VERITAS COLLEGE OF IROSIN

San Julian, Irosin, Sorsogon

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BACHELOR OF SCIENCE AND BUSINESS ADMINISTRATION (BSBA)
Business Law1
AY: 2020-2021, Second Semester

Subject: OBLIGATIONS AND CONTRACTS

PURE AND CONDITIONAL OBLIGATIONS

Art. 1179

1. Pure obligation, concept

A pure obligation is one without a term or condition, hence, it is demandable at one.

Examples:

a. “I promise to give you P 10,000.00.”

b. “I promise to give you P 10,000.00 on demand.”

In both examples, the obligations are demandable at once although instant performance is
not required.

2. Conditional obligations and condition, concept

A conditional obligation is one whose demandability or extinguishment is subject to the
happening of a condition.

A condition is an uncertain event which wields an influence on a legal relationship.

a. Principal kinds of conditions

1. Suspensive condition (also called condition precedent or condition antecedent). This is a

condition that suspends the effectivity of the obligation until the condition is fulfilled. If the
condition is not fulfilled, the obligation is not effective or demandable. If an obligation is
subject to a suspensive condition, it’s birth takes place or its effectivity commences only if and
when the event that constitutes the condition happens or is fulfilled.
2. Resolutory condition (also called condition subsequent) – This is a condition which
extinguishes the obligation upon its fulfilment. Here, the obligation is demandable at once, but
when the condition is fulfilled, the obligation is extinguished and the parties shall return to
each other what they have received.

Art. 1180

1. Nature of obligation when the debtor binds himself to pay when his means permit him to pay.
The obligation shall be considered as one with a period and not subject to a condition. Since the
time of the performance of the obligation cannot be determined, the creditor, before he can
enforce it, must file a court action for the fixing of the period. Any demand by the creditor before
the term arrives is considered premature.

Example:

“I will pay you my debt of P 10,000.00 when my means permit me to do so.”

2. Similar phrases
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 a. “ as soon as possible”
b. “as soon as I have the money”
c. “when I can afford it”

Art. 1181

1. Principal conditions
The provision classifies the principal conditions into suspensive and resolutory conditions.

Art. 1182

1. Kinds of conditions under the provision

a. Potestative condition (also called facultative condition)- This is a condition that depends upon
the exclusive will of one of the parties
1) Potestative on the part of the debtor
a) If condition is also suspensive, the obligation and the condition are void.

Examples:

(1) “I will give you P 10,000.00 if I like.”

(2) “I will give you a pearl earring if I go to pearl farm in Davao,” even if I go to the pearl farm
in Davao, you cannot demand the delivery of a pearl earring from me.
b) If the condition is also resolutory, the obligation and the condition are valid.

Example:

“I will let you use my car until I return from Baguio”

2) Potestative on the part of the creditor

The obligation and the condition are valid, whether the condition is suspensive or resolutory.

Example:

a) “I will give you P 20,000.00 if you go to Baguio.”

b) “I will let you use my car until you return from Baguio.”

b. Casual condition – This is a condition that depends upon chance or upon the will of a third
person. The obligation and the condition are valid.

Examples:

1) “I will give you a car if I win the first prize in the lotto on a bet I placed this morning.”
2) “I will give you P 10,000.00 if X goes to Hong Kong.”

c. Mixed condition – This is a condition that depends partly upon the will of one of the parties
and partly upon chance or the will of a third person. The obligation and the condition are
likewise valid.

Examples:

1) “I will give you 10% of my winnings if you place my bet in the lotto.” (partly upon the will of
the creditor and partly upon chance)
2) “I will give you a house and lot if you marry X.” (partly upon the will of the creditor and
partly upon the will of a third person)

Art. 1183
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 1. Possible and impossible conditions
a. Possible condition. A condition that is capable of fulfilment
b. Impossible condition. A condition that is incapable of performance or cannot be physically
done (physical impossibility), or which is contrary to law, moral, good customs, public order
and public policy (legal impossibility).

Examples:

1) D obliged himself to give P 50,000.00 to C if C can swim across the Pacific Ocean. (Physical
impossibility)
2) D obliged himself to give C P 5,000.00 if C will not vote in the coming senatorial election.
(legal impossibility for being contrary to public policy)

2. Effect of impossible or unlawful condition on obligation

Impossible conditions shall annul the obligation that depends upon them. The obligation and the
condition are void. Thus, in the example above where “ D obliged himself to give C P 5,000.00 if
C will not vote in the coming senatorial election, “ even if C does not vote, C cannot demand the
payment of P 5,000.00 from D.

