OBLIGATIONS AND CONTRACTS SUMMARY
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CHAPTER 3
DIFFERENT KINDS OF OBLIGATIONS
SECTION 1. — Pure and Conditional
Obligations
ART. 1179. Every obligation whose
performance does not depend upon a
future or uncertain event, or upon a
past event unknown to the parties, is
demandable at once. Every obligation
which contains a resolutory condition
shall also be demandable, without
prejudice to the effects of the
happening of the event. (1113)
Pure Obligation- one which is not subject to
any condition and no specific date is
mentioned for its fulfillment and is, therefore,
immediately demandable.
Conditional obligation- one whose
consequences are subject in one way or
another to the fulfillment of a condition
Condition -a future and uncertain event,
upon the happening of which, the effectivity
or extinguishment of an obligation (or rights)
subject to it depends
Characteristics of a condition
(1) Future and uncertain
(2) Past but unknown
Two principal kinds of condition
(1) Suspensive condition (condition
precedent or condition antecedent) or one the
fulfillment of which will give rise to an
obligation (or right).
(2) Resolutory condition (condition
subsequent) or one the fulfillment of which
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will extinguish an obligation (or right)
already existing.
When obligation demandable at once
(1) when it is pure (Art. 1179, par. 1.);
(2) when it is subject to a resolutory
condition (par 1.,par. 2.); or
(3) when it is subject to a resolutory period.
(Art. 1193, par. 2.)
What is really contemplated by the law is the
knowledge to be acquired in the future of a
past event which at the moment is unknown to
the parties interested, for it is only in that
sense that the event can be deemed uncertain.
This knowledge determines whether the
obligation will arise or not.
ART. 1180. When the debtor binds
himself to pay when his means permit
him to do so, the obligation shall be
deemed to be one with a period,
subject to the provisions of Article
1197. (n)
Period- a future and certain event upon the
arrival of which the obligation subject to it
either arises or is extinguished
(1) The debtor promises to pay when his
means permit him to do so.
(2) Other cases. — As when the debtor binds
himself to pay:
(a) “little by little”
(b) “as soon as possible”
(c) “from time to time;”
(d) “as soon as I have the money”
(e) “at any time I have the money”
(f) “in partial payments”
(g) “when I am in a position to pay.”
 ART. 1181. In conditional obligations,
the acquisition of rights, as well as the
extinguishment or loss of those already
acquired, shall depend upon the
happening of the event which
constitutes the condition. (1114)
Effect of happening of condition
(1) Acquisition of rights
(2) Loss of rights already acquired
Effect of non-compliance with resolutory
condition
Where a contract is subject to a resolutory
condition, non-compliance with or non-
fulfillment of the condition resolves the
contract by force of law without need of
judicial intervention.
ART. 1182. When the fulfillment of the
condition depends upon the sole will of
the debtor, the conditional obligation
shall be void. If it depends upon chance
or upon the will of a third person, the
obligation shall take effect in
conformity with the provisions of this
Code. (1115)
Classifications of conditions
(1) As to effect.
(a) Suspensive. — the happening of
which gives rise to the obligation; and
(b) Resolutory. — the happening of
which extinguishes the obligation.
(2) As to form.
(a) Express. — the condition is clearly
stated; and
(b) Implied. — the condition is merely
inferred.
(3) As to possibility.
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(a) Possible. — the condition is
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capable of fulfillment, legally and
physically; and
(b) Impossible. — the condition is not
capable of fulfillment, legally or
physically.
(4) As to cause or origin.
(a) Potestative. — the condition
depends upon the will of one of the
contracting parties;
(b) Casual. — the condition depends
upon chance or upon the will of a third
person; and
(c) Mixed. — the condition depends
partly upon chance and partly upon
the will of a third person.
(5) As to mode.
(a) Positive. — the condition consists
in the performance of an act; and
(b) Negative. — the condition consists
in the omission of an act.
(6) As to number.
(a) Conjunctive. — there are several
conditions and all must be fulfilled;
and
(b) Disjunctive. — there are several
conditions and only one or some of
them must be fulfilled.
(7) As to divisibility.
(a) Divisible. — the condition is
susceptible of partial performance;
and
(b) Indivisible. — the condition is not
susceptible of partial performance.
Potestative condition- a condition
suspensive in nature and which depends
upon the sole will of one of the contracting
parties
(1) Conditional obligation void. — Where the
potestative condition depends solely upon
the will of the debtor, the conditional
obligation shall be void because its validity
and compliance is left to the will of the
debtor (Art. 1308.) and it cannot, therefore,
be legally demanded.
(2) Only the condition void. — If the
obligation is a pre-existing one, and,
therefore, does not depend for its existence
upon the fulfillment by the debtor of the
potestative condition, only the condition is
void leaving unaffected the obligation itself.
Here, the condition is imposed not on the
birth of the obligation but on its fulfillment.
If the condition depends exclusively upon the
will of the creditor, the obligation is valid.
If the condition is resolutory in nature, like the
right to repurchase in a sale with pacto de
retro, the obligation is valid although its
fulfillment depends upon the sole will of the
debtor. The fulfillment of the condition merely
causes the extinguishment or loss of rights
already acquired. (Art. 1181.) The debtor is
naturally interested in its fulfillment.
Casual condition
(1) If the suspensive condition depends upon
chance or upon the will of a third person, the
obligation subject to it is valid.
(2) When the fulfillment of the condition
does not depend on the will of the obligor,
but that on a third person who can in no way
be compelled to carry it out, and it is found
by the court that the obligor has done all in
his power to comply with his obligation, his
part of the contract is deemed complied with
and he has a right to demand performance of
the contract by the other party.
Mixed condition
The obligation is valid if the suspensive
condition depends partly upon chance and
partly upon the will of a third person.
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ART. 1183. Impossible conditions,
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those contrary to good customs or
public policy and those prohibited by
law shall annul the obligation which
depends upon them. If the obligation is
divisible, that part thereof which is not
affected by the impossible or unlawful
condition shall be valid.
The condition not to do an impossible
thing shall be considered as not having
been agreed upon. (1116a)
Article 1183 refers to suspensive conditions. It
applies only to cases where the impossibility
already existed at the time the obligation was
constituted. If the impossibility arises after the
creation of the obligation, Article 1266
governs.
(1) Physically impossible conditions. —
when they, in the nature of things, cannot
exist or cannot be done; and
(2) Legally impossible conditions. — when
they are contrary to law, morals, good
customs, public order, or public policy.
Effect of impossible conditions
(1) Conditional obligation void. — Impossible
conditions annul the obligation which
depends upon them. Both the obligation and
the condition are void.
(2) Conditional obligation valid. — If the
condition is negative, that is, not to do an
impossible thing, it is disregarded and the
obligation is rendered pure and valid. (par.
2.) Actually, the condition is always fulfilled
when it is not to do an impossible thing so
that it is the same as if there were no
condition. The negative condition may be not
to give an impossible thing.
(3) Only the affected obligation void. — If the
obligation is divisible, the part thereof not
affected by the impossible condition shall be
valid.

