OBLIGATIONS AND

CONTRACTS
LECTURE 6
By: Atty. Wilfred Francis B. Martinez
Kinds of Obligations
Kinds of Obligations
1. Pure and Conditional Obligations
2. Obligations with a Period
3. Alternative and Facultative Obligations
4. Joint and Solidary Obligations
5. Divisible and Indivisible obligations
6. Obligations with a Penal Clause
Kinds of Obligations
1. Pure and Conditional Obligations
2. Obligations with a Period
3. Alternative and Facultative Obligations
4. Joint and Solidary Obligations
5. Divisible and Indivisible obligations
6. Obligations with a Penal Clause
Pure and Conditional Obligations
Pure and Conditional Obligations
 Pure Obligation:
 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.
 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.
Pure and Conditional Obligations
 Pure Obligation:
 It is an obligation whose effectivity or extinguishment does not
depend upon the fulfillment or nonfulfillment of a condition or
event.
 A pure obligation is one which is not subject to any condition and
no specific date is mentioned for its fulfillment and is, therefore,
immediately demandable.
 Example: X promises to pay P5,000.00 to Y upon the demand of Y.
Pure and Conditional Obligations
 Pure obligations are generally characterized by their immediate
demandability.
 Example: Floriano vs Delgado
 X obtains a loan from Z in the amount of P10,000.00.
 X makes a promissory note promising to pay Z the amount
of the loan plus interest. X did not indicate when he was
supposed to pay the loan.
 The Supreme Court ruled that Z can immediately demand
the payment of the same, however, X is allowed a
reasonable period pay back the loan. In this case, the
Court gave X 10 days to pay.
Pure and Conditional Obligations
 Conditional Obligation:
 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.
A conditional obligation is one whose consequences
are subject in one way or another to the fulfillment
of a condition.
Pure and Conditional Obligations
 Conditional Obligation:
 What is a Condition?
 Every future and uncertain event upon which an obligation or provision is
made to depend.
 It is a “trigger” or “switch” that, if activated, will give rise or extinguish
an obligation.
 Notes:
 An event which is certain to happen, though it is unknown when it will
happen, is not a condition but an obligation with a term. (Example: X
will give Z his car upon the death of A.)
 It is not enough that the event happened, there must be a show of
proof that the event had happened in order to “trigger” the event.
(Example: X will give his house to Z if Z is able to finish his Doctorate
degree. Once Z shows proof that he completed his Doctorate degree,
X will be obligated to deliver his house to Z.)
Pure and Conditional Obligations
 Exception to the rule that a condition must be a future event:
 Past events may be considered as a condition provided that the
past event was unknown to the parties. (Example: X may agree
to purchase a home from Z, a real estate agent, if the house
being offered by Z has a gold plated toilet. If Z is able to find
this house with a gold plated toilet, X is obligated to purchase
the house from Z.)
 In the above case, the element of future is missing, however, it
is still considered as a “conditional obligation” because the
past event is unknown by the parties.
Pure and Conditional Obligations
 Classification of Conditions:
1. Suspensive and Resolutory.
2. Potestative, Casual, and Mixed.
3. Divisible and Indivisible.
4. Conjunctive and Disjunctive.
5. Positive and Negative.
6. Express and Implied.
7. Possible and Impossible.
Suspensive and Resolutory
 Suspensive and Resolutory.
 Suspensive Condition: (Article 1192)
 Gives rise to an obligation.
 Rights will only be acquired upon the happening of the condition.
 Resolutory Condition: (Article 1192)
 Extinguishes an obligation.
 Rights are already acquired, however, the happening of the condition
extinguishes those rights.
Suspensive and Resolutory
 Differences between a Suspensive and Resolutory
Condition:

