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1. For whose benefit is the term period presumed to have been established?

Art. 1196. Whenever in an obligation a period is designated, it is presumed to

have been established for the benefit of both the creditor and the debtor, unless
from the tenor of the same or other circumstances it should appear that the
period has been established in favor of one or of the other.

General Rule
Term is for the benefit of debtor or creditor. (Meaning: The debtor cannot pay
prematurely and the creditor cannot demand prematurely).

This Article applies only where the parties to a contract themselves have fixed a
period, and not to a case where the parties have authorized the Court to fix a
reasonable term.

Exceptions (if there be such intent)

(a) Term is for the benefit of debtor alone. [Meaning: He is required to pay only at
the end, but he may pay even before.

(b) Term is for the benefit of the creditor alone. (Meaning: Creditor can demand at
any time even before the term expires, and he cannot be compelled to accept
payment from the debtor prior to the stipulated period.

2. Within What Period Must the Action to Fix the Period Be Brought? (Art.
1197 / Comment #5)
Within the proper prescriptive period for specific performance if a period had
been originally fixed, but to be counted from the perfection of the contract. This is
because the right exists by operation of law from the moment of such agreement.
Extrajudicial demand is not therefore essential for the creation of the cause of
action to have the period fixed.

How the Court Fixes the Period? (Art. 1197 / Comment #6)

The Court determines the period by considering the time probably contemplated
by the parties. (Art. 1197). Once the period is fixed by the courts, the period
becomes part of the contract, thus the courts cannot change it. (Ibid.). The same
is true if the period is fixed in a compromise agreement approved by the Court.
This is because the compromise agreement acquires the same force and effect
as the decision. The parties may of course change the period by mutual
agreement, or may even disregard the in which case, the obligation becomes a
pure one, and demandable at once. (See Art. 1197).

3. Today, A owes B P1,000.00 demandable in November 5, 2018. In December

2016 A becomes insolvent. When is the debt demandable? Why?
The debt is immediately demandable in December, 2016 unless A can offer
sufficient security. The insolvency referred to does not have to be judicially
declared; it is sufficient for him to find a hard time paying off his obligations
because of financial reverses that have made his assets less than his liabilities.
If there happens to be a moratorium law, the debtor who happens to be insolvent
can still take advantage of said moratorium, which is really a term or an
extension of a period, because a moratorium is precisely made to aid those who
are insolvent.

4. In alternative obligations, who has the right of choice; when shall the
choice take effect? What are the limitations on a debtors right of choice?
and when shall he lose his right of choice?

As a general rule, the right belongs to the debtor. By way of exception it may
belong to the creditor when such right has expressly been granted to him. (Art.

(Art. 1201) The choice shall produce no effect except from the time it has been
(Art. 1200) The debtor shall have no right to choose those prestations which are:
(a) impossible
(b) unlawful
(c) or which could not have been the object of the obligation.
Art. 1202. The debtor shall lose the right of choice when among the prestations
whereby he is alternatively bound, only one is practicable.

5. D is obliged to give C either Object No. 1 or Object No. 2 or Object No. 3 at

Cs option. Before C communicated his choice to D, object No. 1 had been
destroyed through Ds fault and object No. 2 had been destroyed by a
fortuitous event. What are the rights of C, if any? (Art. 1205, Comment # 2)
ANS.: C can demand:
(a) either object No. 3 (which is still there);
(b) or the price of object No. 1 (with damages, in either case, because C has
been deprived of the right to select).
But C cannot ask for the value of object No. 2 since this was lost fortuitously.

6. Effect if Creditor Delays in Making the Choice ? (Art. 1205, Comment # 3)

If the creditor delays in choosing, he cannot yet hold the debtor in default,
notwithstanding the lapse of maturity, for the debtor does not know what to
deliver. Upon the other hand, if the debtor wants to relieve himself, he may
petition the court to compel creditor to accept, in the alternative, at the creditors
option, with resultant damages if any.

7. Distinctions between ALTERNATIVE AND FACULTATIVE obligation. (Art.

1206 / Comment #2)
(a) First, by example:
1) ALTERNATIVE D will give object No. 1 or object No. 2. If object No. 1 is lost
by a fortuitous event, D will still have to give object No. 2.
2) FACULTATIVE D will give object No. 1 but if D wants, he may give object
No. 2. If object No. 1 is lost by a fortuitous event, the obligation is extinguished
(because the principal object has been lost), and D does not have to give object
No. 2.
(b) Second, in theory.
(1) Various things are due, but the giving (1) Only one thing is principally due, and
of one is sufficient. it is that one which generally is given, but
the other (the substitute) may be given to
render payment or fulfillment easy.
2) If one of the prestations is illegal, the (2) If the principal obligation is void, and
others may be valid and the obligation there is no necessity of giving the
remains. substitute. (The nullity of the principal
carries with it the nullity of the accessory
or substitute. this principle may by
analogy be applied.)
(3) If it is impossible to give all except (3) If it is impossible to give the principal,
one, that last one must still be given. the substitute does not have to be given;
if it is impossible to give the substitute,
the principal must still be given.
(4) The right to choose may be given (4) The right of choice is given only to the
either to debtor or creditor. debtor.

