As to possibility (1183 p.

122 Jurado)

EXAMPLES:

Thus, if A obligates himself to pay to B P10,000 if the latter can contract the inhabitants of Mars, the
obligation is a nullity because the condition is impossible.

If C promises to give to D a parcel of land if the latter secures a divorce from his wife, the obligation is
also a nullity because the condition is contrary to law, good customs and public policy.

If E binds himself to deliver to F an automobile if the latter will go with him around the world on a trial
honeymoon, the obligation is certainly void because the condition is contrary to good customs.

It must be observed that if the obligation is divisible, that part which is not affected by the impossible or
unlawful condition shall be valid.

Thus, if A and B enter into an agreement whereby the former binds himself to give P5,000 to the latter
in two equal installments —

the first installment: to be given if the latter is able to dispose of a cache of opium belonging to the
former and

the second installment: to be given if the latter gets married to C, since the obligation is divisible, that
part (the second part) which is not affected by the unlawful condition shall be valid.

As to Mode (1184 p. 124 Jurado)

EXAMPLES:

Positive

Thus, if A binds himself to give to B P2,000 if the latter passes the bar examinations in his first attempt,
and B flunks the examinations, the obligation is extinguished.

If X binds himself to give a new car to Y if the latter gets married to Z within a period of five years from
the time of the constitution of the obligation, and at the expiration of five years, Y had not yet complied
with the condition, the obligation is also extinguished.

The condition that some event will not happen at a determinate time shall render the obligation effective
from the moment the time indicated has elapsed, or if it has become evident that the event cannot
occur.

Thus, if A binds himself to give P5,000 to B provided that the latter shall not get married before
reaching the age of twenty-five, the condition is negative. If B is not yet married at the time when he
finally reaches the age of twenty-five, the obligation becomes effective.
1192
EXAMPLES

First Infractor: One party violated his obligation; subsequently, the other also violated his part of the
obligation. In this case, the liability of the first infractor should be equitably reduced.

Thus, where a bank failed to release the entire approved loan (P80,000), but the borrower also failed to
pay the partial loan release (P17,000) he received after it fell due, both are in default and their
respective liability for damages shall be offset equitably, exclusive of the interest due on the overdue
loan portion (P17,000) since the borrower derived benefit for its use.

1193-1198 obligations with a term or period

1193
Classification of Terms/Periods in Roman Law
1. Ex Die
Term or period with a suspensive effect
Obligation becomes effective only from the arrival of a certain day

Example: A binds himself to support B from the death of B’s father. Obligation begins only after B’s
father dies.

2. In Diem

Term or period with a resolutory effect

Obligation will subsist up to a certain day, the arrival of which terminates the obligation

Example: A binds himself to support B until B reaches the 18 years old. Obligation terminates upon B
turning 18.

NOTES:
“On or About” – Fulfillment may be made on the date, or a few days after, but not on a remote date.
“On or Before” – Fulfillment may be made before the date, but the deadline is fixed.

1194 (See 1189)

Article 1189 is applicable:

1. Loss


Through the fault of debtor – Obligor to pay damages

Without the fault of debtor – Obligation extinguished 

2. Deterioration
Through the fault of debtor – Creditor may choose between rescission or fulfillment, with damages

Without the fault of debtor – Impairment to be borne by the creditor 


3. Improvement


By its nature or time – Inure to the creditor


At the expense of the debtor – No other right than usufructuary 


Loss in civil law may be:

(1) Physical loss. — when a thing perishes as when a house is burned and reduced to ashes; or
(2) Legal loss. — when a thing goes out of commerce (e.g., when it is expropriated) or when a thing
heretofore legal becomes illegal (e.g., during the Japanese occupation, American dollars had
become impossible since their use was forbidden by the belligerent occupant);
or
(3) Civil loss. — when a thing disappears in such a way that its existence is unknown (e.g., a particular
dog has been missing for sometime); or even if known, it cannot be recovered (Art. 1189[2].),
whether as a matter of fact (e.g., a particular ring is dropped from a ship at sea) or of law (e.g., a
property is lost through prescription). (see Art. 1262.)

1195
EXAMPLE:

D owes C P2,000.00 which was supposed to be paid on December 31 this year. By mistake, D paid his
obligation on December 31 last year.

Assuming that today is June 30, D can recover the P2,000.00 plus P120.00, which is the interest for
one half year at the legal rate of 12%2 or a total of P2,120.00. But D cannot recover, except the
interest, if the debt had already matured.

Neither can there be a right to recovery if D had knowledge of the period. The theory under solutio
indebiti obviously will not apply. (Art. 2154.) D is deemed to have impliedly renounced the period.

1196

Presumption as to benefit of period.

EXAMPLE:
On January 1, D borrowed from C P10,000.00 payable on December 31 at 18% interest.
D cannot pay before December 31 without the consent of C.

