactivity of the fulfillment of the condition.

Art. 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shallretroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposesreciprocal prestations upon the parties, the fruits and interests during the pendency of the conditionshall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shallappropriate 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 ofthe condition that has been complied with. (1120)

3.1.2.3.1.

In obligations to give.

3.1.2.3.2.In obligations to do or not to do.

3.1.2.4.

Loss, deterioration or improvement while the condition is pending.

3.1.2.4.1.

Suspensive condition.

Art. 1189. When the conditions have been imposed with the intention of suspending theefficacy of an obligation to give, the following rules shall be observed in case of the


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improvement, loss or deterioration of the thing during the pendency of the condition: (1) ifthe thing is lost without the fault of the debtor, the obligation shall be extinguished, (2) ifthe thing is lost through the fault of the debtor, he shall be obliged to pay damages; it isunderstood that the thing is lost when it perishes, or goes out of commerce, or disappearsin such a way that its existence is unknown or it cannot be recovered, (3) when the thingdeteriorates 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 therescission 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 noother right than that granted to the usufructuary. (1122)

Art. 579. The usufructuary may make on the property held in usufruct such usefulimprovements or expenses for mere pleasure as he may deem proper, provided he doesnot alter its form or substance; but he shall have no right to be indemnified therefor. Hemay, however, remove such improvements, should it be possible to do so without damageto the property. (487)

Art. 580. The usufructuary may set off the improvements he may have made on theproperty against any damage to the same. (488)

3.1.2.4.2.Resolutory condition.

Art. 1190. When the conditions have for their purpose the extinguishment of an obligationto give, the parties, upon the fulfillment of said conditions, shall return to each other whatthey have received.In case of the loss, deterioration or improvement of the thing, the provisions which, withrespect to the debtor, are laid down in the preceding article shall be applied to the partywho is bound to return.As for the obligations to do and not to do, the provisions of the second paragraph ofArticle 1187 shall be observed as regards the effect of the extinguishment of theobligation. (1123)

3.1.3.

Rescission (resolution) in reciprocal obligations.

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors shouldnot comply with what is incumbent upon him.The injured party may choose between the fulfillment and the rescission of the obligation, with the paymentof damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the lattershould 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, inaccordance with Articles 1385 and 1388 and the Mortgage Law. (1124)

Art. 1380. Contracts validly agreed upon may be rescinded in the cases established by law. (1290)

Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendormay exercise any of the following remedies: (1) exact fulfillment of the obligation, should the vendee fail topay, (2) cancel the sale, should the vendee's failure to pay cover two or more installments, (3) foreclose thechattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover twoor more installments. In this case, he shall have no further action against the purchaser to recover any unpaidbalance of the price. Any agreement to the contrary shall be void. (1454-A-a)

Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal propertywith option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.(1454-A-a)

Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to

pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee maypay, even after the expiration of the period, as long as no demand for rescission of the contract has beenmade upon him either judicially or by a notarial act. After the demand, the court may not grant him a newterm. (1504a)

Art. 1593. With respect to movable property, the rescission of the sale shall of right take place in the interestof the vendor, if the vendee, upon the expiration of the period fixed for the delivery of the thing, should nothave appeared to receive it, or, having appeared, he should not have tendered the price at the same time,unless a longer period has been stipulated for its payment. (1505)

Art. 1533. Where the goods are of perishable nature, or where the seller expressly reserves the right ofresale in case the buyer should make default, or where the buyer has been in default in the payment of theprice for an unreasonable time, an unpaid seller having a right of lien or having stopped the goods in transitu


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may resell the goods. He shall not thereafter be liable to the original buyer upon the contract of sale or forany profit made by such resale, but may recover from the buyer damages for any loss occasioned by thebreach of the contract of sale.Where a resale is made, as authorized in this article, the buyer acquires a good title as against the originalbuyer.It is not essential to the validity of resale that notice of an intention to resell the goods be given by the sellerto the original buyer. But where the right to resell is not based on the perishable nature of the goods orupon an express provision of the contract of sale, the giving or failure to give such notice shall be relevant inany issue involving the question whether the buyer had been in default for an unreasonable time before the

resale was made.It is not essential to the validity of a resale that notice of the time and place of such resale should be givenby the seller to the original buyer.The seller is bound to exercise reasonable care and judgment in making a resale, and subject to thisrequirement may make a resale either by public or private sale. He cannot, however, directly or indirectly buythe goods. (n)

