Suspensive vs Resolutory

Suspensive Resolutory
Condition precedent
Results in the acquisition of rights arising out of
the obligations
The happening of the condition gives birth to the
obligation.
If the condition is not fulfilled, no juridical tie is
created.
What is acquired by the obligee in the
constitution of the obligation is only mere hope
and expectancy, protected by law.
Condition subsequent
Results in the extinguishment of rights arising
out of the obligations
The happening of the condition extinguishes
obligation
If the condition is not fulfilled, juridical relation is
consolidated.
What is acquired by the obligee in the
constitution of the obligation are rights that are
subject to threat or danger of extinction.

Effects of Suspensive Condition (Art. 1188)

Before Fulfillment After Fulfillment

Demandability as well as the acquisition or
effectivity of rightsarising from theobligation is
suspended.
The right of the creditoris mere hope
&expectancy.
The obligation arises and becomes effective.
The right of the creditor is perfected. (becomes
effective & demandable)
Effects are retroactive (applicable only to
consensual contracts)

Alternative Obligations
(Art. 1200)
General rule: The right of choice belongs or pertains to the debtor.
***Once the debtor has made the choice, and such choice is duly communicated to the creditor, the
obligation becomes simple.

Exceptions:
• When the right of choice belongs or pertains to the creditor
• When it has been expressly granted to a third person.

Limitation to the right of choice:

• Debtor cannot choose those prestations or undertakings that are impossible, unlawful, or which
could not have been the object of the obligation.
“Prestations which could not have been the object of prestation”
• Undertakings that are not included among others those from which the obligor may select, or
• Those which are not yet due and demandable at the time the selection is made, or
• Those by reason of accident or some other cause, have acquired a new character distinct or
different from that contemplated by the parties when the obligation was constituted.

Facultative Obligations
(Art. 1206)
Facultative obligation- obligation wherein only one object or prestation has been agreed upon by
the parties to the obligation, but which may be complied with by the delivery of another object or
the performance of another prestation in substitution.
Facultative vs Alternative
Only one object Object due Several objects
By the delivery of another object or by compliance By the delivery of one of the objects or
the performance of another prestation in by the performance of one of the
substitution prestations which are alternatively
due.
Pertains only to the debtor choice May pertain to the debtor, or creditor,
or third person
Loss or impossibility of the object Effect of Loss of all the objects of prestation is
extinguishes the obligation fortuitous necessary to extinguish the obligation
loss
Does not give rise to liability on the part Effect of May give rise to a liability on the part
of the debtor culpable of the debtor
loss

Art. 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does
solidarity of itself imply indivisibility.

Indivisibility and Solidarity

• Indivisibility and Solidarity are not identical

Differences:
Indivisibility Solidarity
As to Nature Refers to the prestation which Refers to the legal tie or vinculum,
constitutes the object of the obligation and consequently, to the subjects or
parties of the obligation
As to requisites Plurality is not required Plurality is indispensable

As to effect of When the obligation of converted into When there is liability on the part of
breach one of indemnity for damages the debtors because of breach, the
because of breach, indivisibility of the solidarity among debtors remains
obligation is terminated

Art. 1211. Solidarity may exist although the creditors and the debtors may not be bound in the same
manner and by the same period and conditions.

Kinds of Solidarity

1. Active (among creditors)

a. Definition: a tie existing among several creditors of one and the same obligation by
virtue of which each of them, possesses the character of creditor only with respect to
his share in the obligation, but in relation to the common debtor or debtors,
represents all of the other creditors
2. Passive (among debtors)
a. Definition: a tie existing among several debtors of one and the same obligation, in
relation to his co-debtors, possesses the character of debtor only with respect to his
share to the obligation, but in relation to the common creditor or creditors, represents
all of the other debtors.
3. Mixed (among creditors and debtors)

Effect of Active Solidarity in general

 Creation of a relationship of mutual agency among solidary creditors

 Creditor is empowered to exercise against the debtor or debtors not only for his rights but
also the rights which correspond to other creditors
  Consequence: Obligation of the one creditor to render an accounting of his acts to such
creditors

