SCHOOL OF ACCOUNTANCY, BUSINESS, AND HOSPITALITY

Second Semester, S.Y. 2024-2025

LAWS 1013: Law on Obligations and Contracts

LESSON 4
KINDS OF OBLIGATIONS

Learning Outcomes: At the end of this module, you are expected to:

LEARNING CONTENT

KINDS OF CIVIL OBLIGATIONS, Part 1

PURE AND CONDITIONAL OBLIGATIONS

Pure Obligation

An obligation whose performance does not depend upon a future or uncertain event, or upon a
past event or upon a past event unknown to the parties, demandable at once (NCC, Art. 1179).
One without a condition or a term (hence, demandable at once), provided there will be no
absurdity.

Examples:

a. I promise to pay you P 1million. [this is demandable at once, unless a period was really
intended, as when a loan has just been contracted (Floriano v. Delgado, 11 Phi.. 154), when
some time is reasonably necessary for the actual fulfillment of the obligation, as when a
person binds himself to pay immediately for the subscription of corporate shares of stock.
(Paul Schenker vs. William F. Gemperle, L-16449, August 31, 1962)]

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 b. “I‟ ll pay you P1million on demand.” (Abarri Inc vs Galan, 47 O.B. 6241) but instant
performance is not a necessity, otherwise absurd consequences will arise.

NOTE: Other obligations which are demandable at once are:

1. Obligations with a resolutory condition; and
2. Obligations with a resolutory term or period [NCC, Arts. 1179 (2) and 1193 (2)].

The most distinctive characteristic of a pure obligation is its immediate demandability. This
quality, however, must not be understood in such a way as to lead to absurd interpretations
which would literally require the obligor or debtor to comply immediately with his obligation. A
distinction must be made between:

1. The immediate demandability of the obligation; and

2. Its performance or fulfillment by the obligor or debtor. Although the obligee or creditor
can demand the performance of the obligation immediately, the quality of immediate
demandability is not infringed or violated when a reasonable period is granted for
performance (Jurado, 2009).

Conditional Obligation

An obligation subject to a condition and the effectivity of which is subordinated to the

fulfillment or non-fulfillment of a future and uncertain event, or upon a past event unknown to
the parties (Pineda,2000).

Condition

A condition is an event which is future and uncertain, upon which the efficacy or extinguishment
of an obligation depends. It has two requisites: first, futurity; and second, uncertainty.

Period vs. Condition

BASIS PERIOD CONDITION

May refer to past event

As to time Refers to the future unknown to the parties

It will happen at an exact date or

As to fulfillment at an indefinite time, but is May or may not happen
definite to arrive

Futurity and uncertainty

Characteristic Futurity and certainty

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 May give rise to an obligation
The effect of its No effect upon the existence of (suspensive) or
happening to the the obligation but only in its the cessation of one already
obligation demandability existing
(resolutory)
If fulfillment is Valid. But the court is
dependent upon the sole empowered to fix the duration of Annulled.
will of the debtor the period.
The moment the condition is
fulfilled, the effects will
Retroactivity No retroactivity. retroact on the day of the
constitution of the
obligation.

Suspensive Condition

A condition the fulfillment of which will give rise to the acquisition of a right. While the condition
has not arrived yet, in the meantime, the rights and obligations of the parties are suspended.

NOTE: In suspensive condition or condition precedent, the efficacy or the obligatory force is
subordinated to the happening of a “future and uncertain event”; if the suspensive condition
does not take place the parties would stand as if the conditional obligation never existed (Gaite
v. Fonacier, GR L-11827, July 31, 1961; Cheng v. Genato, 300 SCRA 722, GR 129760, December
29, 1998; Pineda, 2000).

Effect of loss, deterioration and improvement in an obligation to deliver a determinate thing

subject to a suspensive condition

WITHOUT
BASIS WITH DEBTOR’S FAULT
DEBTOR’S FAULT

Obligation is not extinguished. Obligation is

Loss
Debtor pays damages. extinguished.