Art. 1534. An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind thetransfer of title and resume the ownership in the goods, where he expressly reserved the right to do so incase the buyer should make default, or where the buyer has been in default in the payment of the price foran unreasonable time. The seller shall not thereafter be liable to the buyer upon the contract of sale, butmay recover from the buyer damages for any loss occasioned by the breach of the contract.The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested bynotice to the buyer or by some other overt act an intention to rescind. It is not necessary that such overt actshould be communicated to the buyer, but the giving or failure to give notice to the buyer of the intention

to rescind shall be relevant in any issue involving the question whether the buyer had been in default for anunreasonable time before the right of rescission was asserted. (n)

Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recover asthough there had been a strict and complete fulfillment, less damages suffered by the obligee. (n)

3.2.

Obligations with a period.

Art. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that daycomes.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 beregulated by the rules of the preceding Section. (1125a)

Art. 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rulesin Article 1189 shall be observed. (n)

Art. 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period orbelieving that the obligation has become due and demandable, may be recovered, with the fruits and interests.(1126a)

Art. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for thebenefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it shouldappear that the period has been established in favor of one or of the other. (1127)

Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that aperiod 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.In every case, the courts shall determine such period as may under the circumstances have been probablycontemplated by the parties. Once fixed by the courts, the period cannot be changed by them. (1128a)

Art. 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 furnishto the creditor the guaranties or securities which he has promised, (3) when by his own acts he has impaired saidguaranties or securities after their establishment, and when through a fortuitous event they disappear, unless heimmediately gives new ones equally satisfactory; (4) when the debtor violates any undertaking, in consideration ofwhich the creditor agreed to the period; (5) when the debtor attempts to abscond. (1129a)

Art. 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligationto give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing duringthe pendency of the condition: (1) if the thing is lost without the fault of the debtor, the obligation shall beextinguished, (2) if the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it isunderstood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that itsexistence 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


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

3.3.

Alternative and facultative obligations.

Art. 1199. A person alternatively bound by different prestations shall completely perform one of them.The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131)

Art. 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor.The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not havebeen the object of the obligation. (1132)

Art. 1201. The choice shall produce no effect except from the time it has been communicated. (1133)

Art. 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound,only one is practicable. (1134)

Art. 1203. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation,the latter may rescind the contract with damages. (n)

Art. 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all thethings which are alternatively the object of the obligation have been lost, or the compliance of the obligation hasbecome impossible.The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the servicewhich last became impossible.

Damages other than the value of the last thing or service may also be awarded. (1135a)

Art. 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternativefrom 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 lostthrough a fortuitous event, he shall perform the obligation by delivering that which the creditor should choosefrom among the remainder, or that which remains if only one subsists, (2) if the loss of one of the things occursthrough the fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, throughthe fault of the former, has disappeared, with a right to damages, (3) if all the things are lost through the fault ofthe debtor, the choice by the creditor shall fall upon the price of any one of them, also with indemnity fordamages.The same rules shall be applied to obligations to do or not to do in case one, some or all of the prestations shouldbecome impossible. (1136a)

Art. 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, theobligation is called facultative.The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does notrender him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute onaccount of his delay, negligence or fraud. (n)

3.4.Joint and solidary obligations.

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligationdoes not imply that each one of the former has a right to demand, or that each one of the latter is bound torender, entire compliance with the prestation. There is a solidary liability only when the obligation expressly sostates, or when the law or the nature of the obligation requires solidarity. (1137a)

Art. 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers thecontrary does not appear, the credit or debt shall be presumed to be divided into as many shares as there arecreditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of Courtgoverning the multiplicity of suits. (1138a)

Art. 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, andthe debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, theothers shall not be liable for his share. (1139)

Art. 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itselfimply indivisibility. (n)

Art. 1211. Solidarity may exist although the creditors and the debtors may not be bound in the same manner andby the same periods and conditions. (1140)

Art. 1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything whichmay be prejudicial to the latter. (1141a)

Art. 1213. A solidary creditor cannot assign his rights without the consent of the others. (n)