Neither can C compel D to pay before the expiration of the term. It is presumed that the period
designated, which is December 31, has been established for the benefit of both. D is benefited because
he can use the money for one year. C is also benefited because of the interest the money would earn
for one year.

In a contract of loan with interest, the term is generally for the benefit of both the lender and the
borrower. (see Bachrach Garage & Taxicab Co. vs. Golingco, 39 Phil. 912 [1919].) This is also the case
even where there is no interest stipulated but the creditor receives, in place of interest, other benefits by
reason of the period. (Osorio vs. Salutillo, supra.)

Obviously in the above example, D can pay C before December 31 provided the payment includes the
interest for one (1) year. (see, however, De Leon vs. Santiago Syjuco, Inc., 90 Phil. 311 [1951]; Nicolas
vs. Matias, 89 Phil. 126 [1951].) Where, however, the obligation of D is to deliver say, 100 cavans of
rice, C cannot be compelled to accept performance before the expiration of the period especially if he
would be prejudiced or inconvenienced thereby.
Exceptions to the general rule

(1) Term is for the benefit of the debtor alone. — He cannot be compelled to pay prematurely, but he
can, if he desires, do so.

EXAMPLES:
(1) D borrowed from C P10,000.00 to be paid within one year without interest.
In this case, the period of one year should be deemed intended for the benefit of D only.

Therefore, he can pay any time but he cannot be compelled to pay before one year. Although
the loan is gratuitous, the terms and conditions of the contract or other circumstances may, however,
indicate that the period has been established for the benefit of both parties.

(2) D promised to pay his debt “on or before December 31, 2004.” Here, the payment is to be
made within a stipulated period. D can pay before said date. (see Pastor vs. Gaspar, 2 Phil. 592
[1903].)
(3) D promised to pay his debt “for a term of five years counted from this date.” It has been held
that the debt is payable within five years. (Sia vs. Court of Appeals and Valencia, 92 Phil. 355
[1952].)

(2) Term is for the benefit of the creditor. — He may demand fulfillment even before the arrival of the
term but the debtor cannot require him to accept payment before the expiration of the stipulated period.

EXAMPLE:
D borrowed from C P10,000.00 payable on December 31 with the stipulation that D cannot make
payment before the lapse of the period but C may demand fulfillment even before said date.
Here, C can demand payment at any time but D cannot shorten the one-year period without the
consent of C. Ordinarily, there must be a stipulation granting the benefit of the term to only the creditor.

1197

When no period is mentioned, but it is inferrable from the nature and circumstances of the
obligation that a period was intended. 

Examples:

- Contract of sale on credit without any time fixed for the payment 


- Contract for construction where the period of completion was not stated but intended 


- Contract of lease that states “as long as the tenant pays the stipulated rent” 

- When the period is for a “reasonable time” agreed upon, there is a period fixed. The court

 will determine whether the reasonable time had elapsed. 

- When the seller of a property is given the right to redeem but no period was stipulated for
the redemption, the court may fix the period. 

4. When the period is dependent upon the will of the debtor. 


Examples:


- When the debtor binds himself to pay when his means permit him to do so
- When the debtor binds himself to pay as soon as possible or little by little

- When the debtor shall pay as soon as he has the money


- When the duration of the lease is left to the will of the lessee 

1198

(1) When debtor becomes insolvent.

EXAMPLE:

D owes C P10,000.00 due and payable on December 20. If D becomes insolvent, say on September
10, C, can demand immediate payment from D even before maturity unless D gives sufficient guaranty
or security.

The insolvency in this case need not be judicially declared. It is sufficient that the assets of D are less
than his liabilities or D is unable to pay his debts as they mature.

Note that the insolvency of D must occur after the obligation has been contracted.
In a case, the statement of the Chairman of the Board of Directors of the mortgagor-corporation that it
was “without funds, neither does it expect to have any funds in the foreseeable future” was held a proof
of its insolvency. (People’s Bank & Trust Co. vs. Dahican Lumber Co., 20 SCRA 84 [1967].)

(2) When debtor does not furnish guaranties or securities promised.

EXAMPLE:
Suppose in the same example
D promised to mortgage his house to secure the debt. If he fails to furnish said security as
promised, he shall lose his right to the period. (see Daguhoy Enterprises, Inc. vs. Ponce, 96 Phil.
15 [1954]; Laplana vs. Garchitorena Chereau, 48 Phil. 163 [1925].)

(3) When guaranties or securities given have been impaired or have dis- appeared.
EXAMPLE:

If the debt is secured by a mortgage on the house of D, but the house was burned through his fault, the
obligation also becomes demandable unless D gives a new security equally satisfactory.