(4) Only the condition void. — If the
obligation is a pre-existing obligation, and,
therefore, does not depend upon the
fulfillment of the condition which is
impossible, for its existence, only the
condition is void.
ART. 1184. The condition that some
event happen at a determinate time
shall extinguish the obligation as soon
as the time expires or if it has become
indubitable that the event will not take
place. (1117)
Positive (suspensive) condition - the
happening of an event at a determinate time.
The obligation is extinguished:
(1) as soon as the time expires
without the event taking place; or
(2) as soon as it has become
indubitable that the event will not
take place although the time specified
has not yet expired.
ART. 1185. 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.
If no time has been fixed, the condition
shall be deemed fulfilled at such time as
may have probably been contemplated,
bearing in mind the nature of the
obligation. (1118)
Negative condition- an event will not happen
at a determinate time. The obligation shall
become effective and binding:
(1) from the moment the time
indicated has elapsed without the
event taking place; or
(2) from the moment it has become
evident that the event cannot occur,
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although the time indicated has not
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yet elapsed. If no time is fi xed, the
circumstances shall be considered to
determine the intention of the parties.
This rule may also be applied to a
positive condition.
ART. 1186. The condition shall be
deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
(1119)
Constructive fulfillment of suspensive
condition
Three (3) requisites:
(1) The condition is suspensive;
(2) The obligor actually prevents the
fulfi llment of the condition; and
(3) He acts voluntarily.
The law does not require that the obligor acts
with malice or fraud as long as his purpose is
to prevent the fulfillment of the condition.
He should not be allowed to profi t from his
own fault or bad faith to the prejudice of the
obligee. In a reciprocal obligation like a
contract of sale, both parties are mutually
obligors and also obligees. (see Art.1167.)
Constructive fulfillment of resolutory
condition
Article 1186 applies also to an obligation
subject to a resolutory condition with respect
to the debtor who is bound to return what he
has received upon the fulfillment of the
condition.
 ART. 1187. The effects of a conditional
obligation to give, once the condition
has been fulfilled, shall retroact to the
day of the constitution of the
obligation. Nevertheless, when the
obligation imposes reciprocal
prestations upon the parties, the fruits
and interests during the pendency of
the condition shall be deemed to have
been mutually compensated. If the
obligation is unilateral, the debtor
shall appropriate the fruits and
interests received, unless from the
nature and circumstances of the
obligation it should be inferred that the
intention of the person constituting the
same was different.
In obligations to do and not to do, the
courts shall determine, in each case,
the retroactive effect of the condition
that has been complied with. (1120)
Retroactive effects of fulfillment of
suspensive condition
(1) In obligations to give. — An obligation to
give subject to a suspensive condition
becomes demandable only upon the
fulfillment of the condition. However, once
the condition is fulfilled, its effects shall
retroact to the day when the obligation was
constituted.
(2) In obligations to do or not to do. — With
respect to the retroactive effect of the
fulfillment of a suspensive condition in
obligations to do or not to do, no fixed rule is
provided. This does not mean, however, that
in these obligations the principle of
retroactivity is not applicable.
The courts are empowered by the use of
sound discretion and bearing in mind the
intent of the parties, to determine, in each
case, the retroactive effect of the suspensive
condition that has been complied with. It
includes the power to decide that the
fulfillment of the condition shall have no
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retroactive effect or from what date such
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retroactive effect shall be reckoned.
Retroactive effects as to fruits and
interests in obligations to give
(1) In reciprocal obligations. — There is no
retroactivity because the fruits and interests
received during the pendency of the
condition are deemed to have been mutually
compensated. This rule is necessary for
purposes of convenience since the parties
would not have to render mutual accounting
of what they have received. Fruits here may
be natural, industrial, or civil fruits.
(2) In unilateral obligations. — There is
usually no retroactive effect because they are
gratuitous. The debtor receives nothing from
the creditor. Thus, fruits and interests belong
to the debtor unless from the nature and
other circumstances it should be inferred
that the intention of the person constituting
the same was different.
ART. 1188. The creditor may, before
the fulfillment of the condition, bring
the appropriate actions for the
preservation of his right.
The debtor may recover what during
the same time he has paid by mistake
in case of a suspensive condition.
(1121a)
Rights pending fulfillment of suspensive
Condition
(1) Rights of creditor. — He may take or bring
appropriate actions for the preservation of
his right, as the debtor may render nugatory
the obligation upon the happening of the
condition. Thus, he may go to court to
prevent the alienation or concealment of the
property of the debtor or to have his right
annotated in the registry of property. The
rule in paragraph one applies by analogy to
obligations subject to a resolutory condition.