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Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, hasbeen made by one of them, payment should be made to him. (1142a)

Art. 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors orwith any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of Article1219.The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to theothers for the share in the obligation corresponding to them. (1143)

Art. 1216. 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 directedagainst the others, so long as the debt has not been fully collected. (1144a)

Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidarydebtors offer to pay, the creditor 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 theinterest for the payment already made. If the payment is made before the debt is due, no interest for theintervening period may be demanded.When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying theobligation, such share shall be borne by all his co-debtors, in proportion to the debt of each. (1145a)

Art. 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if suchpayment is made after the obligation has prescribed or become illegal. (n)

Art. 1219. The remission made by the creditor of the share which affects one of the solidary debtors does notrelease 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. (1146a)

Art. 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him toreimbursement from his co-debtors. (n)

Art. 1221. If the thing has been lost or if the prestation has become impossible without the fault of the solidarydebtors, 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 thepayment 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 solidarydebtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor, the provisionsof the preceding paragraph shall apply. (1147a)

Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derivedfrom the nature of the obligation and of those which are personal to him, or pertain to his own share. With respectto 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. (1148a)3.5.

Divisible and indivisible obligations.

Art. 1223. The divisibility or indivisibility of the things that are the object of obligations in which there is only onedebtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title. (1149)

Art. 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtorsdoes not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall notcontribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of theservice in which the obligation consists. (1150)

Art. 1225. For the purposes of the preceding articles, obligations to give definite things and those which are notsusceptible of partial performance shall be deemed to be indivisible.When the obligation has for its object the execution of a certain number of days of work, the accomplishment ofwork by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall bedivisible.

However, even though the object or service may be physically divisible, an obligation is indivisible if so provided bylaw or intended by the parties.In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in eachparticular case. (1151a)

Art. 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligationconsists has been completely delivered or rendered, as the case may be. (1157)

Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially toreceive the prestations in which the obligation consists. Neither may the debtor be required to make partialpayments.However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the debtormay effect the payment of the former without waiting for the liquidation of the latter. (1169a)


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Art. 1720. The price or compensation shall be paid at the time and place of delivery of the work, unless there is astipulation to the contrary. If the work is to be delivered partially, the price or compensation for each part havingbeen fixed, the sum shall be paid at the time and place of delivery, in the absence if stipulation. (n)

Art. 1420. In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may beenforced.

3.6.

Obligations with a 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, damagesshall be paid if the obligor refuses to pay the penalty or is guilty of fraud 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)

Art. 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty, savein the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillmentof the obligation and the satisfaction of the penalty at the same time, unless this right has been clearly grantedhim. However, if after the creditor has decided to require the fulfillment of the obligation, the performancethereof should become impossible without his fault, the penalty may be enforced. (1153a)

Art. 1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may bedemanded. (n)

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularlycomplied with by the debtor. Even if there has been no performance, the penalty may also be reduced by thecourts if it is iniquitous or unconscionable. (1154a)

Art. 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. (1155)

4. Extinguishment of obligations.

Art. 1231. Obligations are extinguished: (1) by payment or performance, (2) by the loss of the thing due, (3) by thecondonation or remission of the debt, (4) by the confusion or merger of the rights of creditor and debtor, (5) bycompensation, (6) by novation.Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, andprescription, are governed elsewhere in this Code. (1156a)

4.1.

Voluntary.

4.1.1.

By execution.

4.1.1.1.

Payment or performance.

Art. 1232. Payment means not only the delivery of money but also the performance, in any othermanner, of an obligation. (n)

Art. 1233. A debt shall not be understood to have been paid unless the thing or service in which theobligation consists has been completely delivered or rendered, as the case may be. (1157)

Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recoveras though there had been a strict and complete fulfillment, less damages suffered by the obligee. (n)

Art. 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. (n)

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has nointerest in the fulfillment of the obligation, unless there is a stipulation to the contrary.Whoever pays for another may demand from the debtor what he has paid, except that if he paidwithout the knowledge or against the will of the debtor, he can recover only insofar as the payment

has been beneficial to the debtor. (1158a)Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of thelatter, cannot compel the creditor to subrogate him in his rights, such as those arising from amortgage, guaranty, or penalty. (1159a)