Query (Art. 1206 / Comment #3)

The law says that the loss or deterioration of the thing intended as a substitute,
thru the negligence of the obligor, does not render him liable. (This is because
the debtor can always select the principal, and not necessarily the substitute. And
it is understood that the sentence above applies before choice has been made.)
Suppose instead of loss thru negligence, loss of the substitute was done
deliberately should the debtor be now held liable?
ANS.: Still no, since he can always comply with the principal obligation.

8. A, B, and C are joint debtors of D to the amount of P9, 000.00. How much
can D demand from A? Why? Suppose the debtors are solidary, how much
can D demand from A? Why? Suppose further that B is insolvent, who will
shoulder the share of B? (Art. 1207)
D can demand P3,000.00 from A, because In a joint obligation each obligor
answers only for a part of the whole liability and to each obligee belongs only a
part of the correlative rights. (Joint Obligations)

If the debtors are solidary, D can demand the whole of P9,000.00 from A. A in
turn, after paying D, can ask reimbursement from B and C to the amount of
P3,000.00 each. Because in a solidary or joint and several obligation, the
relationship between the active and the passive subjects is so close that each of
the former or of the latter may demand the fulfillment of or must comply with the
whole obligation. (Solidary Obligations)

If B is insolvent, and since it is a Solidary obligation, Bs share shall be

shouldered by A and C.
9. What are some Instances Where the Law Imposes Solidary Liability? (ART.
1207/Comment #4)
(a) obligations arising from tort
(b) obligations arising from quasi-contracts
(c) legal provisions regarding the obligations of devisees and legatees
(d) liability of principals, accomplices, and accessories of a felony
(e) bailees in commodatum

10. A and B are solidary debtors of C, D, E, and F, joint creditors to the amount
of P1,000,000. How much can C recover from A?
ANS.: Since C is only a joint creditor, he can only recover his share which is
P250,000 from A, a solidary debtor. (NOTE: Had C been solidary creditor, he
could have recovered P1,000,000 from A; had A been a joint debtor, and C, also
a joint creditor, C could have recovered only P125,000 from A.)

11. What is the nature of the liability of partners? (Art. 1208 / Comment #6)
Liabilities of Partners
(a) If it arises out of a contract, the liability is joint or pro rata.
Exception if the dependents of an employee claim compensation for the
employees death in line of duty.

(b) If it arises out of a crime or a quasi-delict, the liability is solidary (together with
the partnership).
12. Example of a case when solidarity may exist even when the creditors and
the debtors are not bound in the same manner:
A and B solidarily bound themselves to pay a total of P1,000,000 to C, D, and E
subject to the following conditions and terms: Cs share will be due at the end of
the year; D will get his share only if he passes the bar; and E will get his share
only after he (E) has painted the house of X. Here, the obligation is still solidary.

In the example given, when will this solidary obligation be due and
ANS.: The obligation is still solidary but Cs share will only be due and
demandable at the end of the year, and E and Ds shares will be due and
demandable only upon the fulfillment of the condition.
Supposing the obligation is to be subject to different terms and conditions, the
following is the solution:
The creditor may recover that part which is pure and unconditional, and should
leave in suspense or pending, the right to demand the payment of the remainder
until the expiration of the term or the fulfillment of the condition. Solidarity is still
preserved by recognizing in the creditor the power, upon the fulfillment of the
condition or the expiration of the term, of claiming from any or all of the debtors,
that part of the obligation effected by these conditions.

13. A and B are solidary debtors of C to the amount of P1, 000.00. The debt
prescribed. But A voluntarily paid C, nevertheless because A felt morally
obliged to pay. (ART 1219 / Comment # 1)
a) May A recover from C what he has paid? Why?
b) May A get any reimbursement from B? Why?
(a) A cannot recover from C what he has paid because it was voluntarily given
after A knew of the prescription of the debt. The law says, when a right to sue
upon a civil obligation has lapsed by extinctive prescription, the obligor cannot
recover what he has delivered or the value of the service he has rendered.
(Art. 1424, Civil Code).
(NOTE: If payment had been made by A to C, without A knowing that the debt
had prescribed, A can recover from C on the basis of solutio indebiti.)

(b) A cannot get any reimbursement from B because A paid the debt after it had
prescribed. The law says, Payment by a solidary debtor shall not entitle him
to reimbursement from his co-debtors if such payment is made after the
obligation has prescribed or become illegal. (Art. 1218, Civil Code).