In this case, the house need not be totally destroyed as it is sufficient that the security be impaired by
the act of D.
But in case of a fortuitous event, it is required that the security must disappear. But if the security given
deteriorates in such a manner as to become illusory, it must be deemed to have disappeared or lost as
contemplated in paragraph 3.

If the debt is secured by a bond, the failure of D to renew the bond or replace it with an equivalent
guarantee upon its expiration will likewise give C the right to demand immediate payment. (see Gaite
vs. Fonacier, 2 SCRA 831 [1961].)

(3) When debtor violates an undertaking.

EXAMPLE:
Now, suppose that C in the example agreed to the period in consideration of the promise of D to repair
the piano of C free of charge. The violation of this undertaking by D gives C the right to demand
immediate payment of the loan.

(4) When debtor attempts to abscond.

EXAMPLE:
Before the due date of the obligation, D (debtor) changed his address without informing C (creditor) and
with the intention of escaping from his obligation. This act of D is a sign of bad faith which results in the
loss of his right to the benefit of the period stipulated.
Observe that a mere attempt or intent to abscond is sufficient.

1199
EXAMPLE: (alternative obligation)
1. A promised to give B a land, or a painting, or 500 pesos. The delivery of one is enough. 


2. D borrowed from C P10,000. It was agreed that D could comply with his obligation by giving C
P10,000, or a color television set, or by painting the house of C.

The delivery of the P10,000, or a color television set, or the painting of the house of C, is
sufficient to comply with the obligation. Performance must be complete. C cannot be compelled
to accept, for instance, P5,000 and half of the television, thereby establishing a co-ownership
between them, or P5,000, and the painting of a part of his house. (Art. 1199, par. 2.)

1200
EXAMPLES:

(1) D insured his house with R, an insurance company. It is agreed that, if the house is destroyed or
damaged, R may either pay the damage or loss or “reinstate or rebuild the house.”

Since nothing is said in the contract as to who has the right of choice, it belongs to R, as debtor.

(2) S binds himself to deliver item one or two to B on November 10 and to communicate his choice
on or before November 5.

If S delays in making his selection, B cannot exercise the right because it is not expressly
granted to him. But judgment in the alternative cannot be defeated by S by refusing to make a
choice. In such case, the court can give the right of choice to B.

1201
1202
1203

EXAMPLE:

D borrowed from C P20,000.00. It was agreed that instead of P20,000.00, D could deliver item one, or
item two, or item three.

If through the fault of C, item one is destroyed, D can rescind the contract if he wants.

In case of rescission, the amount of P20,000.00 must be returned by D with interest. C, in turn, must
pay D the value of item one plus damages.

D, instead of rescinding the contract, may choose item two or three with a right to recover the value of
item one with damages. If D chooses item one, his obligation is extinguished. C is not liable for
damages.

1204

Articles 1203 and 1204 apply when the right of choice belongs to the debtor. Under Article 1205, the
creditor has the right to choose.

(1) Some of the objects. — If some of the objects of the obligation have been lost or have become
impossible even through the fault of the debtor, the latter is not liable since he has the right of choice
and the obligation can still be performed. This is an exception to the general rule established in Article
1170 regarding liability for damages arising from negligence.

(2) All of the objects.—If all of them have been lost or have become impossible through the debtor’s
fault, the creditor shall have a right to indemnity for damages since the obligation can no longer be
complied with. Of course, if the cause of the loss is a fortuitous event, the obligation is extinguished.

The phrase “or the compliance of the obligation has become impossible” refers to obligations “to do.”

EXAMPLE:
S agreed to deliver item one, or item two, or item three.

If item one is lost through the fault of S, he can still select either item two or item three. The loss of item
one and two with or without the fault of S will reduce the obligation to a simple one.

If all the items are lost through his fault, liability will attach; if through a fortuitous event, the obligation
will be extinguished.

Basis of indemnity.
The indemnity shall be fixed taking as basis the value of the last thing which disappeared (referring to
obligations to give) or that of the service which last became impossible (referring to obligations to do).
In case of disagreement, it is incumbent upon the creditor to prove such value, or which thing last
disappeared or which service last became impossible.

Other damages may also be awarded. (Art. 1204, pars. 2 and 3.)
EXAMPLE:
In the above example, if items one and two are lost, S will be bound to deliver item three.

If subsequently, item three is also lost through the fault of S, the basis for indemnity is the value of item
three since S would have been bound to deliver it had it not also been lost.

The liability of S is not affected although the loss of items one and two was through a fortuitous event.
If item three is lost without the fault of S, his obligation is extinguished and he shall not be liable for
damages although the loss of items one and two was due to his fault.

The reason is that after the loss of items one and two, the obligation is converted into a simple one to
deliver item three. (Art. 1202.)

S cannot be held responsible for the loss of items one and two