DIFFERENT KINDS OF OBLIGATIONS

DIFFERENT KINDS OF OBLIGATIONS

PURE OBLIGATION

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

CONDITIONAL OBLIGATION

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

CONDITION

• a future and uncertain fact or event upon which an obligation is subordinated or made to depend.

CONDITIONAL OBLIGATION

• one whose effectivity is subordinated to the fulfillment or nonfulfillment of a future and uncertain fact or event.

CLASSIFICATION OF CONDITIONS

• Suspensive — when the fulfillment of the condition results in the acquisition of rights arising out of the obligation.

CLASSIFICATION OF CONDITIONS

• Resolutory — when the fulfillment of the condition results in the extinguishment of rights arising out of the obligation.

CLASSIFICATION OF CONDITIONS

• Potestative
• Casual
• Mixed

CLASSIFICATION OF CONDITIONS

• Conjunctive — when there are several conditions, all of which must be realized.
• Alternative — when there are several conditions, but only one must be realized.

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

SUSPENSIVE CONDITION

• If A obligates himself to give to B P100,000 if the latter gets married to C, the condition is suspensive in character. In such case, B cannot acquire the P100,000 unless he gets married to C.

SUSPENSIVE CONDITION

• If X obligates himself to give to Y a certain house and lot if the latter passes the bar examinations in his first attempt, the condition is also suspensive in character.

RESOLUTORY CONDITION

• If a person donates a parcel of land to the City of Manila subject to the condition that the City shall transform it into a public park within a period of one year from the time of the perfection of the donation, the condition which is imposed is resolutory in character.

RESOLUTORY CONDITION

• If the City fails to transform the land into a public park within the stipulated period, the rights which it acquired over the land as a result of the donation are resolved or extinguished altogether.

RESOLUTORY CONDITION

• If a person sells a parcel of land with right of repurchase. Once the sale with pacto de retro is perfected, the vendee a retro becomes the owner of the property.

RESOLUTORY CONDITION

• However, his right is not absolute in character because it may be extinguished or lost if the vendor a retro exercises his right of repurchase within the legal or stipulated period of redemption.

Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code.

POTESTATIVE CONDITION

• A distinction must be made between the effects of a potestative condition whose fulfillment depends exclusively upon the will of the creditor and the effects of one whose fulfillment depends exclusively upon the will of the debtor.

POTESTATIVE CONDITION

• In the first the condition as well as the obligation is valid, while in the second not only the condition, but even the obligation itself, is void.

POTESTATIVE CONDITION

• Art. 1182 is applicable only to a suspensive condition.
• Hence, if the condition is resolutory and, at the same time, potestative, the obligation, as well as the condition, is valid even though the fulfillment of the condition is made to depend upon the sole will of the obligor or debtor.

CASUAL CONDITION

• If the obligor promises to deliver his automobile to the obligee if a certain candidate is elected to the position of President of the Philippines in 2016, the obligation is valid because it is evident that the fulfillment of the condition to which it is subject depends upon the will of others.

MIXED CONDITION

• Where the debtor promises to pay his debts to the creditor as soon as he shall have received funds derived from the sale of his house, it was held that the fulfillment of the condition depends partly upon the will of the debtor and partly upon the will of third persons, as a consequence of which it is perfectly valid and enforceable.

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

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

IMPOSSIBLE CONDITION

• If A obligates himself to pay to B P10,000 if the latter can contract the inhabitants of Mars, the obligation is a nullity because the condition is impossible.

IMPOSSIBLE CONDITION

• If C promises to give to D a parcel of land if the latter secures a divorce from his wife, the obligation is also a nullity because the condition is contrary to law, good customs and public policy.

IMPOSSIBLE CONDITION

• If E binds himself to deliver to F an automobile if the latter will go with him around the world on a trial honeymoon, the obligation is certainly void because the condition is contrary to good customs.

IMPOSSIBLE CONDITION

• If A and B enter into an agreement whereby the A binds himself to give P5,000 to the B in two equal installments — the first installment to be given if the latter is able to sell drugs belonging to A and the second installment to be given if the B gets married to C...
• since the obligation is divisible, the second part which is not affected by the unlawful condition shall be valid.

IMPOSSIBLE CONDITION

• Attention must also be called to the fact that there is a difference with respect to effect between a condition which is impossible, illegal, inappropriate or illicit when it is attached to an obligation and the same condition when it is attached to a simple or remuneratory donation or to a testamentary disposition.

IMPOSSIBLE CONDITION

• In the first, the obligation itself is void, while in the second, the condition is considered as not imposed, although the donation or testamentary disposition itself is valid.

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

ARTICLE 1186

• The doctrine can be applied only to suspensive and not to resolutory conditions.

CASE

• Where the conditions which are imposed by a certain company in order that its employees will be entitled to retirement benefits can no longer be complied with because the retirement or pension plan was willfully abrogated by a unilateral act of the Board of Directors of the company, it was held that such conditions are deemed complied with in conformity with Art. 1186.