(2) Rights of debtor. — He is entitled to
recover what he has paid by mistake prior to
the happening of the suspensive condition.
This right is granted to the debtor because
the creditor may or may not be able to fulfill
the condition imposed and hence, it is not
certain that the obligation will arise. This is a
case of solutio indebiti which is based on the
principle that no one shall enrich himself at
the expense of another.
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. (1122)
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Requisites for application of Article 1189
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(1) The obligation is a real obligation;
(2) The object is a specific or
determinate thing;
(3) The obligation is subject to a
suspensive condition;
(4) The condition is fulfilled; and
(5) There is loss, deterioration, or
improvement of the thing during the
pendency of the happening on one
condition.
Kinds of loss
(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 or when a thing heretofore legal
becomes illegal
(3) Civil loss. — when a thing disappears in
such a way that its existence is unknown or
even if known, it cannot be recovered
whether as a matter of fact or of law
Rules in case of loss, etc. of thing during
pendency of suspensive condition
(1) Loss of thing without debtor’s fault.
(2) Loss of thing through debtor’s fault.
(3) Deterioration of thing without debtor’s
fault. — A thing deteriorates when its value is
reduced or impaired with or without the fault
of the debtor.
(4) Deterioration of thing through debtor’s
fault.
(5) Improvement of thing by nature or by time.
(6) Improvement of thing at expense of debtor.
 ART. 1190. When the conditions have
for their purpose the extinguishment
of an obligation to give, the parties
upon the fulfillment of said conditions,
shall return to each other what they
have received.
In case of the loss, deterioration
or improvement of the thing, the
provisions which, with respect to the
debtor, are laid down in the preceding
article shall be applied to the party
who is bound to return.
As for obligations to do and not
to do, the provisions of the second
paragraph of Article 1187 shall be
observed as regards the effect of the
extinguishment of the obligation.
(1123)
Effects of fulfillment of resolutory
condition
(1) In obligations to give. — When the
resolutory condition in an obligation to give
is fulfilled, the obligation is and the parties
are obliged to return to each other what they
have received under the obligation.
(2) In obligations to do or not to do. — In
some obligations, the courts shall determine
the retroactive effect of the fulfillment of the
resolutory condition (par. 2.) as in the case
where the condition is suspensive.
The courts in the exercise of discretion may
even disallow retroactivity taking into
account the circumstances of each case.
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ART. 1191. The power to rescind
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obligations is implied in reciprocal
ones, in case one of the obligors should
not comply with what is incumbent
upon him.
The injured party may choose between
the fulfillment and the rescission7 of the
obligation, with the payment of
damages in either case. He may also
seek rescission, even after he has
chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission
claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without
prejudice to the rights of third persons
who have acquired the thing, in
accordance with
Articles 1385 and 1388 and the
Mortgage Law.8 (1124)
Kinds of obligation according to the
person obliged
(1) Unilateral. — when only one party is
obliged to comply with a prestation.
(2) Bilateral. — when both parties are
mutually bound to each other. In other
words, both parties are debtors and creditors
of each other.
Bilateral obligations may be reciprocal or non-
reciprocal.
(a) Reciprocal obligations- those which
arise from the same cause and in
which each party is a debtor and
creditor of the other, such that the
performance of one is designed to be
the equivalent and the condition for
the performance of the other.
(b) Non-reciprocal obligations- those
which do not impose simultaneous
and correlative performance on both
 parties. In other words, the
performance of one party is not
dependent upon the simultaneous
performance by the other.
Remedies in reciprocal obligations
Article 1191 is the general provision on
rescission of reciprocal obligations. It speaks of
the right of the “injured party’’ to choose
between rescission or fulfillment of the
obligation, with the right to claim damages in
either case. It governs where there is non-
compliance by one of the contracting parties in
case of reciprocal obligations. The remedy
granted is predicated on a breach of obligation
by the other party that violates the reciprocity
between them. The breach contemplated is the
obligor’s failure to comply with an existing
obligation, not a failure of a condition to
render binding that obligation.
Choice of remedy by injured party
(1) action for specific performance
(fulfillment) of the obligation with damages;
or
(2) action for rescission of the obligation also
with damages.
Breach of obligation on part of plaintiff
Breach of an obligation- when there is a
failure or refusal, by a party without legal
reason or excuse to perform, in whole or in
part the obligation or undertaking which is
incumbent upon him
Under the rule of exceptio non adimpleti
contractus, the party who has not performed
his part of the agreement is not entitled to sue.
Effect of rescission
Generally, to rescind a contract is not merely
to terminate it, but to abrogate and undo it