Effect of Passive Solidary in general

 Liability of debtor for the payment of the entire obligation, with consequent right to demand
reimbursement from the others for their corresponding shares once payment has been
made.
 Reason: Debtor in respect to the creditor is the debtor of the entire amount of obligation, but
in respect to co-debtors, the debtor is only liable to his share in the obligation

Distinguished from suretyship

 Solidary Guarantor (fiador in solidum): is a person who binds himself solidarily with the
principal debtor

Solidary Debtor Solidary Guaranty

Liable not only for the payment of the debt of
another, but also for the payment of a debt which
is properly his own
If solidary debtor pays the entire amount of
obligation, he has the right to reimburse the
amount which corresponds to the share of his
co-debtors
Rights are more limited
(extension of time granted to one of the debtors
without the consent of the others would not effect
of releasing the other debtors from their
obligation)
Has no other rights than those bestowed upon
him in Sec 4 Chapter 3 of this code.
If a surety pays the entire amount of obligation
he has a right to demand reimbursement from
the principal debtor of the entire amount that he
has paid
More Rights (an extension granted to the
principal debtor would release the surety from
the obligation)
Outside of the liability he assumes to pay the
debt before the property of the principal debtor
has been exhausted, retains all rights, actions
and benefits which pertains to him by reason of
the fiansa

Effect of varied conditions or periods

 The vinculum or bond in solidary obligations may be either uniform or varied

 The relationship of solidarity is not destroyed by the fact that the obligation of one debtor is
conditional, the obligation of another is with a term or period, and the obligation of a third
is pure
 The character of solidary is not destroyed if the debtors are bound by different conditions
or by different periods.

Illustration:

A, B and C borrowed 60,000 from X binding themselves jointly and severally, and stipulated that in
case A shall be demandable on June 15, 1972, in case of B June 15, 1974 and in case of C June 15
1976. X proceeds against A despite repeated demands.

X can collect 20,000 from A his share from the obligation, and then wait until the period is reach.
Case in Point: Inchausti & Co. vs Yulo

Quick Facts:

 Defendants 6 brothers and sisters executed an instrument admitting their solidary

indebtedness to the plaintiff for 253,446.42 at 10% interest per annum payable in 5 annual
installments the first payable on June 13, 1910
 The Defendants defaulted> plaintiff brought an action against Gregorio Yulo for the entire
indebtedness plus interest in accordance in the acceleration clause
 3 debtors (Francisco, Manuel, Carmen) entered into agreement reducing the obligation to
225,000 at 6% int per annum payable in 8 yrs first installment on Jun 30 1912

Can the plaintiff sue Gregorio Yulo alone considering that there are other debtors?

Answer: the debtors, having obliged themselves in solidum, the creditor can bring its action in toto
against any one of them. The new agreement with the 3 other debtors do not change the nature of
the obligation, as well settled, “solidarity may exist even though the debtors are not bound in the
same manner and for the same periods and under the same conditions.”

What is the effect of the partial remission of the debt made by the creditor in favor if the 3 debtors?

Answer: the effect of the partial remission made by the creditor in favor of one or more of the
solidary debtors necessarily benefit the others, therefore the defendant has the right to enjoy the
benefits of the partial remission of the debt granted by the creditor.

What is the effect of the extension of time for payment granted by the creditor to the three of the
debtors?

Answer: Gregorio cannot allege as a defense to the action that it is premature. When they have
defaulted in their very first installment, the whole obligation have already been matured.
Art. 1212. Each on of the solidary creditors may do whatever may be useful to the others, but not
anything which may be prejudicial to the latter.

Effect of Beneficial and Prejudicial Act

 As consequence of mutual agency, each one of the creditors may do whatever may be
useful or beneficial to the others but not anything which may be prejudicial to the latter
 As far as debtor or debtors are concerned, a prejudicial act performed by a solidary creditor
shall be valid and binding because of the principle mutual representation
 As far as the creditors are concerned, the creditor who performed the act shall incur the
obligation of indemnifying the others damages

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

Effect of Assignment of Rights

 A solidary creditor cannot assign his rights without the consent of the others.
o Reason:
 If the assignment is made to anyone of the other solidary creditors, there is no violation of
the precept in Art. 1213
 If the assignment is made to a third person there is a clear violation
Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or
extrajudicial, has been made by one of them, payment should be made to him.