CASE

• Consequently, such employees are now entitled to retirement benefits.

Art. 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation.

Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated.

If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different.

PROBLEM

• Before the war, the Phil. Long Distance Co. (PLDT) adopted a pension plan for its employees by virtue of which all employees who have reached the age of 50 years and who have rendered 20 years or more service may be retired with a pension. After the war, the Board of Directors of the Company passed a resolution abrogating the pension plan.

PROBLEM

• Subsequently, sixty employees who were affected filed a complaint against the Company claiming monetary benefits under the pension plan.

PROBLEM

• The Company interposed the following defenses: (1) that the obligation to pay a pension to the plaintiffs is subject to certain suspensive conditions; consequently, such plaintiffs have no personality to ask for monetary benefits until after such conditions are fulfilled;

PROBLEM

• (2) that even granting without admitting that they have, they are not entitled to such benefits until after the conditions are fulfilled;
• and (3) that war losses had extinguished the Company’s obligation to proceed with the pension plan.

ANSWER

• The 1st defense is untenable. While it is true that when an obligation is subject to a suspensive condition, what is acquired by the creditor is only a mere hope or expectancy, nevertheless, it is a hope or expectancy that is protected by the law.

ANSWER

• The second defense is untenable. According to Art. 1186 of the NCC, the condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. The act of the Board of Directors of the Phil. Long Distance Co. in abrogating the pension plan certainly falls within the sphere or purview of this rule.

ANSWER

• The third defense is also untenable. This is so because the defense of fortuitous event is available only if the obligation is determinate and not if the obligation is generic. Here, the obligation is clearly generic since it involves the payment of money.

ARTICLE 1187

• If A had obligated himself to sell a certain parcel of land to B for P100,000 subject to a condition of a suspensive character, and such condition was fulfilled two years after the perfection of the contract...

ARTICLE 1187

• a literal application of the principle of retroactivity would have the effect of compelling A to deliver to B not only the land, but also all of the fruits which he may have gathered or received therefrom during the period from the time of the perfection of the contract to the time of the fulfillment of the condition;

ARTICLE 1187

• and as far as B is concerned, it would have the effect of compelling him to pay to A not only the P100,000, but also the interest thereon during the same period.

ARTICLE 1187

• But because of the reciprocal character of the obligation, the law, as a matter of justice and convenience, considers the fruits and interests as the equivalent of each other.

IN OTHER WORDS

• They are deemed to compensate each other mutually.

UNILATERAL OBLIGATION

• If A had obligated himself to give to B a parcel of land if the latter gets married to C, and the condition is fulfilled only after two years from the time of the constitution of the obligation, he shall be obligated to deliver only the land and not the fruits which he may have gathered or received therefrom during the pendency of the condition.

TO BE CONTINUED

OBLIGATIONS with a PERIOD

Obligations with a period may be defined as those whose demandability or extinguishment is subject to the expiration of a term or period.

Distinguished from condition

As to requisites

• While a term or period refers to an interval of time which is future and certain
• a condition refers to a fact or event which is future and uncertain.

As to fulfillment

• While a term or period is an interval of time which must necessarily come, although it may not be known when
• a condition is a future and uncertain fact or event which may or may not happen.

As to influence on obligation

• While a term or period merely exerts an influence upon the time of the demandability or extinguishment of an obligation
• a condition exerts an influence upon the very existence of the obligation itself.

As to retroactivity of effects

• While a term or period does not have any retroactive effect unless there is an agreement to the contrary
• a condition has retroactive effects

As to effect of will of debtor

• When a term or period is left exclusively to the will of the debtor, the existence of the obligation is not affected
• but when a condition is left exclusively to the will of the debtor, the very existence of the obligation is affected.

Classification of Term or Period

• Suspensive or resolutory
• Legal, conventional or judicial
• Definite or indefinite

Effect of fortuitous event

• In obligations with a term or period, any stipulation in the contract to the effect that in case of a fortuitous event the contract shall be deemed suspended during the term or period does not mean that the happening of the fortuitous event shall stop the running of the term or period agreed upon.

Effect of fortuitous event

• Its only effect is to relieve the contracting parties from the fulfillment of their respective obligations during the term or period.

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LOSSES

A THING IS LOST

• when it perishes
• when it goes out of commerce
• when it disappears in such a way that its existence is unknown or it cannot be recovered

RULES ON LOSSES

• If the thing is lost without the fault of the debtor, the obligation shall be extinguished

RULES ON LOSSES

• If the thing is lost through the fault of the debtor, he shall be obliged to pay damages

RULES ON LOSSES

• When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor

RULES ON LOSSES

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

RULES ON LOSSES

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

RULES ON LOSSES

• If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor

RULES ON LOSSES

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

Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances, it can be inferred that a period was intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will of the debtor.