14. What is meant by joint indivisible obligation and give its effect of non-
compliance? (ART. 1224)
Joint Indivisible Obligation
(a) Here the object is indivisible and yet the parties are merely bound jointly.
(b) Example: Mila and Ligaya are jointly bound to give a specic car to Jose.

Effect of Non-Compliance
(a) The obligation is converted into a monetary one for indemnity.

(b) Example: Mila and Ligaya promised jointly to give a specic car worth
P2,400,000 to Jose. In the meantime, the car is with Honda Motors Co. Milas
share is, therefore, P1,200,000. If Mila, because of gambling, does not have the
money, but Ligaya has P1,200,000 it is clear that they cannot get the car from
Honda Motors Co. So they also cannot comply with their obligation of delivering
the car to Jose. Here, the obligation to give the car is converted to a monetary
obligation to give P2,400,000 to Jose. Ligaya is not responsible for Milas
insolvency, so she is duty bound to give only P1, 200,000. Mila will be indebted
to Jose for her share of P1, 200,000.

(c) Suppose in the preceding problem, the obligation was SOLIDARY and
INDIVISIBLE, what would be the effect?
ANS.: Jose can demand the whole car or its price of P2, 400,000 from Ligaya
alone, but Ligaya can later recover reimbursement from Mila.

15. May Any Penalty Be Demandable? (ART. 1226)

ANS.: No. The penalty may be enforced only when it is demandable in
accordance with the provisions of the Civil Code, one of which states that the
penalty may be reduced if it is inequitous or unconscionable. (Art. 1229, Civil

16. What is the general rule on a debtor substituting Penalty for the Principal
Obligation? (ART. 1227)
The general rule is that the debtor is not allowed to just pay the penalty instead of
fullling the obligation. He can only do so if the right has been EXPRESSLY
reserved. The reason is that if he can just pay, fulllment of the obligation will be
considered an alternative one. The word EXPRESSLY means that any implied
reservation is not allowed.

17. What is the effect of nullity of the penal clause or of the principal
Effect of Nullity of the Penalty Clause
If the principal obligation is null and void, the penal clause will have no more use
for existence and is therefore also considered null and void. Upon the other
hand, just because the penal clause is not valid, it does not mean that its nullity
will also make the principal obligation null and void. Reason: The principal
obligation can stand alone, and the void penal clause will just be disregarded.

18. How payment or performance is made?

(a) If the debt is a monetary obligation, by delivery of the money. The amount
paid must be full, unless of course otherwise stipulated in the contract.
[NOTE: The term indebtedness has been dened as an unconditional and
legally enforceable obligation for the payment of money. Within that denition,
it is apparent that a tax may be considered an indebtedness.
(b) If the debt is the delivery of a thing or things, by delivery of the thing or things.
(c) If the debt is the doing of a personal undertaking, by the performance of said
personal undertaking.
(d) If the debt is not doing of something, by refraining from doing the action.

19. Is a creditor bound to accept payment from a third person and if payment is
so received what are the rights of the paying third person? (ART. 1236)

Right of Creditor to Refuse Payment by Third Person

The creditor can refuse payment by a stranger (3rd person)
(a) if there is a stipulation allowing this;
(b) or if said third person has an interest in the ful llment of the obligation (co-
debtor, guarantor, even a joint debtor).

20. To whom shall payment be made? (ART. 1240)

(a) to the person in whose favor the obligation has been constituted (the
This refers to the creditors at the time of payment, not the original creditor at
the time the obligation was constituted.
(b) to the successor-in-interest (like the heirs);
(c) to any person authorized to receive it.
The authorization may be by agreement or by law.
If the recipient was not authorized, the payment generally is NOT valid
(without prejudice to Art. 1241 of the New Civil Code)

21. A owes B P100,000.00. C in behalf of A pays P100,000.00 against the

consent of A, although C had previously told A that he (C) did not intend to
be reimbursed. B accepted the payment by C in behalf of A. (ART. 1238)
a) Is As obligation towards B extinguished? Why?
b) May C still recover from A? Why?
(a) Yes, As obligation toward B is extinguished even if A did not consent to the
donation. The law says: But the payment is in any case valid as to the creditor
who has accepted it. (2nd sentence, Art. 1238, Civil Code).

(b) Yes, C may still recover from A, although originally C did not intend to be
reimbursed. This is so because here there has been no real donation. However,
inasmuch as the payment by C had been effected against the will of A, all that C
can recover from A is to the extent that A has been bene ted by Cs payment to
B in As behalf.

