Requisites of a Prestation:

(1) Possible - physically and juridically;

(2) Assessable - Must have a possible equivalent in money.
(3) Determinate, or at least, determinable;

Mora solvendi – Delay on the part of the debtor to fulfil his obligation either to give (ex re) or to
do (ex persona).
Requisites:
1. Obligation must be liquidated, due and demandable
2. Non-performance by the debtor within the period agreed upon
3. Demand, judicial or extra-judicial, by the creditor, unless demand is not necessary under the
circumstances enumerated in Art 1169 par (2).
Effects:
1. The debtor is liable for damages. [Art. 1170]
2. For determinate objects, the debtor shall bear the risk of loss, even if the loss is due to
fortuitous events. [1165 par 3]

Mora accipiendi – Delay on the part of the creditor to accept the performance of the obligation
Requisites:
(1) Debtor offers performance.
(2) Offer must be in compliance with the prestation as it should be performed.
(3) Creditor refuses performance without just cause.
Effects:
(1) The responsibility of the debtor is reduced to fraud and gross negligence.
(2) The debtor is exempted from risk of loss of the thing, which is borne by the creditor.
(3) The expenses incurred by the debtor for the preservation of the thing after the mora shall be
chargeable to the creditor.
(4) If the obligation bears interest, the debtor does not have to pay from the time of delay.
(5) The creditor is liable for damages.
(6) The debtor may relieve himself of the obligation by consigning the thing. [Tolentino]

Requisites for Fraud to Vitiate a Contract:

(1) It must have been employed by one contracting party upon the other;
(2) It must have induced the other party to enter into the contract;
(3) It must have been serious; and
(4) It must have resulted in damage or injury to the party seeking annulment. [Tolentino]

Diligence Required [De Leon]

(1) By stipulation of the parties
(2) By law, in the absence of stipulation
(3) Diligence of a good father of a family, if both the contract and law are silent. (1173 par 2)
(4) Future negligence may be waived except in cases where the nature of the obligation or the
public requires another standard of care (i.e. common carriers)
Note: Only future simple negligence may be waived. Future gross negligence may not be waived
since such negligence amounts to fraud.

Liability in case of Fortuitous Event

No person shall be responsible for fortuitous events, UNLESS:
(1) expressly specified by law [Arts. 552 (2); 1942, 2147, 2148, 2159]
(2) liabilityspecifiedbystipulation
(3) the nature of the obligations requires assumption of risk [Art. 1174]
(4) debtor is guilty of concurrent or contributory negligence
(5) debtor has promised to deliver the same thing to two or more persons who do not have the
same interest [Art. 1165 par. 3]
(6) the thing is lost due to the obligor’s fraud, negligence, delay or contravention of the tenor of
the obligation [Art. 1170]
(7) the obligation to deliver a specific thing arises from a crime [Art. 1268]
(8) the object is a generic thing, i.e. the genus never perishes
Note: ‘Genus nunquam perit’ only pertains to physical perishing. The genus may still perish
legally. [Labitag]

Requisites of Exemption Based on Force Majeure

(1) The event must be independent of the debtor’s will (fraud or negligence).
(2) The event must be unforeseeable or inevitable.
(3) The event renders it impossible for debtor to fulfill his obligation in a normal manner.
(4) The debtor must be free from any negligence or participation in the aggravation of the injury
to the creditor [Tolentino, 1987; De Leon, 2003]
(5) It must be the sole cause, not merely a proximate cause.

Accion Subrogatoria
Requisites
(1) The person to whom the right of action pertains must be indebted to the creditor
(2) The debt is due and demandable
(3) The creditor must be prejudiced by the failure of the debtor to collect his debts due him from
third persons, either through malice or negligence
(4) The debtors assets are insufficient (debtor is insolvent)
(5) The right of action is not purely personal to the debtor

Accion Pauliana
Requisites [Cheng v CA, 2001]
(1) There is a credit in favor of the plaintiff prior to the alienation by the debtor
(2) The debtor has performed a subsequent contract conveying patrimonial benefit to third
person/s.
(3) The debtor’s acts are fraudulent to the prejudice of the creditor.
(4) The creditor has no other legal remedy to satisfy his claim
(5) The third person who received the property is an accomplice to the fraud.