3. Effect when obligation contains both impossible and possible conditions

a. If the obligation is divisible, only that part that is not affected by the unlawful or impossible
condition shall valid.

Example:

D agrees to give C all books in Accounting in the review class if C enrols with him at the
ABC CPA Review School and P 50,000.00 if C can steal the question in the coming CPA Board
Examination. The obligation to give the Accounting books is valid, but the obligation to give P
50,000.00 is void because it depends upon a condition that is unlawful.

b. If the obligation is indivisible, the entire obligation is void.

Example:

D agrees to give C P 100,000.00 if C enrols with him at the ABC CPA Review School and
if C can steal the question in the coming CPA Board Examination. The obligation is void because
that part that is lawful (if C enrols with him at the ABC CPA Review School) cannot be separated
from that part that is unlawful (if C can steal the question in the coming CPA Board Examination)
since there is only one consideration for both conditions.

4. Negative impossible condition

The condition not to do an impossible thing shall be considered as not having been
agreed upon; hence, the obligation is demandable at once.

Example:

D obliged himself to give C P 5,000.00 of C does not swim across the Pacific Ocean. The
negative impossible condition “not to swim across the Pacific Ocean” is deemed as not having been
agreed upon; hence, the obligation is considered a pure obligation and is demandable at once.

Art. 1184 – 1185

1. Positive condition, concept and effect on obligation

A positive condition is a condition that some event will happen at a determinate time. When the
performance of an obligation depends upon the happening of some event at a determinate time,
the obligation shall be extinguished as soon as the time expires without the event taking place or
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 if there is no more doubt that the event will not take place even before the expiration of such
determinate time.

Example:

D obliged to give C a house and lot if C will marry X within one year. If the one-year
period expired without C marrying X, then D’s obligation will be extinguished. If X dies before the
expiration of the one-year period and C has not yet married her, D’s obligation is likewise
extinguished on the date of X’s death. However, D’s obligation arises if C marries X within the
one-year period.

2. Negative condition, concept and effect on obligation

A negative condition is a condition that some event will not happen at a determinate time. When
the fulfilment of the obligation depends upon the condition that some event will not happen at a
determinate time, the obligation becomes effective as soon as the time expires, or it has become
evident that the event will not take place.

Example:

D obliged himself to give C a house and lot if C will not marry X within one year. If the
one-year expires without C marrying X, then D’s obligation will become effective or demandable.
If X dies before the expiration of the one-year period and C has not yet married her, D’s
obligation likewise becomes effective or demandable on the date of X’s death. However, D’s
obligation is extinguished if C marries X within the one-year period.

Art. 1186

1. Constructive fulfilment of condition

If the debtor voluntarily prevents the fulfilment of the condition, such condition is deemed fulfilled
and the obligation becomes demandable. In order that there is constructive fulfilment of the
condition, the following requisites must concur: a) there must be intent on the part of the debtor to
prevent compliance with the condition, and b) he actually prevents its fulfilment.

Example:

D, a job recruiter, obliged himself to provide a job to C in one of the firms abroad that he
represents, provided that C passes the pre-employment physical examination including the anti-
drug test. D, however, put a dangerous drug in the drink of C; hence, C failed in his physical
examination and was found unfit for employment. In this case, the condition that C must pass the
pre-employment physical examination is deemed fulfilled. D is therefore obliged to provide a job
for C. If C, however, is really disqualified form employment because he had tuberculosis, then the
condition is not deemed fulfilled. In either case, C may recover damages from D for the latter’s
act of placing a dangerous drug on the former’s drink.

2. When constructive fulfilment not applicable

The condition is not deemed fulfilled if the debtor prevents its fulfilment in the exercise of a lawful
right or for justifiable reasons.

Example:

Donato obliged himself to give a house and lot to Carmelo if Carmelo marries Teresa.
Later, Donato tried to convince Carmelo not to marry Teresa because Donato found out that
Teresa was the daughter of Carmelo’s father by another woman. Here, the condition is not
deemed fulfilled because the prevention of its fulfilment by the debtor’s is for a lawful purpose, i.e.
stopping the marriage between a brother and a sister from taking place which is considered void.