Creditor may choose between

recission of obligation or Impairment borne by
Deterioration
fulfillment (with indemnity for creditor.
damages in either case)
a. By the thing’s nature or through time – inure to the
benefit of the creditor
Improvement
b. At the debtor’s fault – Debtor shall have no right
other that granted to a usufructuary

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 NOTE: The abovementioned do not apply to indeterminate or generic things on the basis of the
maxim “genus nun quam peruit” (genus never perishes). It will only apply when the object or
thing to be given is specific.

Positive Suspensive Condition

A condition which requires a positive act on the part of the obligor that gives rise to the
acquisition of rights.

In case of a contract to sell, the obligation to deliver the subject properties becomes
demandable only upon the happening of the positive suspensive condition (payment of full
purchase price). Without full payment, there can be no breach of contract to speak of because
the seller has no obligation yet to turn over the title (Reyes v. Tuparan, G.R. No. 188064, June 1,
2011).

Resolutory Condition

A condition where the rights already acquired are lost upon fulfillment of the condition. It is also
known as condition subsequent.

Suspensive Condition vs. Resolutory Condition

SUSPENSIVE RESOLUTORY
BASIS CONDITION CONDITION

Effect of Obligation arises or Obligation is

fulfillment becomes effective. extinguished.

Effect of non- If not fulfilled, no juridical If not fulfilled, juridical

fulfillment relation is created. relation is consolidated.

Rights are not yet Rights are already vested,

When rights are acquired, but there is but subject to the threat or
acquired hope or expectancy that danger of extinction.
they will soon be
acquired.

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 Negative Resolutory Condition

An act, which if not done, would give rise to a cause of action against the obligor. It
contemplates a situation where rights are already acquired but subject to an obligation, the
non- fulfillment of which does not affect the rights already acquired but merely gives a cause of
action in favor of the other party. In a contract of sale, the buyer‟ s non-payment of the price is
a negative resolutory condition. In such case, the seller has lost and cannot recover the
ownership of the property unless he takes action to set aside the contract of sale (Heirs of
Atienza v. Espidol, G.R. No. 180665, August 1, 2010).

Potestative Condtion

A condition which depends upon the will of one of the contracting parties (NCC, Art. 1182).

Effects of potestative conditions upon the obligation

If the condition is potestative in the sense that its fulfillment depends exclusively upon the will
of the debtor, and the same is suspensive, both the condition and obligation are VOID.

However, if the condition is a pre-existing one or the condition is resolutory, only the condition
is void, leaving the obligation itself valid because what is left to the sole will of the debtor is not
the existence or the fulfillment of the obligation but merely its extinguishment.

If the condition is potestative in the sense that its fulfillment depends exclusively upon the will
of the creditor, the obligation shall be valid. This is so because the provision of the first sentence
of Art. 1182 extends only to conditions which are potestative to the obligor or debtor. Besides,
the creditor is naturally interested in the fulfillment of the condition since it is only by such
fulfillment that the obligation arises or becomes effective (Jurado, 2009 citing NCC, Art. 1181
and Manresa).

Casual Condition

It is the performance or the fulfillment of the condition which depends upon chance and/or the
will of a third person.

Mixed Condition

It is the performance or fulfillment of the condition which depends partly upon the will of a party
to the obligation and partly upon chance and or the will of a third person.

NOTE: Casual and mixed conditions are valid, unlike purely potestative conditions.

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Impossible Conditions

GR: Impossible conditions annul the obligation which depends upon the parties but not of a
third person.

XPNs:

1. Pre-existing obligation;
2. Obligation is divisible;
3. In simple or remuneratory donations;
4. In case of conditions not to do an impossible thing; and
5. In testamentary dispositions.

NOTE: In the foregoing, the obligations remain valid, only the condition is void and deemed to
have not been imposed. it is applicable only to obligations not to do and gratuitous obligations.

Other types of conditions

1. Positive – It involves the doing of an act;

2. Negative –Itinvolves the omission of an act;
3. Divisible – Itis susceptible of partial performance;
4. Indivisible – It is not susceptible of partial performance;
5. Conjunctive – There are several conditions in an obligation all of which must be
performed;
6. Alternative – There are several conditions in an obligation but only one must be
performed;
7. Possible – Itis capable of fulfillment according to the nature, law, public policy or
good customs; and
8. Impossible – It is not capable of fulfillment according to nature, law, public policy or
good customs (NCC, Art. 1183).