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PROBLEM

• D borrowed P2,000 from C in 2010. The debt is evidenced by a promissory note executed by D wherein he promised to pay as soon as he has money or as soon as possible. C has made repeated demands upon D for payment, but up to now no payment has been made. Suppose that C will bring an action against D for payment of the debt, will the action prosper?

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 give a guaranty or security for the debt

(2) When he does not furnish to the creditor the guaranties or securities which he has promised

(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory

(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period

(5) When the debtor attempts to abscond

Alternative and Facultative Obligations

When an obligation comprehends several objects

• conjunctive - when all of the objects or prestations are demandable at the same time
• distributive - when only one is demandable

DISTRIBUTIVE

• ALTERNATIVE - when it comprehends several objects or prestations which are due, but it may be complied with by the delivery or performance of only one of them

DISTRIBUTIVE

• FACULTATIVE - when it comprehends only one object or prestation which is due, but it may be complied with by the delivery of another object or the performance of another prestation in substitution

FACULTATIVE vs. ALTERNATIVE

As to objects due

• In facultative obligations only one object is due, while in alternative obligations several objects are due.

As to compliance

• Facultative obligations may be complied with by the delivery of another object or by the performance of another prestation in substitution of that which is due, while alternative obligations may be complied with by the delivery of one of the objects or by the performance of one of the prestations which are alternatively due.

As to choice

• In the first, the right of choice pertains only to the debtor, while in the second, the right of choice may pertain even to the creditor or to a third person.

As to the effect of fortuitous loss

• In the first, the loss or impossibility of the object or prestation which is due without any fault of the debtor is sufficient to extinguish the obligation, while in the second, the loss or impossibility of all of the objects or prestations which are due without any fault of the debtor is necessary to extinguish the obligation.

As to effect of culpable loss

• In the first, the culpable loss of the object which the debtor may deliver in substitution before the substitution is effected does not give rise to any liability on the part of such debtor; in the second, the culpable loss of any of the objects which are alternatively due before the choice is made may give rise to a liability on the part of the debtor.

Joint and Solidary Obligations

Joint and Solidary Obligations

• When there is a concurrence of two or more creditors or of two or more debtors in one and the same obligation, the obligation may be either joint (obligación mancomunada) or solidary (obligación solidaria).

JOINT OBLIGATION

• an obligation where there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which each of the creditors has a right to demand, and each of the debtors is bound to render, compliance with his proportionate part of the prestation which constitutes the object of the obligation

SOLIDARY OBLIGATION

• an obligation where there is a concurrence of several creditors, or of several debtors, or of several creditors and several debtors, by virtue of which each of the creditors has a right to demand, and each of the debtors is bound to render, entire compliance with the prestation which constitutes the object of the obligation

GENERAL RULE

• An obligation is presumed to be JOINT.

EXCEPTIONS

• when the obligation expressly states that there is solidarity
• when the law requires solidarity
• when the nature of the obligation requires solidarity

Thus, where the debtors agreed to pay the obligation “jointly and severally,”or “individually and collectively”everyone of them can be held responsible for the payment of the entire obligation.

PROBLEM

• A, B, and C executed a promissory note binding themselves to pay P9,000 to X, Y, and Z. The note is now due and demandable.

QUESTIONS

• Can the creditors proceed against A alone for payment of the entire obligation? Why?
• Can X alone proceed against A, B and C for payment of the entire obligation? Why?

QUESTIONS

• Suppose that X proceeds against A alone for payment, how much can he collect? Why?
• Suppose that C is insolvent, can A and B be held liable for his share in the obligations? Why?

QUESTIONS

• Suppose that the obligation was about to prescribe, but X wrote a letter to A demanding for payment of the entire debt, will this have the effect of interrupting the running of the period of prescription? Why?

ANSWERS

• (a) The creditors cannot proceed against A alone for the payment of the entire obligation. Since the promissory note is silent with respect to the right of the creditors as well as the liability of the debtors, the obligation is, therefore, presumed to be joint.

ANSWERS

• (b) X alone cannot proceed against A, B and C for the payment of the entire obligation for the same reason stated in the previous paragraph. The most that he will be able to collect from the three debtors will be his proportionate share in the obligation which is P3,000.

ANSWERS

• (c) If X proceeds against A alone for payment, the most that he will be able to collect will be only P1,000.

ANSWERS

• (d) If C is insolvent, his co-debtors cannot be held liable for his share in the obligations. This necessarily follows from the principle that in joint obligation, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors, the credits or debts being considered distinct from one another.

ANSWERS

• (e) The demand made by X upon A, for the purpose of interrupting the running of the period of prescription, shall prejudice the latter only, but not the other debtors. Consequently, if after ten years, X, Y and Z should bring an action against A, B and C to collect the debt, the defense of prescription would be absolute insofar as B and C are concerned, but partial insofar as A is concerned.