Art. 1189.When the conditions have been imposed with the intention of suspending the efficacy
of an obligation to give, the following rules shall be observed in case of the improvement, loss or
deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is
understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such
a way that its existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne
by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the
rescission of the obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit
of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that granted
to the usufructuary.

If the period is for the benefit of the debtor alone, he shall lose every right to make use of it
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a
guaranty or security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment,
and when through a fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to
the period;
(5) When the debtor attempts to abscond
[Art. 1198]
(6) When required by law or stipulation;
(7) If parties stipulated an acceleration clause [Tolentino]
The obligation immediately becomes due and demandable even if the period has not yet expired.
The obligation becomes a pure one. [Tolentino]

ALTERNATIVE OBLIGATIONS:
Definition
Several prestations are due but the performance of one is sufficient. [De Leon]
Right of Choice [Art. 1200]
Belongs to the debtor, UNLESS—
(1) it is expressly granted to the creditor
(2) it is expressly granted to a third person

Limitations to the right of choice [Tolentino]

(1) indivisible (cannot choose part of one prestation and part of another; See Art. 1199, par. 2)
(2) impossible prestations
(3) unlawful prestations
(4) those which could not have been the object of the obligation
When choice shall produce effect
Choice shall produce no effect except from the time it has been communicated. [Art. 1201]
Form of notice
Notice of selection or choice may be in any form provided it is sufficient to make the other party
know that the selection has been made. It can be:
(1) oral
(2) inwriting
(3) tacit
(4) any other equivocal means [Tolentino]
Selection may be implied from the fact of performance [Tolentino]

Purposes of Penalty
(1) Funcion coercitiva de garantia - to insure the performance of the obligation.
(2) Funcion liquidatoria - to liquidate the amount of damages to be awarded to the injured party
in case of breach of the principal obligation (compensatory).
(3) Funcion restrictamente penal - to punish the obligor in case of breach of the principal
obligation (punitive).

Rules on Penalty
(1) The penalty shall substitute the indemnity for damages and payment of interest in case of
non-compliance [Art. 1226], UNLESS:
a. There is an express provision to that effect
b. The obligor refuses to pay the penalty
c. The obligor is guilty of fraud in non-fulfillment
In this case, damages and interest aside from the penalty may be awarded [Tolentino]
(2) Debtor cannot exempt himself from the performance of the principal obligation by paying the
stipulated penalty UNLESS this right has been expressly reserved for him [Art. 1227].
(3) Creditor cannot demand the fulfillment of the principal obligation and demanding the
satisfaction of the penalty at the same time UNLESS the right has been clearly granted to him
[Art. 1227]. A tacit or implied grant is admissible.
a. If the creditor chooses to demand the satisfaction of the penalty, he cannot afterwards
demand the fulfillment of the obligation.
b. If there was fault on the part of the debtor, creditor may demand not only the satisfaction of
the penalty but also the payment of damages.
c. If the creditor has chosen to demand the fulfillment of the principal obligation and the
performance thereof becomes impossible without his fault, he may still demand the
satisfaction of the penalty.

When Penalty may be Reduced [Art. 1229]:

(1) If the principal obligation has been partly complied with
(2) If the principal obligation has been irregularly complied with.
(3) If the penalty is iniquitous or unconscionable, even if there has been no performance.
Presumption of Joint Obligation
An obligation is presumed joint if there is a concurrence of several creditors, or of several debtors,
or of several creditors and debtors in one and the same obligation [Art. 1207]
Exceptions:
(1) When the obligation expressly states that there is solidarity
(2) When the law requires solidarity, i.e. quasi-delicts (Art. 2194), joint payees by mistake (Art.
2157), acts under articles 19- 22 if committed by two or more persons acting jointly
(3) When the nature of the obligation requires solidarity
(4) When a charge or condition imposed upon heirs or legatees, and the testament expressly
makes the charge or condition in solidum
(5) When the solidary responsibility is imputed by a final judgment upon several defendants