22. Distinguish dation in payment from payment by cession?

a) does not affect ALL the properties a) in general, affects ALL the properties of
the debtor
b) does not require plurality of creditors b) requires more than one creditor
c) only the specic or concerned creditors c) requires the consent of all the creditors
consent is required
d) may take place during the solvency of d) requires full or partial insolvency
the debtor
e) transfers ownership upon delivery e) does not transfer ownership
f) this is really an act of novation f) not an act of novation

23. Is the parties stipulation to pay an obligation in a foreign currency valid?

Give reason. (ART. 1249)

24. Where is payment to be made? (ART. 1251)

(a) If there is a stipulation in the place DESIGNATED
(b) If there is no stipulation
1) If it is an obligation to deliver a determinate specific thing, then in the
place where the thing might be (usually or habitually) at the time the
obligation was CONSTITUTED. (If merely temporarily there, as when the
object is being shipped or is already in the ocean, payment should be at
the domicile of the debtor.)
2) If the obligation is any other thing (as when it is to deliver a generic
thing, or to give money, or a personal obligation), delivery must be made
at the domicile of the debtor.
25. Give the requirements for application of payment and how it is being
Requirements for Application of Payment:
(a) there must be two or more debts (severalty of debt);
(b) the debts must be of the same kind;
(c) the debts are owed by the same debtor in favor of the same creditor (thus,
there must be only one debtor and only one creditor);

How Application of Payment Is Made

First Rule - The debtor makes the designation. (Art. 1252, par. 1, Civil
Second Rule - If not, the creditor makes it, by so stating in the receipt that
he issues, unless there is cause for invalidating the contract. (Art. 1251,
par. 2, Civil Code); Thus, if the obligation itself is void, the application and
the payment are also void. If the debtors consent in accepting the receipt
was vitiated as by fraud, error, or violence the application is not
valid, i.e., it is voidable.
Third Rule - If neither the debtor nor the creditor has made the application,
or if the application is not valid, then application is made by operation of
law. (Arts. 1253 and 1254, Civil Code).
Fourth Rule - if application cannot be inferred from other circumstances,
the debt which is most onerous to the debtor, among those due, shall be
deemed to have been satised. (ART. 1254)

26. Is a debtor allowed to withdraw the thing or sum consigned? Give the
effects of its withdrawal?
The withdrawal by the debtor is a matter of PRIVILEGE.
Effects of its withdrawal:
(a) The obligation remains.
(b) The creditor loses any preference (priority) over the thing.
(c) The co-debtors, guarantors, and sureties are RELEASED (unless they

NOTE: The co-debtors referred to are the solidary co-debtors, not the joint ones, for
their liabilities are distinct.

NOTE: Regarding the solidary co-debtors, they are released only from the solidarity, not
from their own individual shares, since unlike guarantors or sureties, the solidary co-
debtors are in themselves PRINCIPAL debtors.)

27. A commits the crime of theft and is asked to return the car stolen to its
owner B. If before the car is delivered to B, it is destroyed by fortuitous
event, is As liability extinguished? Why? (ART.1268)

ANS.: No, As liability is not extinguished.

Reason: As obligation to deliver the car arose from a criminal offense, and in
such a case, the rule is, he is liable even if the loss occurs because of a
fortuitous event. The only exception to the rule is when the creditor (the offended
party in the crime) is in MORA ACCIPIENDI.

28. Give the reasons Why Dation in Payment Is Governed by the Law of Sales
(ART.1245 / Comment # 4)

This is so because dation in payment the transfer or conveyance of ownership

of a thing as an accepted equivalent of performance really partakes in one
sense of the nature of sale, i.e., the creditor is really buying some property of the
debtor, payment for which is to be charged against the debtors debt. However, it
may also be called a novation. But sales and novation require common
29. What are the Essential Requisites for Consignation? (ART. 1257, Comment
(a) existence of a valid debt
(b) valid prior tender, unless tender is excused
(c) prior notice of consignation (before deposit)
(d) actual consignation (deposit)
(e) subsequent notice of consignation

30. What are the Special Forms of Payment ? (ART. 1252 / Comment #1)
There are four special forms of payment:
(a) application (or imputation) of payments (Art. 1252, Civil Code);
(b) dation in payment (adjudicacion en pago or datio in solutum) (Art. 1245,
Civil Code);
(c) assignment in favor of creditors (cession) (Art. 1255, Civil Code);
(d) tender of payment and consignation (Arts. 1256-1261, Civil Code).

31. What are the Requisites for Voluntary Assignment? (ART. 1255)
(a) more than one debt;
(b) more than one creditor;
(c) complete or partial insolvency of debtor;
(d) Abandonment of all debtors property not exempt from execution (unless
exemption is validly waived by debtor) in favor of creditors;
(e) acceptance or consent on the part of the creditors (for it cannot be imposed
on an unwilling creditor).