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Penal Clauses in Obligations

The document discusses penal clauses in obligations. A penal clause attaches an additional obligation to pay a penalty in case of breach of the principal obligation. It serves to encourage fulfillment of the obligation or substitute for damages. A penal clause becomes demandable upon breach, whereas a condition does not. There are different types of penal clauses depending on their origin, purpose, and demandability. The penalty may be enforced when it is demandable according to the provisions of the code, such as in cases of breach or fraud.

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Gwen Caldona
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276 views1 page

Penal Clauses in Obligations

The document discusses penal clauses in obligations. A penal clause attaches an additional obligation to pay a penalty in case of breach of the principal obligation. It serves to encourage fulfillment of the obligation or substitute for damages. A penal clause becomes demandable upon breach, whereas a condition does not. There are different types of penal clauses depending on their origin, purpose, and demandability. The penalty may be enforced when it is demandable according to the provisions of the code, such as in cases of breach or fraud.

Uploaded by

Gwen Caldona
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Article 1226.

In obligations with a
penal clause, the penalty shall Differences between a condition and
substitute the indemnity for damages a penal clause
and the payment of interests in case of A penal clause first constitutes an
non-compliance, if there is no obligation while a condition does not.
stipulation to the contrary. A penal clause is demandable in the
Nevertheless, damages shall be paid if default of the unperformed obligation
the obligor refuses to pay the penalty while a condition is never
or is guilty of fraud in the fulfillment demandable.
of the obligation.
The penalty may be enforced only Kinds of Penal Clause
when it is demandable in accordance 1. Origin
with the provisions of this Code. a. Legal penal clause - provided by law
b. conventional penal clause -
Principal and Accessory Obligations provided by the stipulation of the
1. Principal obligation - An obligation parties
that can stand by itself and does not 2. Purpose
depend for its validity and existences a. Compensatory penal clause -
through another obligation. penalty substitutes damages.
2. Accessory obligation - An obligation b. Punitive penal clause - penalty due
that is attached to a principal to breach or violation
obligation and cannot stand alone. 3. Demandability or effect
a. Subsidiary or alternative penal
Obligation with a Penal Clause clause - only the penalty can be
An obligation which contains an enforced
accessory undertaking to pay a b. Joint or cumulative penal clause -
previously agreed indemnity in case of both principal obligation and penal
violation of the principal prestation, clause can be enforced.
intended primarily to encourage its
fulfillment. The creditor may recover damages and
interests when:
Penal Clause - the stipulation by the parties says so
It is an accessory undertaking attached - the debtor refuses to pay the penalty
to an obligation to assume greater - the debtor is guilty of fraud in the
liability in case of breach. performance of the obligation

Purposes of a Penal Clause The penalty may be enforced when it


-to insure their fulfillment by creating is demandable.
an effective restraint against breach The penalty is demandable only if
(reparation). there is a breach of the obligation and
-to substitute a penalty for the it is not contrary to law, good morals,
indemnity for damages and the good customs, public order or public
payment of interests in case of non- policy.
compliance or to punish the debtor for If the obligation is unperformed due to
non-fulfillment or violation of his a fortuitous event, the penalty is not
obligation (Punishment). demandable.

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