Principal Effects of Joint Liability [Tolentino]

(1) Demand by one creditor upon the debtor, produces the effects of default only with respect
to the creditor who demanded and the debtor on whom the demand was made, but not with
respect to others.
(2) Interruption of prescription by the judicial demand of one creditor upon a debtor does not
benefit the other creditors nor interrupt the prescription as to other debtors.
(3) Vices of each obligation arising from the personal defect of a particular debtor or creditor do
not affect the obligation or right of the others.
(4) Insolvency of a debtor does not increase the responsibility of his co-debtors, nor does it
authorize a creditor to demand anything from his co-debtors.
(5) Defense of res judicata is not extended from one debtor to another.

When Indivisible [Art. 1225]

(1) Obligations to give definite things
(2) Obligations not susceptible of partial performance
(3) Indivisibility is provided by law or intended by the parties, even though object or service may
be physically divisible
(4) In obligations not to do, when character of prestation requires indivisibility

Effects of Active Solidarity [Tolentino]

(1) Death of solidary creditor does not transmit solidarity to his heirs but rather to all of them
taken together (joint)
(2) Each represents the other in receiving payment and all other advantageous acts (i.e. interrupt
prescription and render the debtor in default for the benefit of all creditors)
(3) Each one of the solidary creditors may do whatever may be useful to the others, but not
anything which may be prejudicial to the latter. [Art. 1212]
(4) One creditor does NOT represent all others in acts such as novation (even if advantageous),
compensation and remission. In this case, even if debtor is released, the other creditors can still
enforce their rights against the creditor who made the novation, compensation or remission [Art.
1215, par. 2]
(5) The creditor who collects the debt, shall be liable to the others for the share in the obligation
corresponding to them. [Art. 1215, par 2]
(6) The credit is divided equally among them, unless agreement to the contrary.
(7) 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 who demanded [Art. 1214]

Effects of Passive Solidarity [Tolentino]

(1) Each debtor can be required to pay the entire obligation, but after payment he can recover
from the co-creditors their respective shares
(2) Each debtor may set up his own claims against the creditor as payment of the obligation
(3) Remission of the entire debt affects all debtors, but when remission is limited to the share of
one debtor, the other debtors are still liable for the balance of the obligation
a. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle
him to reimbursement from his co-debtors. [Art. 1220]
b. 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 effected. [Art. 1219]
(4) All debtors are liable for the loss of the thing due, even if only one of them is at fault, or after
incurring delay it is lost by fortuitous event
(5) Interruption of prescription as to one debtor affects all others, but renunciation of
prescription already had does not prejudice the others. (Reason: prescription extinguishes the
mutual representation among solidary debtors)
(6) Interests due by delay of one is borne by all of them

Defenses Available to a Solidary Debtor [Art. 1222]

(1) Those derived from the nature of the obligation
a. Defenses inherent in an obligation include non-existence of the obligation because of absolute
simulation or illicit object, nullity due to defect in capacity or consent of all debtors,
unenforceability, non-performance of suspension condition or non-arrival of period,
extinguishment of the obligation, res judicata, and prescription.
(2) Those personal to him
a. Personal defenses such as minority, insanity, fraud, violence, or intimidation will serve as a
complete exemption of the defendant debtor from liability to the creditor
(3) Those pertaining to his own share
(4) Those personally belonging to other co-debtors but only as regards that part of the debt for
which the latter are responsible.

Art. 1231. Obligations are extinguished:

(1) By payment or performance;
(2) Bythelossofthethingdue;
(3) By the condonation or remission of the debt;
(4) Bytheconfusionormergeroftherights of creditor and debtor;
(5) Bycompensation;
(6) Bynovation.
Other
obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription,
are governed elsewhere in this Code.