Effect of Demand by a Creditor

 Any solidary creditor may demand the payment or performance of the obligation from one,
some or all of the debtors
 Demand may be judicial or extra-judicial
 Payment shall only be made to the creditor who made the demand
 In the absence of demand (judicial or extra judicial) payment may be made by the debtor to
anyone of the solidary creditors

Art 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary
creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the
provisions of Art 1219.

The creditor who may have executed any of these acts, as well as he who collects the debt, shall be
liable to the others for the share in the obligation corresponding to them.

Effect of Novation

 Definition: is the change or substitution of an obligation by another, resulting in its

extinguishment or modification,
 Methods:
o Either by changing its object or principal condition,
o Or by substituting another in place of the debtor,
o Or by subrogating a third person in the rights of the creditor.
 It may extinguish the obligation, but it creates a new one in lieu of the old obligation.
Ways of Novation:
1. If Novation is effected by changing its object or principal condition
a. The new obligation may be prejudicial or beneficial to the other solidary creditors
i. Prejudicial: the solidary creditor who affected the novation shall reimburse
the others for damages incurred by them
ii. Beneficial and creditor who affected novation able to perform: such creditor
shall be liable to the others for the share which corresponds to them
2. If Novation is effected by Substituting another person in place of the debtor
a. The solidary creditor who affected the novation is liable for the acts of the new debtor
in case there is deficiency in performance.
3. If the novation is effected by subrogating a third person in the rights of the solidary creditor
a. The obligation of the debtor or creditors is not in reality extinguished
b. The relationship of the other creditors and the debtor or debtors is maintained
c. Note: If the novation is effected by subrogating a third person in the rights of all
solidary creditors, the creditor responsible for such novation is liable to the other
creditors for the share which corresponds to them in the obligation.
 General Rule: extension of time for the payment of the obligation is given by the creditor to a
solidary debtor does not constitute a novation
o Reason: in order that an obligation may be extinguished by another, which
substitutes it, it is necessary that it should be so expressly declared or that the old
and new obligation are incompatible with each other on every point.
 In Suretyship: an extension of time granted to the principal debtor by the creditor without
the consent of the surety extinguishes the latter’s liability
o Exception: when a surety is liable for different payments, an extension of time as to
one or more will not affect the liability of the surety for the others.
Effect of Compensation and Confusion

COMPENSATION CONFUSION
DEFINITION Is a figurative Refers to the
operation of merger of the
weighing two qualities of
obligations creditor and
simultaneously in debtor in one
order to and the same
extinguish them person with
to the extent that respect to one
the amount of one and the same
is covered by the obligation.
amount of the
other
IF PARTIAL There may be some doubt as to the
part of the obligation to which the
confusion or compensation shall be
applied.
Remedy: apply the rules regarding
the payment of this code
IF TOTAL The obligation is extinguished
altogether and what is left is the
ensuing of liability for reimbursement
within each group.
As to the Creditor: the creditor
causing the confusion or
compensation is obliged to
reimburse to other creditors
As to Debtor: the debtors benefited
by the extinguishment of the
obligation being obliged to reimburse
the debtor who made the confusion
or compensation possible

Effect of Remission

Definition: is an act of pure liberality, the creditor without receiving any compensation or equivalent,
renounces his right to enforce the obligation, thereby extinguishing the obligation either in its entirety
or in the part or aspect thereof.

2 Kinds of Remission or Condonation

1. Total
2. Partial

Effect as to Creditor: gives rise to a liability on the part of the creditor or creditors responsible for the
remission to reimburse the other for the share in the obligation corresponding them.

Effect as to the Debtor:

 1. If remission covers entire Obli: obligation is totally extinguished and entire juridical relation
among debtors is also terminated. No reimbursement. If the whole obligation is condoned
through the efforts of a solidary debtor or for his benefit, he is not entitled to any
reimbursement from his co-debtor.
2. If the remission is for the benefit of one of the debtors and it covers his entire share in the
obligation, he is completely released from the creditor or creditors, but he is still bound to his
co-debtors. IF ONE OF THE DEBTOR IS INSOLVENT: the debtor whose obli is condoned is
bound for the share of the debtor who is insolvent
3. If the remission is for the benefit of one of the debtors and it covers only a part of his share:
the character of the debtor is not affected. IF CREDITOR PROCEED TO ANY ONE OF THE
DEBTOR FOR THE PAYMENT OF WHOLE OBLIGATION: such debtor can avail a defense
of partial remission.