Art. 1238. Payment made by a third person who does not intend to be reimbursed by the debtor isdeemed to be a donation, which requires the debtor's consent. But the payment is in any case validas to the creditor who has accepted it. (n)

Art. 1239. In obligations to give, payment made by one who does not have the free disposal of thething due and capacity to alienate it shall not be valid, without prejudice to the provisions of Article1427 under the Title on "Natural Obligations." (1160a)


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Art. 1240. Payment shall be made to the person in whose favor the obligation has been constituted,or his successor in interest, or any person authorized to receive it. (1162a)

Art. 1241. Payment to a person who is incapacitated to administer his property shall be valid if he haskept the thing delivered, or insofar as the payment has been beneficial to him.Payment made to a third person shall also be valid insofar as it has redounded to the benefit of thecreditor. Such benefit to the creditor need not be proved in the following cases: (1) if after thepayment, the third person acquires the creditor's rights, (2) if the creditor ratifies the payment tothe third person, (3) if by the creditor's conduct, the debtor has been led to believe that the thirdperson had authority to receive the payment. (1163a)

Art. 1242. Payment made in good faith to any person in possession of the credit shall release thedebtor. (1164)

Art. 1243. Payment made to the creditor by the debtor after the latter has been judicially ordered toretain the debt shall not be valid. (1165)

Art. 1244. The debtor of a thing cannot compel the creditor to receive a different one, although thelatter may be of the same value as, or more valuable than that which is due.In obligations to do or not to do, an act or forbearance cannot be substituted by another act orforbearance against the obligee's will. (1166a)

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debtin money, shall be governed by the law of sales. (n)

Art. 1246. When the obligation consists in the delivery of an indeterminate or generic thing, whosequality and circumstances have not been stated, the creditor cannot demand a thing of superiorquality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation andother circumstances shall be taken into consideration. (1167a)

Art. 1247. Unless it is otherwise stipulated, the extrajudicial expenses required by the payment shallbe for the account of the debtor. With regard to judicial costs, the Rules of Court shall govern.(1168a)

Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelledpartially to receive the prestations in which the obligation consists. Neither may the debtor berequired to make partial payments.However, when the debt is in part liquidated and in part unliquidated, the creditor may demand andthe debtor may effect the payment of the former without waiting for the liquidation of the latter.(1169a)

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is notpossible to deliver such currency, then in the currency which is legal tender in the Philippines.The delivery of promissory notes payable to order, or bills of exchange or other mercantiledocuments shall produce the effect of payment only when they have been cashed, or when throughthe fault of the creditor they have been impaired.In the meantime, the action derived from the original obligation shall be held in the abeyance. (1170)

Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene,the value of the currency at the time of the establishment of the obligation shall be the basis ofpayment, unless there is an agreement to the contrary. (n)

Art. 1251. Payment shall be made in the place designated in the obligation.There being no express stipulation and if the undertaking is to deliver a determinate thing, thepayment 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 additionalexpenses shall be borne by him.

These provisions are without prejudice to venue under the Rules of Court. (1171a)4.1.1.1.1.

Requisites of a valid payment.

4.1.1.1.2.

Application of payments.

Art. 1252. He who has various debts of the same kind in favor of one and the same creditor,may declare at the time of making the payment, to which of them the same must beapplied. Unless the parties so stipulate, or when the application of payment is made by theparty for whose benefit the term has been constituted, application shall not be made as todebts which are not yet due.


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If the debtor accepts from the creditor a receipt in which an application of the payment ismade, the former cannot complain of the same, unless there is a cause for invalidating thecontract. (1172a)

Art. 1253. If the debt produces interest, payment of the principal shall not be deemed tohave been made until the interests have been covered. (1173)

4.1.1.1.3.Payment by cession.

4.1.1.2.

Tender of payment and consignation.

4.1.2.

By substitution.

4.1.2.1.

Compensation.