Article 1244. The debtor of a thing cannot compel the creditor to receive a different one, although
the latter may be of the same value as, or more valuable than that which is due. In obligations to
do or not to do, an act or forbearance cannot be substituted by another act or forbearance
against the obligee's will. (1166a)
Exceptions to Art. 1244:
(1) If the obligation is facultative
(2) If the creditor agrees (Dation in payment)
(3) Substantial Performance by Debtor (Creditor only has a right to damages) [Art 1234]
If the obligation has been substantially performed in good faith, the obligor may recover as
though there had been a strict and complete fulfillment, less damages suffered by the obligee.
Requisites:
a. There must be substantial performance (its existence depends upon the circumstances of each
particular case); and
b. The obligor must be in good faith [De Leon]
(4) Whentheobligeeacceptsthe performance, knowing its incompleteness or irregularity, and
without expressing any protest or objection, the obligation is deemed fully complied with. [Art.
1235]

A.1 APPLICATION OF PAYMENTS

Designation of the debt to which should be applied a payment made by a debtor who owes
several debts to the same creditor.
Requisites:
(1) There is a plurality of debts
(2) Debts are of the same kind
(3) Debts are owed to the same creditor and
by the same debtor
(4) All debts must be due, UNLESS parties so
stipulate, or when application is made by the party for whose benefit the term has been
constituted
(5) Payment made is not sufficient to cover all debts [Art. 1252]

Rules on Application of Payments

(1) Preferential right of debtor - debtor has the right to select which of his debts he is paying.
(2) The debtor makes the designation at the time he makes the payment.
(3) If not, the creditor makes the application, by so stating in the receipt that he issues, unless
there is cause for invalidating the contract.
(4) If neither the creditor nor debtor exercises the right to apply, or if the application is not valid,
the application is made by operation of law.
(5) If debt produces interest, the payment is not to be applied to the principal unless the interests
are covered.
(6) When no application can be inferred from the circumstances of payment, it is applied: (a) to
the most onerous debt of the debtor; or (b) if debts due are of the same nature and burden, to
all the debts in proportion.
(7) Rules of application of payment may not be invoked by a surety or solidary guarantor.

Limitations:
1. Right of creditor to refuse partial payment
[Art. 1248]
2. Rule on satisfaction of interest before the Principal. [Art. 1453]
3. Debtor cannot apply payment to a debt which is not yet liquidated
4. He cannot choose a debt with a period (established for the creditor’s benefit) before the period
has arrived.
5. Stipulation as to preference of payment.
[Tolentino]

A.2. DATION IN PAYMENT

Delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted
equivalent of the performance of the obligation (dacion en pago).
Requisites:
(1) Existence of a money obligation
(2) Alienation to the creditor of a property by the debtor with the creditor’s consent
(3) Satisfaction of the money obligation

A.3. PAYMENT BY CESSION

Special form of payment where the debtor assigns/abandons ALL his property for the benefit of
his creditors in order that from the proceeds thereof, the latter may obtain payment of their
credits.
Requisites:
(1) There is a plurality of debts
(2) There is a plurality of creditors
(3) Partial or relative insolvency of debtor
(4) Acceptance of the cession by the creditors
[Art. 1255]

Requisites of consignation
(1) There is a debt due
(2) Consignation is made because of some legal cause
a. There was tender of payment and creditor refuses without just cause to accept it
b. Instances when consignation alone would suffice as provided under Art. 1256
(3) Previous notice of consignation was given to those persons interested in the performance of
the obligation
(4) Amount or thing due was placed at the disposal of the court
(5) After the consignation has been made, the persons interested were notified thereof

When tender and refusal not required [Art. 1256]

(1) Creditor is absent or unknown, or does not appear at the place of payment.
(2) Creditor is incapacitated to receive the thing due at the time of payment.
(3) Without just cause, creditor refuses to give receipt.
(4) Two or more persons claim the same right to collect (i.e. Interpleader)
(5) Title of the obligation has been lost.