from the beginning, that is, not merely to
release the parties from further obligations
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to each other in respect to the subject of the
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contract, but to annul the contract and
restore the parties to the relative positions
which they would have occupied as if no such
contract had ever been made.
In case of rescission of contract based on
Article 1191, mutual restitution is required to
bring back the parties, as far as practicable, to
their original situation prior to the inception
of the contract. Rescission creates the
obligation to return the object of the contract.
It requires a mutual restitution of the
benefits each party may have received as a
result of the contract. It can be carried out
only when the one who demands rescission
can return whatever he may be obliged to
restore.
To rescind is to declare a contract void and to
abrogate it from its inception.
Court may grant guilty party term for
performance.
The court shall decree the rescission claimed
unless there should be just cause for granting
the party in default a term for the
performance of his obligation. Obviously, this
exception applies only where the guilty party
is willing to comply with his obligation but
needs time to do so and not where he refuses
to perform.
Remedies are alternative.
The remedies of the injured or aggrieved
party are alternative and not cumulative, that
is, he is privileged to choose only one of the
remedies, and not both, subject only to the
exception in paragraph 2, to wit: he may also
seek rescission even after he has chosen
fulfillment if the latter should become
impossible. But after choosing rescission of
the obligation, he cannot thereafter demand
its compliance, nor seek partial fulfillment
under the guise of recovering damages. (Siy
vs. Court of Appeals, 138 SCRA 536 [1985])
Limitations on right to demand
Rescission
(1) Resort to the courts. — The rescission
contemplated by Article 1191 is a judicial
rescission.
(2) Power of court to fix period. — The court
has discretionary power to allow a period
within which a person in default may be
permitted to perform his obligation if there is
a just cause for giving time to the debtor
(3) Compliance by aggrieved party with his
obligation. — A party to a contract cannot
demand performance of the other party’s
obligation unless he is in a position to comply
with his own obligations. Similarly, the right
to rescind a contract can be demanded only if
a party thereto is ready, willing, and able to
comply with his own obligations thereunder.
(4) Right of third persons. — Rescission
creates the obligation of mutual restitution.
However, if the thing, subject matter of the
obligation, is in the hands of a third person
who acted in good faith, rescission is not
available as a remedy.
(5) Slight or substantial violation. — The
general rule is that rescission will not be
granted for slight or casual breaches of
contract. The violation should be substantial
and fundamental as to defeat the object of the
parties in making the agreement.
(6) Waiver of right. — The right to rescind
may be waived, expressly or impliedly.
(7) Contract to sell. — In a contract to sell, the
payment of the purchase price is a positive
suspensive condition the failure of which is
not a breach, casual or serious, but a situation
that prevents the obligation of the vendor to
convey title from acquiring an obligatory
force. The breach contemplated in Article
1191 is the obligor’s failure to comply with
an obligation already extant, not a failure of a
condition to render binding that obligation.
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(8) Sales of real property and of personal
property in installments. — In sales of real
property, Article 1592,16 as impliedly
amended by R.A. No. 6552, governs the
exercise of the right of rescission. Article
1191 is subordinated to the provision of
Article 1592 which speaks of nonpayment of
the purchase price as a resolutory condition,
when applied to sales of immovable property.
(9) Judicial compromise. — Article 1191
applies only to reciprocal obligations in
general and not to obligations arising from a
judicial compromise. Judgment upon
agreement of the parties is more than
a mere contract binding upon them.
(10) Arbitration clause in a contract. — The
act of treating a contract as rescinded on
account of infractions by the other
contracting party is valid albeit provisional as
it can be judicially assailed. The right cannot
be exercised where there is a valid
stipulation on arbitration.
Rescission of contract without previous
judicial decree
(1) Where automatic rescission expressly
stipulated. — The parties, may validly enter
into an agreement that violation of the terms
of the contract would cause cancellation
thereof even without judicial intervention or
permission or termination. This stipulation is
in the nature of a resolutory condition.
(2) Where contract still executory. — In the
absence of stipulation to the contrary, the
right to rescind a contract must be invoked
judicially; it cannot be exercised solely on a
party’s own judgment that the other has
committed a breach of the obligation.
Action for rescission not required upon
breach of compromise agreement
Compromise- an agreement between two or
more persons who, for preventing or putting
an end to a lawsuit, adjust their respective
positions by mutual consent in the way they
feel they can live with.
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other also violated his part of the obligation.
In this case, the liability of the first infractor
should be equitably reduced.