EXCEPTIONS: is case the debt had already been totally paid by anyone of the solidary debtors
before the remission was affected, ABOVE RULES IS NOT APPLICABLE

Effect of Payment to a Creditor

 if one of creditor is able to collect the entire obligation from some of all of the debtors, the
obligation is totally extinguished. Gives rise to an obligation of the creditor to render an
account to his co-creditors.

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 directed against the others, so long as the debt has not been fully collected.

Effect of Demand upon a Debtor

 Anyone of the debtor can be held liable for the payment of the entire obligation, the creditor
may proceed against any one or some or all of the debtor simultaneously.
 The demand against one of them shall not be an obstacle to those which may subsequently
be directed against the others so long as the debt has not been fully collected
 The debtor cannot and should not complain that the creditor should thereafter proceed
against him to collect his credit.
 The fact that an action has been brought or that payment has been enforced against them
not being a bar thereto so ling as there remains a balance to collect.
 The failure or creditor to include the solidary guarantor or surety as a defendant in the first
suit does not implies a waiver of right of action against such surety
o A creditor’s right to proceed against the surety exists independently of his right to
proceed against the principal
 The obligation of the surety is the same as the principal: as soon as the principal is in default
so as the surety

Art 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more
solidary debtors offer to pay, the creditor my
choose which offer to accept.

He who made the payment may claim from hi co-debtors only the share which corresponds to each,
with the interest for the payment already made. If the payment is made before the debt is due, no
interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the
debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the
debt of each

Art 1218. 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.

Effect of Payment by a Debtor

 The effect is either the total or partial extinguishment of the obligation

 When one of the solidary debtors paid the whole or entire obligation immediately gives rise to
a right to claim from his co-debtors the share which corresponds to them
o NOT APPLICABLE: when the debtor makes the payment after the obligation has
prescribed or has become illegal
 General Rule on Computation of Interest: shall be computed from the time payment was
made.
 Exception: if the payment was made before the debt became due, no interest may be
demanded

Nature of Right of Debtor

 The right of solidary debtor who made the payment to demand reimbursement from his co-
debtor is merely contingent and conditional
 Once payment is made, obligation from creditor is extinguished, gives rise to a new
obligation by the co-debtor in favor of the debtor who made the payment
 There is no real case of subrogation

Case in Point:

Bank of the P.I vs. McCoy

52 Phil 831

Quick Facts:
 Bank instituted an action against McCoy and 6 other solidary debtors of the payment of
indebtedness of P16,000.
 McCoy entered into a compromise with Bank and paid 12,000 before the hearing

Issue: WON McCoy be substituted as Plaintiff to compel other debtors to reimburse to her their
proportionate share

Held: McCoy necessarily acquired the right to prosecute the action for contribution against her co-
defendants. It was a proper case of substitution of parties resulting from the subrogation of one of
the defendants to the right of the plaintiff.

Wilson vs. Berkenkotter

Quick Facts:
 Berkenkotter, Wilson and Gulick executed promissory note solidarily to pay their
indebtedness of 90,000 to the Chratered Bank of India, Australia and China with interest.
 Berkenkotter paid on Nov 1944
 Berkenkotter demanded reimbursement
  Wilson tendered 625.51 in accordance with the Ballantyne Schedule, Berkenkotter refuse to
accept
 Wilson deposited the amount to CFI of Manila
Issue: WON Ballantyne Schedule is applicable
Held: Ballantyne Schedule is applicable to obligations contracted during the Japanese occupation. If
the obligation is created during the Japanese occupation then its applicable, but if it was created
before the war, then its not applicable. When appellant paid the entire loan plus interest the whole
obligation was extinguished, the debtors were no longer liable with the bank instead a new obligation
was created in favor of the appellant

Art 1219. The remission made by the creditor of the share, which affects one of the solidary debtors,
does not release the latter from his responsibility towards the co-debtors, in case the debt had been
totally paid by anyone of them before the remission was affected.