Effects of Consignation
If accepted by the creditor or declared properly made by the Court:
(1) Debtor is released in same manner as if he had performed the obligation at the time of
consignation
(2) Accrual of interest is suspended from the moment of consignation.
(3) Deterioration or loss of the thing or amount consigned, occurring without the fault of debtor,
must be borne by creditor from the moment of deposit
Any increment or increase in the value of the thing after consignation inures to the benefit of the
creditor

Effects of Withdrawal by Debtor [Arts. 1260- 1261]

(1) Before approval of the court - Obligation remains in force.
(2) After approval of the court or acceptance by the creditor, with the consent of the latter -
Obligation remains in force, but guarantors and co-debtors are liberated. Preference of the
creditor over the thing is lost.
(3) After approval of the court or acceptance by the creditor, and without creditor’s consent -
Obligation subsists, without change in the liability of guarantors and co-debtors, or the creditor’s
right of preference.

Other cases where loss is attributed to debtor

(1) Law provides that the debtor shall be liable even if the loss is due to fortuitous events [Arts.
1942, 1979, 2147, 2159].
(2) Obligor is made liable by express stipulation.
(3) Nature of the obligation requires an assumption of risk.
(4) Fault or negligence concurs with the fortuitous event.
(5) Loss occurs after delay.
(6) Debtor has promised to deliver the same thing to two or more different parties.
(7) Obligation arises from a criminal act.
(8) Bailee in commodatum: saves his own thing and not the thing of the creditor, etc. [Art. 1942].
(9) Depositary in deposit for certain instances [Art. 1979].

Doctrine of Unforeseen Events

Requisites [Tolentino]:
(1) The event or change in circumstances could not have been foreseen at the time of the
execution of the contract;
(2) It makes the performance of the contract extremely difficult but not impossible;
(3) The event must not be due to the act of any of the parties; and
(4) The contract is for a future prestation
CONDONATION
Requisites:
(1) Debt must be existing and demandable.
(2) Renunciation must be gratuitous.
(3) Debtor must accept the remission. [Art. 1270]
If the renunciation is not gratuitous, the nature of the act changes and it may be:
(1) Dation in payment – when the creditor receives a thing different from that stipulated;
(2) Novation – when the object or principal conditions of the obligation have changed;
(3) Compromise – when the matter renounced is in litigation or dispute and in exchange of some
concession which the creditor receives.

Presumptions of Condonation:
(1) Whenever the private document in which the debt is found is in the possession of the debtor,
it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved. [Art.
1272]
(2) Delivery of a private document evidencing credit made voluntarily by the creditor to the
debtor implies the renunciation of the action of creditor against the latter. [Art. 1272]
(3) Accessory obligation of pledge has been remitted when thing after its delivery is found in the
possession of the debtor or third person. [Art. 1274]

CONFUSION OR MERGER OF RIGHTS

Requisites
(1) It should take place between principal debtor and creditor. [Art 1276]
(2) The very same obligation must be involved;
(3) The confusion must be total, i.e. as regards the whole obligation.

COMPENSATION
Requisites [Art. 1279]
(1) Each obligor is bound principally, and at the same time a principal creditor of the other
(2) Both debts must consist in a sum of money, or if the things due are fungible, of the same kind
& quality
(3) Both debts are due
(4) Debts are liquidated and demandable
(5) There must be no retention or controversy over either of the debts, commenced by third
persons and communicated in due time to the debtor
(6) Compensation is not prohibited by law
Effects
(1) Both debts are extinguished to the concurrent amount, even though the creditors and debtors
are not aware of the compensation.
(2) Accessory obligations are also extinguished.

NOVATION
Requisites
(1) A previous valid obligation
(2) Agreement of all the parties to the new obligation
(3) Animus novandi or intent to novate
(4) Substantial difference between old and new obligations and, consequently, extinguishment
of the old obligation
(5) Validity of the new obligation

Legal Subrogation – takes place by operation of law

Legal subrogation is not presumed, except in the following circumstances:
(1) When creditor pays another creditor who is preferred, even without the debtor’s knowledge
(2) When a third person not interested in the obligation pays with the express or tacit approval
of the debtor
(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of
the obligation pays, without prejudice to the effects of confusion as to the latter’s share (Art.
1302)