Art. 1187
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 1. Effects of fulfilment of suspensive condition in conditional obligation to give
Upon the fulfilment of the suspensive condition, the obligation becomes effective and
demandable. However, the effects of the obligation shall retroact to the day the obligation was
constituted. Hence, the creditor shall be entitled to the thing from the time the obligation was
perfected.

Example:

On August 01, 2015, D promised to give his agricultural lot to C if C passes the CPA
Board Examination in October 2015. C passed the CPA Board Examination on October 20, 201.
In this case, it was as if C was entitled to the lot on August 01, 2015. Hence, any alienation, such
as donation, of the lot made by C before October 20, 2015 will be considered valid.

a. Where there is no retroactive effect

The retroactive effect, however, does not apply to the fruits and interest during the pendency of
the condition, as follows:

(1) In reciprocal obligations, the fruits and interests received during the pendency of the condition
shall be deemed to have been mutually compensated, i.e, they are not required to be
delivered for convenience.
(2) In unilateral obligations, the debtor shall keep the fruits and interest unless there was a
contrary intent.
2. Effects of fulfilment of suspensive condition in conditional obligation to do and not to do.
The courts shall determine in each case the retroactive effects of the condition that has not been
complied with.

Art. 1188

1. Creditor’s right before the fulfilment of suspensive condition

The creditor may, before the fulfilment of the condition, take appropriate actions to preserve his
right. Such actions include the following:

a. Filing a court action to prevent debtor from deliberately alienating, destroying, or concealing
the property
b. Recording the expected right with the Register of Deeds to give notice to the third persons
c. Asking for security from the debtor if he is about to become insolvent, such as requiring the
debtor to provide a survey for the debt.

2. Debtor’s right to recover payment made before fulfilment of condition

a. If the debtor paid believing that the condition had been fulfilled, i.e. by mistake, then he can
recover the payment as this is a case of solution indebiti. He shall also be entitled to the fruits
or legal interest if the creditor accepted the payment in bad faith.
b. If he paid with knowledge that the condition has not yet been fulfilled:
1) If the condition is eventually fulfilled, then he can no longer recover the payment, as
fulfilment of the condition entitles the creditor anyway to demand performance of the
obligation
2) If the condition is not fulfilled, then he shall be entitled to recover, except if his making the
payment is equivalent to a waiver of the condition.

Art. 1189

1. Application of the provision

The provision applies only if:

a. The object of the obligation is determinate

b. The loss, deterioration or improvement take s place before the fulfilment of the condition ;and
c. The obligation is subject to a suspensive condition which is eventually fulfilled
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 2. Loss of the thing
a. When thing is considered lost
1) When it perishes, such as when a particular house is completely razed in a fire;
2) When it loss out of commerce, such as when a food item is banned because of its harmful
side effects; or
3) When it disappears in such a way that its existence is unknown, or it cannot be recovered,
such as when a specific ring is misplaced and it cannot be located, or it is dropped at the
bottom of the ocean.
b. Rules in case of loss
1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished. This
is based on the rule that no person shall be responsible for the fortuitous event and the
object being determinate, cannot be replaced.
2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages.

3. Deterioration of the thing

a. When there is deterioration of the thing
There is deterioration if the thing becomes impaired in quality, functioning or condition.
b. Rules in case of deterioration
1) If the thing deteriorates without the fault of the debtor, the impairment shall be borne by
the creditor
2) If the thing deteriorates through the fault of the debtor, the creditor may choose between
the rescission of the obligation and its fulfilment, with a right to damages in either case.

4. Improvement of the thing

a. When there is improvement of the thing
There is improvement in the thing if there is enhancement in its value or quality, such as
when something is added or attached to it.
b. Rules in case of improvement
1) If the thing is improved by its nature, or by time, the improvement shall insure to the
benefit of the creditor. This is to compensate the creditor who would otherwise suffer in
case the thing deteriorates without the debtor’s fault.
2) If the thing is improved at the expense of the debtor, he shall have no other right than that
granted to the usufructuary. Usufruct is the right to enjoy the property of another with the
obligation of preserving its form and substance. The debtor may remove the
improvements provided he does not cause damage to the thing. Otherwise, he must
deliver the thing in its improved condition to the creditor without any right to
reimbursement. He may however set off the improvements against any damage caused
on the thing.