Art 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not
entitle him to reimbursement from hi co-debtors.

Art 1221. If the thing has been lost or if the prestation has become imposible without the fault of the
solidary debtors, the obligation shall be extinguished.

If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price
and the payment of damages and interest, without prejudice to their action against the guilty or
negligent debtor.

If through a fortuitous event, the thing is lost or the performance has become impossible after one of
the solidary debtors has incurred in delay through the judicial or extra-judicial demand upon him by
the creditor, the provisions of the preceding paragraph shall apply.

Effect of the Loss or Impossibility of Performance

1. If the loss or impossibility of the thing is not due to the fault of the solidary debtors, the
obligation is extinguished.
2. If the loss or impissbility is due to the fault of one solidary debtor, the obligation is converted
to a indemnity, but the solidarity character of obligation remains.
a. Remedy: the creditor can still proceed against one, or some or all of the debtors with
damages, and the debtor who paid shall have the right to reimburse against the guilty
or negligent debtor.
3. If the loss or impossibility is due to a fortuitous event after one of the debtors had already
incurred delay, the obligation is converted into indemnity. (SAME RULE)

Sec. 6 – Obligations with Penal Clause

– one in which an accessory undertaking is attached for the purpose of insuring its performance by
virtue of which the obligor bound to pay a stipulated indemnity or perform a stipulated prestation in
case of breach.
– Penalty or penal clause is an accessory obligation attached to the principal obligation

Purposes of penalty:
• insure the performance of the obligation (funcion coercitiva o de garantia); general purpose
• liquidate the amount of damages to be awarded to the injured party in case of breach of the
principal obligation (funcion liquidatoria); compensatory; pre-agreed amount for the damages
• to punish the obligor in case of breach of the principal obligation (funcion estrictamente penal);
punitive
Effects of payment when there has been judicial order to retain:
(Art. 1243)
***Payment by the debtor to the creditor after having been judicially ordered to retain the debt is
invalid.
– Such payment must be made to the proper officer of the court issuing the writ of attachment or
garnishment in conformity with the Rules of Court. Payment in this Article is void.

Section 5. – Compensation
(Art. 1278)
Compensation- mode of extinguishing in their concurrent amount those obligations of persons who
in their own right are creditors and debtors to each other.
– weighing two obligations simultaneously in order to extinguish them to the extent in which the
amount of one is covered by the amount of the other.
– Simplified payment (pago abreviado)
– double advantage over payment:
– facility of payment- takes effect by operation of law
– guaranty for the effectivity of the credit may avoid prejudice to one party by fraud or insolvency of
the other.
Payment Compensation
Takes effect by acts of parties Takes effect by operation of law
Capacity to give and to acquire are necessary Capacity to give and to acquire not essential
Complete and indivisible payment Partial payment

Confusion Compensation
One person in whom is merged the qualities of 2 persons who are creditors and debtors of each
creditor and debtor other
Only one obligation 2 obligations

Counterclaim Compensation
Similarity of debts is not necessary 2 debts must consists in money or if not, they
must be of the same kind and quality
Does not require liquidation of debts Debts must be Liquidated
Need to be pleaded to be effectual Need not be pleaded

Kinds of Compensation:
As to cause
• Legal- takes effect by operation of law when all the requisites are present (Art.
1278-1279, Civil Code)
• Voluntary- agreement of the parties who are mutually creditors and debtors tocompensate their
respective obligations, requisites may not all be present
◦ takes effect the moment the parties agree
• Facultative- by the will of only one party and the other one cannot choose compensation because
of any impediment.
(Art. 1287-1288)
• Judicial- takes effect by judicial decree
◦ takes effect the moment the judicial decree becomes final and executor

As to effect
• Total – compensation of 2 equal debts
• Partial - compensation of two unequal debts.