OBLIGATIONS WITH A PERIOD

Obligation with a period or a term

Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when
that day comes (NCC, Art.1193).

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Term or period

A certain length of time which determines the effectivity or the extinguishment of the
obligations.

Requisites of a valid period or term

1. Future;
2. Certain; and
3. Possible, legally and physically (Paras, 2008).

“Day certain”

It is understood to be that which must necessarily come, although it may not be known when.

Kinds of terms or periods

1. Ex die – This is a term or period with suspensive effect. The obligation begins only from a
day certain, in other words upon the arrival of the period.
2. In diem – A period or term with a resolutory effect. Up to a certain extent, the obligation
remains valid, but upon the arrival of said period, the obligation terminates.
3. Legal – A period granted under the provisions of the law.
4. Conventional or voluntary – The period agreed upon or stipulated by the parties.
5. Judicial – The period or term fixed by the courts for the performance of an obligation or
for its termination.
6. Definite – The exact date or time is known and given.
7. Indefinite – It is something that will surely happen but the date of happening is unknown.
e.g. “I will pay when my means permit me to do so.” When the debtor

When the debtor binds himself to pay when his means permit him to do so, the obligation is
deemed with a period (NCC, Art. 1180). This is valid because it is not the payment itself that is
dependent upon the will of the debtor, but the moment of payment.

As the time of payment is not fixed, the court must fix the same before any action for collection
may be entertained, unless, the prior action of fixing the term or period will only be a formality
and will serve no purpose but delay (Tiglao v. Manila RailroadCo., 98 Phil. 181, GR. L-7900,
January 12, 1956).

Effect of a fortuitous event to an obligation with a period

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 It only relieves the contracting parties from the fulfillment of their respective obligation during
the term or period.

ALTERNATIVE OBLIGATIONS

Alternative obligation

It is one where the debtor is alternatively bound by different prestations but the complete
performance of one of them is sufficient to extinguish the obligation.

Facultative obligation

It is one where the debtor, who has a reserved right to choose another prestation or thing, is
bound to perform one of the several prestations due or to deliver a thing as substitute for the
principal.

Conjunctive obligation

One where the debtor has to perform several prestations; it is extinguished only by the
performance of all of them.

BASIS FACULTATIVE OBLIGATIONS ALTERNATIVE OBLIGATIONS

Number of Only one object is due. Several objects are due.

prestation
Manner of May be complied with by substitution May be complied with by fulfilling
compliance of one that is due. any of those alternately due.
GR: Choice pertain to debtor.
Choice pertains only to debtor. XPN: Expressly granted to creditor or
Right to choose
third person.
Effect of Fortuitous loss extinguishes the Fortuitous loss of all prestations will
fortuitous loss obligation. extinguish the obligation.
Culpable loss obliges the debtor to
Effect of culpable Culpable loss of any object due will
loss deliver substitute prestation without give rise to liability to debtor.
liability to debtor.

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 The creditor shall have the right of
indemnity for damages when,
When substitution has been made and
through the fault of the debtor, all
communicated to the creditor, the
the things which are
obligor is liable for the loss of the thing
alternatively the object of the
on account of delay, negligence or
obligation have
fraud.
Liability of the been lost or the compliance of the
debtor obligation has become impossible.

If one prestation is void, the others

If principal obligation is void, the
that are free from any vices of
Void prestation creditor cannot compel delivery of the
consent preserve the validity of the
substitute.
obligation.

If some prestations are impossible to

perform except one - this one must
If there is impossibility to deliver the
be delivered.
Impossibility of principal thing or prestation, the
prestation obligation is extinguished, even if the
If all prestations are impossible to
substitute obligation is valid.
perform, the obligation is
extinguished.

Where the choice is given to the

Loss of the substitute before the creditor, the loss of the alternative
Loss of substitute substitution is made through the fault of
the debtor doesn’t make him liable. through the fault of the debtor
renders him liable for damages.