Art. 1278. Compensation shall take place when two persons, in their own right, are creditors anddebtors of each other. (1195)

Art. 1279. In order that compensation may be proper, it is necessary: (1) that each one of theobligors 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 samekind, and also of the same quality if the latter has been stated, (3) that the two debts be due, (4) thatthey be liquidated and demandable, (5) that over neither of them there be any retention orcontroversy, commenced by third persons and communicated in due time to the debtor. (1196)

Art. 1280. Notwithstanding the provisions of the preceding article, the guarantor may set upcompensation as regards what the creditor may owe the principal debtor. (1197)

Art. 1281. Compensation may be total or partial. When the two debts are of the same amount, thereis a total compensation. (n)

Art. 1282. The parties may agree upon the compensation of debts which are not yet due. (n)

Art. 1283. If one of the parties to a suit over an obligation has a claim for damages against the other,the former may set it off by proving his right to said damages and the amount thereof. (n)

Art. 1284. When one or both debts are rescissible or voidable, they may be compensated againsteach other before they are judicially rescinded or avoided. (n)

Art. 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of athird person, cannot set up against the assignee the compensation which would pertain to himagainst the assignor, unless the assignor was notified by the debtor at the time he gave his consent,that he reserved his right to the compensation.If the creditor communicated the cession to him but the debtor did not consent thereto, the latter

may set up the compensation of debts previous to the cession, but not of subsequent ones.If the assignment is made without the knowledge of the debtor, he may set up the compensation ofall credits prior to the same and also later ones until he had knowledge of the assignment. (1198a)

Art. 1286. Compensation takes place by operation of law, even though the debts may be payable atdifferent places, but there shall be an indemnity for expenses of exchange or transportation to theplace of payment. (1199a)

Art. 1287. Compensation shall not be proper when one of the debts arises from a depositum or fromthe obligations of a depositary or of a bailee in commodatum.Neither can compensation be set up against a creditor who has a claim for support due by gratuitoustitle, without prejudice to the provisions of paragraph 2 of Article 301. (1200a)

Art. 1288. Neither shall there be compensation if one of the debts consists in civil liability arisingfrom a penal offense. (n)

Art. 1289. If a person should have against him several debts which are susceptible of compensation,

the rules on the application of payments shall apply to the order of the compensation. (1201)

Art. 1290. When all the requisites mentioned in Article 1279 are present, compensation takes effectby operation of law, and extinguishes both debts to the concurrent amount, even though thecreditors and debtors are not aware of the compensation. (1202a)

4.1.2.2.Dation in payment (datio in solutum).

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debtin money, shall be governed by the law of sales. (n)

4.1.2.3.Payment by cession.


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Art. 1255. The debtor may cede or assign his property to his creditors in payment of his debts. Thiscession, unless there is stipulation to the contrary, shall only release the debtor from responsibilityfor the net proceeds of the thing assigned. The agreements which, on the effect of the cession, aremade between the debtor and his creditors shall be governed by special laws. (1175a)

4.1.2.4.

Novation.

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.(1203)

Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it isimperative that it be so declared in unequivocal terms, or that the old and the new obligations be onevery point incompatible with each other. (1204)

Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, maybe made even without the knowledge or against the will of the latter, but not without the consentof the creditor. Payment by the new debtor gives him the rights mentioned in Articles 1236 and1237. (1205a)

Art. 1294. If the substitution is without the knowledge or against the will of the debtor, the newdebtor's insolvency or non-fulfillment of the obligations shall not give rise to any liability on the partof the original debtor. (n)

Art. 1295. The insolvency of the new debtor, who has been proposed by the original debtor andaccepted by the creditor, shall not revive the action of the latter against the original obligor, exceptwhen said insolvency was already existing and of public knowledge, or known to the debtor, whenthe delegated his debt. (1206a)

Art. 1296. When the principal obligation is extinguished in consequence of a novation, accessoryobligations may subsist only insofar as they may benefit third persons who did not give theirconsent. (1207)

Art. 1297. If the new obligation is void, the original one shall subsist, unless the parties intended thatthe former relation should be extinguished in any event. (n)

Art. 1298. The novation is void if the original obligation was void, except when annulment may beclaimed only by the debtor or when ratification validates acts which are voidable. (1208a)

Art. 1299. If the original obligation was subject to a suspensive or resolutory condition, the newobligation shall be under the same condition, unless it is otherwise stipulated. (n)

Art. 1300. Subrogation of a third person in the rights of the creditor is either legal or conventional.The former is not presumed, except in cases expressly mentioned in this Code; the latter must beclearly established in order that it may take effect. (1209a)