Art. 1190

1. Effects of fulfilment of a resolutory condition in conditional obligation to give

a. The obligation will be extinguished
b. The parties shall return to each other what they have received unless a contrary intent
appears
c. In case of loss, deterioration or improvement of the thing, the provisions of article 1189 shall
be applied to the party who is bound to return

2. Effects of fulfilment of resolutory condition in conditional obligation to do and not to do

The courts shall determine, in each case, whether or not to give the extinguishment of the
obligation any retroactive effect.

Art. 1191

1. Application of the provision

The provision of Art. 1191 is applicable only to reciprocal obligations. A reciprocal obligation is
one that arises from the same cause and in which each party is a debtor and a creditor of the
other, such that the obligation of one is dependent upon the obligation of the other. Reciprocal
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 obligations are to be performed simultaneously so that the performance of one is conditioned
upon the simultaneous fulfilment of the other. If one party performs his obligation but the other
does not, the party performing his obligation suffers injury by reason of the delay.

2. Remedies of the injured party

a. Rescission with damages
The remedy of rescission (more appropriately referred to as “resolution”) in reciprocal
obligations is implied; hence, it is not required to be stipulated. The rescission is on the
breach of faith of one of the parties which is violative of the reciprocity between them. The
availment by the injured party of this right, however, is subject to the following limitations:
1) The obligation is not automatically rescinded by reason of one party’s non-fulfilment of his
obligation. In the absence of stipulation, a party cannot unilaterally and extra-judicially
rescind a contract. A judicial or notarial act is necessary before a valid rescission or
resolution can take place.
2) Rescission is not available if there is a just cause for the fixing of the period within which
the debtor can comply with his obligation.
3) Rescission is not available if the thing subject matter of the obligation is already in the
possession of a third person who acquired it in good faith.
4) Recession will not be granted if there is a slight or casual breach of the contract. It will be
allowed only for such breaches which are as fundamental or substantial as to defeat the
purpose of the parties in making the agreement.
b. Fulfilment of the obligation with damages

3. Nature of remedies
The remedies of rescission and fulfilment may be availed of by the injured party in the alternative.
He cannot ask for both. If he has chosen recession of the obligation, he can no longer ask for
fulfilment. However, he may also seek recession, even after he has chosen fulfilment, if the latter
becomes impossible.

4. Agreement for automatic cancellation valid

There is nothing in Art. 1191 that prohibits the parties from entering into an agreement that a
violation of the terms of the contract would cause its cancellation even without court intervention.
The rationale for the foregoing is that in contracts providing for automatic revocation, judicial
intervention is necessary not for purpose of obtaining a judicial declaration rescinding a contract
already rescinded by virtue of the agreement providing for rescission even without judicial
intervention, but in order to determine whether or not the rescission was proper. Where such
propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it
is not itself the revocatory act.

Art. 1192

1. When it can be determined who first violated the contract

The liability of the first infractor shall be equitably tempered or reduced. This rule is fair because
the second infractor also derived or thought he would derive some advantage by his own act or
neglect.

2. When it cannot be determined who first violated the contract

The contract shall be extinguished. This rule is likewise just, because it its presumed that both at
about the same tried to reap some benefit.

OBLIGATION WITH A PERIOD

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Art. 1193

1. Obligation with a period, concept

An obligation with a period is one whose demandability or extinguishment is subjected to the
expiration of the term which must necessarily come. In other words, there is a day certain when
the obligation will arise or cease.

2. Period and day certain, concept

Period is a space of time which determines the effectivity or extinguishment of an obligation.
Thus, the space of time between August 01, 2015 and December 01, 2015 is a period the lapse
of which will cause an obligation to arise or cease.

A day certain is that which must necessarily come although it may not be known when. An
example is the death of a person which must necessarily come although it may not be known
when.

3. Period distinguished from condition

a. As to fulfilment
A condition is an uncertain event; while a period is an event which is certain to happen at a
date known beforehand, or at a time which cannot be determined.
b. As to influence on obligation
A condition causes an obligation to arise or cease, while a period merely fixes the time for the
efficaciousness of an obligation
c. As to time
A period always refers to the future, while a condition may refer to a past event unknown to
the parties
d. As to the will of the debtor
A period that depends upon the will of the debtor authorizes the court to fix its duration, while
a condition that depends upon the will of the debtor, which is suspensive shall annul the
obligation.