(Art. 1279)
requisites of compensation:
1. 2 parties are principal creditors and principal debtors of each other
2. both debts must consist in money, or if the things due are consumables, they must be of the same
kind and quality
◦ limited to obligations to give
◦ consumables- movables which cannot be used in a manner appropriate to their nature without
being consumed
◦ fungibles- may be exchanged or compensated by another of the same kind and quality
3. both debts must be due
4. both debts must be liquidated and demandable
◦ liquidated debts- those that may be determined by simple arithmetical operation
5. no retention or controversy commenced by 3rd persons over either of the debts and
communicated in due time to the debtor
◦ retention – application of the credits of one of the parties to the satisfaction of the claims of a 3rd
person
◦ controversy – refers to a case in which 3rd persons claim to be the creditor
6. compensation must not be prohibited by law
#2 compensation cannot be applied to obligations to do because of the differences in the respective
capacities of the obligors.
#5 controversy: the effect is provisional suspension of the compensation. If the credit is adjudicated
to the party interested in the compensation, compensation may take place, but if the credit was
adjudicated to the 3rd person who claims to be the creditor, compensation cannot take place.

Dation in payment (dacion en pago) – transmission of the ownership of a thing by the debtor to the
creditor as an accepted equivalent of the performance of the obligation.
– Property is alienated to the creditor insatisfaction of a debt in money;
– law on sales shall govern (Art. 1245);
– exception in Art. 1244

(Art. 1244-1246)
obligation to give specific or determinate thing – the debtor cannot fulfill his obligation by delivering a
thing which is different from what is due although such may be of the same value or even more
valuable than that which is due.

Obligation to do or not to do – the obligor cannot fulfill his obligation by substituting another act or
forbearance.

***if the creditor or obligor accepts the delivery or substitution, such acceptance shall give the same
effect as a fulfillment or performance of the obligation.
(Art. 1255)

Cession or assignment- special form of payment whereby the debtor abandons all of his property
for the benefit of the creditor in order that from the proceeds thereof the latter may obtain payment of
their credits.
Requisites:
• plurality of debts
• partial or relative insolvency of the debtor
• acceptance of the cession by the creditor
◦ insolvency Law- applicable if the creditor did not accept the cession

Kinds of Cession:
• contractual- Art. 1255, NCC
• judicial- Insolvency Law
Cession vs Dation in
Payment
Plurality of creditors is essential Number of parties There may be only one creditor
Debtor is in partial or relative Financial condition Debtor not necessarily in financial
insolvency of the parties difficulty
Universality of debtor's property Object Thing equivalent of the performance of
the obligation
Release the debtor for the net Effect Extinguishes the obligation to the
proceeds of the things ceded or extent the value of the thing delivered
assigned, unless there is a contrary (as equivalent of the performance of
intention. the obligation)

(Art. 1256-1258)
tender of payment – manifestation made by the debtor to the creditor to immediately comply with
the obligation
consignation – deposit of the object of the obligation in a competent court in accordance with
the rule prescribed by law after refusal or inability of the creditor to accept the tender of payment.
General requisites of consignation – relative to payment. (Arts. 1232-1251)
– those which ave already taken up in connection with payment in general.
– Person who pays
– person to whom payment must be made
– object of the obligation to be paid
– time when payment or performance becomes demandable.
General Rule: requisites must be strictly complied
Exception: in consideration of justice and equity
(Case: Rural Bank of Caloocan vs CA)
***Since consignation is a special form of payment, it must conform not only with the special
requirements prescribed by law, but also with all the requisites of a valid payment.
Exceptions to the rule that there must be a previous tender of payment:(Art. 1256)
1. when the creditor is absent or unknown
2. when the creditor is incapacitated
3. when the creditor refused to give a receipt
4. when 2 or more person claim the right to collect
5. when the title of the obligation has been lost

Reason for the exceptions:

#2 incapacitated persons do not have the capacity to administer their property; the debtor will be
made to pay again because the payment is invalid subject to the exception provided in Art. 1241
(protection to the debtor)
#3 would mean that there has been a previous tender of payment or it was already said by the
creditor that he will not accept any tender of payment.
#4 protection to the debtor, to avoid tender of payment to the wrong individual
***When valid tender of payment is made, the obligation is not extinguished unless it is completed by
consignation.
Effect: exemption of the debtor from payment of interest and/or damages
***Consignation is applicable to both movable and immovable objects.