Art. 1301. Conventional subrogation of a third person requires the consent of the original partiesand of the third person. (n)

Art. 1302. It is presumed that there is legal subrogation: (1) when a creditor pays another creditorwho is preferred, even without the debtor's knowledge, (2) when a third person, not interested inthe obligation, pays with the express or tacit approval of the debtor, (3) when, even without theknowledge of the debtor, a person interested in the fulfillment of the obligation pays, withoutprejudice to the effects of confusion as to the latter's share. (1210a)

Art. 1303. Subrogation transfers to the persons subrogated the credit with all the rights theretoappertaining, either against the debtor or against third person, be they guarantors or possessors ofmortgages, subject to stipulation in a conventional subrogation. (1212a)

Art. 1304. A creditor, to whom partial payment has been made, may exercise his right for the

remainder, and he shall be preferred to the person who has been subrogated in his place in virtue ofthe partial payment of the same credit. (1213)

4.1.3.

By agreement between the parties.

4.1.3.1.At the time the obligation arises (resolutory condition, resolutory period).

4.1.3.2.

Subsequent to the birth of the obligation.

4.1.3.2.1.Mutual dissent or compromise.

4.1.3.2.2.

Unilateral termination.

4.1.3.2.3.Remission of the debt.


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Art. 1270. Condonation or remission is essentially gratuitous, and requires the acceptanceby the obligor. It may be made expressly or impliedly.One and the other kind shall be subject to the rules which govern inofficious donations.Express condonation shall, furthermore, comply with the forms of donation. (1187)

Art. 1271. The delivery of a private document evidencing a credit, made voluntarily by thecreditor to the debtor, implies the renunciation of the action which the former had againstthe latter.If in order to nullify this waiver it should be claimed to be inofficious, the debtor and hisheirs may uphold it by proving that the delivery of the document was made in virtue ofpayment of the debt. (1188)

Art. 1272. Whenever the private document in which the debt appears is found in thepossession of the debtor, it shall be presumed that the creditor delivered it voluntarily,unless the contrary is proved. (1189)

Art. 1273. The renunciation of the principal debt shall extinguish the accessory obligations;but the waiver of the latter shall leave the former in force. (1190)

Art. 1274. It is presumed that the accessory obligation of pledge has been remitted whenthe thing pledged, after its delivery to the creditor, is found in the possession of thedebtor, or of a third person who owns the thing. (1191a)

4.2. Involuntary.

4.2.1.

On account of the party.

4.2.1.1.

Confusion or merger of the credit and the debt.

Art. 1275. The obligation is extinguished from the time the characters of creditor and debtor aremerged in the same person. (1192a)

Art. 1276. Merger which takes place in the person of the principal debtor or creditor benefits theguarantors. Confusion which takes place in the person of any of the latter does not extinguish theobligation. (1193)

Art. 1277. Confusion does not extinguish a joint obligation except as regards the sharecorresponding to the creditor or debtor in whom the two characters concur. (1194)

4.2.1.2.

Death of the party (in strictly personal obligations).

4.2.1.3.

Change of civil status.

4.2.2.

On account of the object (subject matter).

4.2.2.1.

Loss of the thing due.

Art. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished ifit 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 doesnot extinguish the obligation, and he shall be responsible for damages. The same rule applies whenthe nature of the obligation requires the assumption of risk. (1182a)

Art. 1263. In an obligation to deliver a generic thing, the loss or destruction of anything of the samekind does not extinguish the obligation. (n)

Art. 1264. The courts shall determine whether, under the circumstances, the partial loss of the objectof the obligation is so important as to extinguish the obligation. (n)

Art. 1265. Whenever the thing is lost in the possession of the debtor, it shall be presumed that theloss was due to his fault, unless there is proof to the contrary, and without prejudice to the

provisions of article 1165. This presumption does not apply in case of earthquake, flood, storm, orother natural calamity. (1183a)

Art. 1268. When the debt of a thing certain and determinate proceeds from a criminal offense, thedebtor shall not be exempted from the payment of its price, whatever may be the cause for the loss,unless the thing having been offered by him to the person who should receive it, the latter refusedwithout justification to accept it. (1185)