4. Kinds of period
a. According to effect
1) Suspensive period (Ex die) – it is one the expiration of which causes the obligation to
arise. An obligation with a suspensive cannot be demanded until the expiration of the
term. (Ex die, Latin for “from a certain day”)
2) Resolutory period (In diem) – it is one the expiration of which causes the extinguishment
of the obligation. An obligation with a resolutory period is demandable at one but is
terminated upon the expiration of the term. (In diem, Latin for “until a certain day”)
b. According to source
1) Legal period – period fixed by law
2) Voluntary period – period fixed by stipulation of the parties
3) Judicial period – period fixed by the court

Art. 1194- Art. 1195

1. Application of the provision

The provision is applicable only to an obligation to give a thing. It does not apply to obligations to
do and not to do.
2. Effect of payment before expiration of term or period
a. If the debtor made the payment believing that the period has arrived, he may recover what he
has paid with its fruits and interest. This is based on the quasi-contract of solutio indebiti.
Thus, if an obligation due on December 31, 2015 is paid by mistake on December 31, 2014,
the debtor can recover the amount paid together with the interest from the date of payment.

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 b. If the debtor made the payment with knowledge of the period or with knowledge that the
period has not arrived, he cannot recover what he has paid or delivered. Bu making the
payment or delivery, he is deemed to have impliedly waived the benefit of the period.

Art. 1196

1. Party benefited by period

The period is presumed to have been established for the benefit of both and debtor and the
creditor, unless from the tenor of the obligation or other circumstances it should appear that the
period has been established for only one of them.

2. Effect if period is for the benefit of both parties

If the period is for the benefit of both parties, the creditor cannot demand payment form the
debtor, and the debtor cannot compel the creditor to accept payment, before the expiration of the
period.

3. When period is for the benefit of one of the parties

a. Benefit of the debtor
The period is for the benefit of the debtor if the parties so stipulated or it can be inferred from
the tenor of the obligation that the period was established for the benefit of the debtor, such
as when the debt is “payable within one year” or “payable on or before December 31, 2015.
Here, the debtor may make payment before the expiration of the term or wait for the last day
of the term to make his payment. However, he cannot be compelled by the creditor to make
payment before the expiration of such term.

b. Benefit of the creditor

The period is for the benefit of the creditor if the parties so stipulated or it can be inferred from
the tenor of the obligation that the period was established for the benefit of the creditor, such
as when the debt is “collectible on or before December 31, 2015. Here, the creditor may
demand payment from the debtor before the expiration of the term or wait up to the last day of
the term to demand payment. However, he cannot be compelled by the debtor to accept
payment before the expiration of the term.

Art. 1197

1. When the court may fix the period

a. If the obligation does not fix a period, but from its nature and the circumstances it can be
inferred that a period was intended.
b. When the duration depends upon the will of the debtor

2. Effect of period fixed by the court

When the period is fixed by the court, the period becomes part of the agreement of the parties;
hence, the court cannot change it without the consent of the parties.

3. When the court may not fix the period

If no term was specified in the obligation and the parties did not intend a period, the court has no
right to fix it, such as when the obligation is a pure one and demandable at once.

Art. 1198

1. Effect when debtor loses the benefit of the period

The benefit of the period may be established for the benefit of the debtor; hence, the creditor may
demand payment from him only upon the expiration of the term. However, if the debtor loses the
benefit of the period, the obligation becomes a pure obligation and is immediately demandable.

2. Cases when the debtor loses the benefit of the period

a. .The insolvency of the debtor does not require judicial declaration. It is sufficient that he has a
hard time paying his debts. Since the debtor is insolvent, the security may be provided by
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 third persons, such as when another person constitutes a real mortgage on his lot to secure
the debt.
b. When he does not furnish the guaranties or securities that he has promised
c. When by his own acts he has impaired such guaranties or securities after their establishment,
and when through a fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory.
d. When he violates any undertaking in consideration of which the creditor agreed to the period.
e. When the debtor attempts to abscond
To abscond is to depart secretly and hide oneself. It is not essential that the debtor actually
absconds in order for him to lose the benefit of the period. It is sufficient that there is an intent
or attempt on his part to abscond.

MR. ROBERTO G. FORTES, LL.B,MPA

Contact Number: 0906-4512310

0938-6048649

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