Rescission distinguished from (2) First infractor cannot be determined. —

termination One party violated his obligation followed by
the other, but it cannot be determined which
Rescission has likewise been defi ned as the of them was the first infractor. The rule is
“unmaking of a contract, or its undoing from that the contract shall be deemed
the beginning, and not merely its termination.” extinguished and each shall bear his own
Rescission may be effected by both parties by damages.
mutual agreement; or unilaterally by one of
them declaring a rescission of contract
without the consent of the other, if a legally
sufficient ground exists or if a decree of
rescission is applied for before the courts.

On the other hand, termination refers to an

“end in time or existence; a close, cessation or
conclusion.” When an agreement is
rescinded, it is deemed inexistent, and the
parties are returned to their status quo ante.
Hence there is mutual restitution of benefi ts
received.
However, when it is terminated, it is deemed
valid at its inception.
Prior to termination the contract binds the
parties who are thus obliged to observe its
provisions. The consequences of termination
may be anticipated and provided by the
contract. As long as the terms of the contract
are not contrary to law, morals, good
customs, public order or public policy they
shall be respected by the courts
ART. 1192. In case both parties have
committed a breach of the obligation, the
liability of the first infractor shall be
equitably tempered by the courts. If it
cannot be determined which of the parties
fi rst violated the contract, the same shall
be deemed extinguished, and each shall
bear his own damages. (n)

Where both parties guilty of breach

(1) First infractor known. — One party

violated his obligation; subsequently, the

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