Art. 1269. The obligation having been extinguished by the loss of the thing, the creditor shall have allthe rights of action which the debtor may have against third persons by reason of the loss. (1186)

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


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fault of the debtor, the obligation shall be extinguished, (2) if the thing is lost through the fault ofthe debtor, he shall be obliged to pay damages; it is understood that the thing is lost when itperishes, or goes out of commerce, or disappears in such a way that its existence is unknown or itcannot be recovered, (3) when the thing deteriorates without the fault of the debtor, theimpairment is to be borne by the creditor, (4) if it deteriorates through the fault of the debtor, thecreditor may choose between the rescission of the obligation and its fulfillment, with indemnity fordamages in either case, (5) if the thing is improved by its nature, or by time, the improvement shallinure to the benefit of the creditor, (6) if it is improved at the expense of the debtor, he shall haveno other right than that granted to the usufructuary. (1122)

Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the rightgranted him by Article 1170, may compel the debtor to make the delivery.If the thing is indeterminate or generic, he may ask that the obligation be complied with at theexpense of the debtor.If the obligor delays, or has promised to deliver the same thing to two or more persons who do nothave the same interest, he shall be responsible for any fortuitous event until he has effected thedelivery. (1096)

4.2.2.2.

Impossibility to perform the service due.

Art. 1266. The debtor in obligations to do shall also be released when the prestation becomes legallyor physically impossible without the fault of the obligor. (1184a)

Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation ofthe parties, the obligor may also be released therefrom, in whole or in part. (n)

Art. 1269. The obligation having been extinguished by the loss of the thing, the creditor shall have allthe rights of action which the debtor may have against third persons by reason of the loss. (1186)

Art. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished ifit 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 doesnot extinguish the obligation, and he shall be responsible for damages. The same rule applies whenthe nature of the obligation requires the assumption of risk. (1182a)

4.2.3.

On account of laches (extinctive prescription).

CONTRACTS.

1. Concept.

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other,to give something or to render some service. (1254a)

2. Characteristics and effect of contracts.

2.1.

Autonomy.

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deemconvenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)

Art. 1690. The head of the family shall furnish, free of charge, to the house helper, suitable and sanitary quarters aswell as adequate food and medical attendance.

Art. 1691. If the house helper is under the age of eighteen years, the head of the family shall give an opportunity tothe house helper for at least elementary education. The cost of such education shall be a part of the house helper'scompensation, unless there is a stipulation to the contrary.

Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the

right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for inArticles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one whosowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value isconsiderably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of theland does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon theterms of the lease and in case of disagreement, the court shall fix the terms thereof. (361a)

Art. 87, FC. Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during themarriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any familyrejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage.(133a)


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Art. 1490. The husband and the wife cannot sell property to each other, except: (1) when a separation of propertywas agreed upon in the marriage settlements, or (2) when there has been a judicial separation or property underArticle 191. (1458a)

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person orthrough the mediation of another: (1) the guardian, the property of the person or persons who may be under hisguardianship, (2) agents, the property whose administration or sale may have been entrusted to them, unless theconsent of the principal has been given, (3) executors and administrators, the property of the estate underadministration, (4) public officers and employees, the property of the State or of any subdivision thereof, or of anygovernment-owned or controlled corporation, or institution, the administration of which has been entrusted tothem; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in thesale; (5) justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers andemployees connected with the administration of justice, the property and rights in litigation or levied upon anexecution before the court within whose jurisdiction or territory they exercise their respective functions; thisprohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property andrights which may be the object of any litigation in which they may take part by virtue of their profession, (6) anyothers specially disqualified by law. (1459a)

2.2.

Consensuality.

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to thefulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature,may be in keeping with good faith, usage and law. (1258)

Art. 1316. Real contracts, such as deposit, pledge and Commodatum, are not perfected until the delivery of theobject of the obligation. (n)

Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has bylaw a right to represent him.A contract entered into in the name of another by one who has no authority or legal representation, or who hasacted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person onwhose behalf it has been executed, before it is revoked by the other contracting party. (1259a)

2.3.

Mutuality.

Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will ofone of them. (1256a)

Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditionalobligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall takeeffect in conformity with the provisions of this Code. (1115)

Art. 1310. The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shalldecide what is equitable

Obligations and Contracts Provisions

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