What are the requisites of donation?

1. Donor must have Capacity to make the donation
2. He must have donative Intent (animus donandi)
3. There must be Delivery
4. Donee must Accept or consent to the donation during the lifetime of the donor and of the donee in
case of donation inter vivos (Art. 746, NCC); whereas in case of donation mortis causa, acceptance
is made after donor’s death because they partake of a will (Art. 728, NCC)

Consensual contracts- contracts perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all of the
consequences which according to their nature may be in keeping with good faith, usage and law.
Real Contracts- perfected upon the delivery of the obligation.

(Art. 1324)
if the option is without consideration, the offeror may withdraw his offer by communicating such
withdrawal to the offeree at any time before acceptance.
If it is founded upon a consideration, the offeror cannot withdraw his offer

article contemplates an option contract – a preparatory contract.

An option is a contract granting a privilege to buy and sell within an agreed time and at a determined
price. It is a separate and distinct contract which the parties may enter upon consummation of the
option. It must be supported by a consideration distinct from the price.

Option Money Distinguished From Earnest Money

Once more, the SC in Oesmer, et al. v. Paraiso Dev. Corp., G. R. No. 157493, February 5, 2007,
had the occasion to distinguish earnest money from option money. It said that earnest money and
option money are not the same but distinguished thus: (a) earnest money is part of the purchase
price, while option money is the money given as a distinct consideration for an option contract; (b)
earnest money is given only where there is already a sale, while option money applies to a sale not
yet perfected; and (c) when earnest money is given, the buyer is bound to pay the balance, while
when the would-be buyer gives option money, he is not required to buy, but may even forfeit it
depending on the terms of the option.

(Art. 1381-1382)
rescissible contracts are:
lesion or inadequacy of cause will not invalidate the contract, unless there be fraud, mistake, or
undue influence

effects:
1. contracts in behalf of ward
• entered into by guardians whenever their wards suffer lesion or damages by more than ¼ of the
value of the thing which are the object thereof.
• Rules of Court: judicial guardian entering into a contract with respect to the property of his ward
must ordinarily secure the approval of a competent court.
• Apply Arts 326, CC; Rules 95-96 New Rules of Court
2. contracts in behalf of absentees
• rescissible if the absentee suffer the lesion or damage by more than ¼ of the value of the thing
which are the object thereof.
• principles applicable in Art. 1381, par 1 are applicable to this provision since the powers and
duties of representatives are the same as that of the guardian.

When is form important:

when the law requires that the contractmust be in a certain form in order to be valid
◦ must appear in writing
▪ donation and acceptance ofpersonal property whose value exceeds P5,000.00
▪ sale of a piece of land or any interest therein through an agent
▪ agreements regarding payment of interest in contract of loan
▪ antichresis
◦ must appear in public document
▪ donations of immovable properties regardless of value
▪ partnerships where immovable property or real rights are contributed to the common fund
◦ must be registered
▪ chattel mortgages
▪ sales or transfer of large cattle
• when the law requires that the contract must be in a certain form in order to be enforceable.
◦ Covered by the Statutes of Frauds

Status of verbal sale of land:

(basta alam mo na to, statute of fraud:valid but unenforceable)

REFORMATION – used when the true intention of the parties to a perfected and valid contract are
not expressed in the instrument purporting to embody their agreement by reason of mistake, fraud,
inequitable conduct or accident
– based on justice and equity
Reformation of Annulment of contract
contract
Presupposes a valid contract in which there Based on a defective contract in which there has
has already been a meeting of the mind been no meeting of the minds because the
consent of one or both of the contracting parties
has been vitiated.
Not a remedy when there has been fraud, Remedy when there has been no meeting of the
mistake, inequitable conduct or accident. minds because of mistake, fraud, inequitable
conduct, or accident

Badges of fraud: (conveyance)

1. inadequate cause or consideration
2. transfer made by a debtor after the suit has been begun and while it is pending against him
3. sale on credit by an insolvent debtor
4. evidence of large indebtedness or large insolvency
5. transfer of all of the property of a debtor when he is insolvent
6. transfer made between father and son
7. failure of vendee to take exclusive possession of all property