Right to choose prestation in an alternative obligation

G.R: The right of choice belongs to the debtor XPN: Unless it has been
expressly given to the creditor (NCC, Art. 1200).

Limitations on debtor’s right to choose

• The debtor must absolutely perform the prestation chosen. He cannot compel the
creditor to receive part of one and part of the other undertaking;

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 • The debtor shall have no right to choose those prestation which are impossible,
unlawful or which could not have been the object of the obligation (NCC, Art. 1200);
• The debtor shall lose the right to choice when among the prestation whereby he is
alternatively bound, only one is practicable (NCC, Art. 1202);
• The selection made by the debtor (or the creditor when it has been expressly granted to
him) cannot be subjected by him to a condition or a term unless the creditor (or debtor
in case the choice is with the creditor) consents thereto (Tolentino, 2002).
Effectivity of the choice in alternative obligations

The choice made takes effect only upon communication of the choice to the other party and
from such time the obligation ceases to be alternative (NCC, Art. 1201; NCC, Art. 1205).

NOTE: The notice of selection or choice may be in any form provided it is sufficient to make the
other party know that the election has been made (Tolentino,2002).

When alternative obligation becomes a simple obligation

1. When the debtor has communicated the choice to the creditor;
2. When debtor loses the right of choice among the prestations whereby the debtor is
alternatively bound, only one is practicable (NCC, Art. 1202).

NOTE: The choice made by the debtor does not require the concurrence of the creditor.
Otherwise, it would destroy the very nature of the right to select given to the debtor.

Impossibility of choice due to creditor’s acts

When choice is rendered impossible through the creditor‟ s fault, the debtor may bring an
action to rescind the contract with damages (NCC, Art. 1203).

Plurality of parties

When there are various debtors or creditors and the obligation is joint, the consent of all is
necessary to make the selection effective, because none of them can extinguish the entire
obligation.

If the obligation is solidary and there is no stipulation to the contrary, the choice by one will
binding personally upon him, but not as to the others. Thus, if A and B solidarily bind themselves
to deliver a horse or a carabao to C, the selection of A of the horse, when communicated to C will

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 bind him and he cannot later on deliver the carabao. But it is not binding on B who may
extinguish the obligation by delivering the carabao (Tolentino, 2002).

Effect of loss of objects in alternative obligations

Due to fortuitous event Due to debtor’s fault

CHOICE BELONGS TO DEBTOR

Creditor shall have a right to be
indemnified for damages
based on the value of the last
Debtor released from the thing which disappeared or last
All are lost
obligation. service which became
impossible.
Debtor shall deliver that
Debtor shall deliver that whichwhich he shall choose from among
Some but not all are lost he shall choose from among the the remainder without
remainder. damages
Only one remains
Deliver that which remains.

CHOICE BELONGS TO CREDITOR

Creditor may claim the price or
Debtor released from the value of any of them with
All are lost
obligation indemnity for damages.
Creditors mat claim any of those
subsisting OR he may
Creditor may choose from choose any of those were lost,
among the remainder or that but it is the price or
which remains if only one value of which right to
Some but not all are lost
subsist. damages that can be
claimed.
Deliver that which remains. In case of fault of debtor,
creditor has a right to indemnify for damages.
Only one remains

*** END of LESSON 5 ***

REFERENCES

LAWS 1013 – Law on Obligations and Contracts (Week 5) | 11

Domingo, A. (2019). Regulatory Framework for Business Transactions (RFBT) Multiple Choice
Questions (MCQ) CPA Reviewer. Benguet, Philippines: Coaching for Results Publishing

Soriano, Fidelito (2016). Notes in Business Law. Manila, Philippines: GIC Enterprises & Co., Inc.

Domingo, A. (2015). Obligations and Contracts; Laws, Principles, and Jurisprudence. Benguet,
Philippines: Coaching for Results Publishing

De Leon, Hector (2014). The Law on Obligations and Contracts. Manila: Rex Book Store

Civil Code of the Philippines

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