Suspensive Resolutory
If the condition is fulfilled, the If the condition is fulfilled, the
obligation arises. obligation is extinguished.
If the condition does not take place, If the condition does not take place,
performance will not be required. the legal tie subsists or continues.
The existence of the obligation is The obligation already exists but is
mere hope that the event will subjected to the threat of
happen. termination or extinguishment.
Suspensive and Resolutory
 Examples of Suspensive Condition:
 X will give his car to Z if Z passes his board exam.
 A will sell his house to B if B is able to obtain a fire insurance for
the house.
 Examples of Resolutory Condition:
 X will give his car to Z immediately, however, Z will return the car
after Z passes the board exam.
 M will lease his condominium unit to B until B is able to buy his
own house. Once B buys his own house, B will be obligated to
return the condominium unit to M.
Class Participation (SW8)
 Instruction: Identify which among the following are
suspensive conditions, and which are resolutory
conditions.
1. Maria is a student of medicine studying in UST. To help
reduce her travel time, her godfather obligated himself
to let Maria use his car until she graduates from UST.
2. Juan bought a house from Pedro. The terms of payment
are as follows: (a) P1,000,000.00 as down payment; (b)
P2,000,000.00 remaining price to be paid when Pedro
finishes the ongoing renovations to the house.
Class Participation (SW8)
3. Kazel and Lorenzo entered into an agreement whereby
Kazel will lend her Car to Lorenzo, and in exchange,
Lorenzo will allow Kazel to use his Condominium Unit.
They executed an agreement which contained a provision
stating that both parties will return their respective
properties once Lorenzo’s son reaches the age of
majority (18 years old).
4. John is a student at XYZ University. The University gave
him a Scholarship. To maintain the scholarship, John is
required to maintain a final grade of 90 points in all his
classes. If John does not reach this grade, his scholarship
will be taken away.
Potestative, Casual and Mixed Condition
 Potestative Condition
 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.
Potestative, Casual and Mixed Condition
 Potestative Condition
 A condition that depends upon the will of one of the contracting parties, as a
general rule, a Potestative Condition is valid.
 Example: X promised to give Z a bonus of P500,000.00 if Z is able to build a
house for X in three months.
 When can a potestative condition invalidate or void an obligation?
 If the condition is based solely upon the will of the debtor (Purely Potestative
Condition). Examples:
1. X borrows P500,000.00 from Y. X will pay back Y when he feels like it. – This is a
void obligation.
2. X borrows P500,000.00 from Y. X will pay back Y when X has money. – This is a valid
obligation.
3. X borrows P500,000.00 from Y. X will pay back Y when X decides to sell his house. –
This is a void obligation.
4. X borrows P500,000.00 from Y. X will pay back Y when X sells his house which is
currently for sale. – This is a valid obligation.
Potestative, Casual and Mixed Condition
 Why are Purely Potestative conditions void?
 Because the validity and compliance of the obligation is left to the
will of the debtor, thus, the creditor is deprived of his right to
demand its fulfillment.
 There is no burden or consequence on the part of the debtor. The
debtor can simply say that he will not perform his obligation, and
leave the creditor without any recourse (“iniwan sa ere”.
 In the void examples in the previous slide. X seems to have an
obligation to pay back Y, however, such obligation will only arise
based on X’s decision. Y is therefore stripped of his right to go
after X if X decides not to pay back the loan.
 X may have a moral obligation to pay back the loan, but X is not
bound by a legal obligation. As a result, Y cannot even go to court to
ask for fulfillment. Because of this, the law prohibits Purely
Potestative Condition.
Potestative, Casual and Mixed Condition
 Note: Conditional obligations that depend purely upon the will
of the debtor is void (Purely Potestative Conditions), however,
if the conditional obligation depend purely upon the will of the
creditor, the obligation is valid.
 Why?
1. Because Article 1182 mentions only debtor/obligee.
2. Because the creditor is naturally interested in the fulfillment of the
obligation.
 Example:
 X obligated himself to pay back his loan to Y when he is in the mood to
pay it back. – Void because the payment is purely upon the will of the
DEBTOR.
 X obligated himself to pay back his loan to Y, when Y is in the mood to
receive the payment made by X. – Valid because the collection of the
debt is purely upon the will of the CREDITOR.
Potestative, Casual and Mixed Condition
 What if the condition is partially based upon the will of
the debtor and partially upon chance or the will of a
third person?
 The obligation is valid.
 This is known as a Mixed Condition.
 It is valid because, even though the condition is based upon the
will of the debtor, the condition still has a chance of being
“triggered” or “activated” by an event outside of the debtor’s
control.
Potestative, Casual and Mixed Condition
 Example: Jacinto vs Chua Leng
 X (buyer) and Z (seller) entered into a contract of sale for a piece of
land. The land is occupied by illegal settlers (squatters).
 X and Z agreed that, X will pay the remaining balance for the land
when the squatters are evicted. X undertook the obligation to evict
the squatters.
 PROBLEM: X never evicted the squatters. Because the squatters were
not evicted, X’s obligation to pay the remaining balance did not arise.
The seller (Z) claims that the obligation is purely potestative and
wants the contract be declared void. Is Z correct?
 SC Decision: Z is not correct. The condition is mixed and not purely
potestative.
 In this case, if X did not want to evict the squatters, Z still has the
option to evict the squatters himself since he is still the legal owner of
the land. If Z is successful in evicting the squatters, X’s obligation to
pay the remaining balance arises.
Class Participation (SW9)
 Instruction: Identify which among the following
conditional obligations are valid.
1. “On this date, I, Juan Dela Cruz, in the presence of two
witnesses, promises to pay my debt in the amount of
P500,000.00 to Maria Beltran, if I place my house on
sale.”

2. “On this date, I, Juan Dela Cruz, in the presence of two

witnesses, promises to pay my debt in the amount of
P500,000.00 to Maria Beltran, when my house is sold.”
Class Participation (SW9)
 Instruction: Identify which among the following
conditional obligations are valid.
3. Benito sold his house to Mike for P1 Million Pesos. Mike
will pay P500,000.00 now, and P500,000.00 when the
house is renovated by Benito.

4. Jonathan is building a bridge for the City of Quezon. He

will start building the bridge, but will only finish it if he
is in the mood to do so.
Possible and Impossible Conditions
 Art. 1183. Impossible conditions, 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.
Possible and Impossible Conditions
 Possible Conditions:
 Those conditions that are capable of fulfillment in a physical and
legal sense.
 Impossible Conditions:
 Those conditions that cannot be fulfilled by the parties due to
physical or legal limitations.
 Example: (legal limitation)
 X purchases a building from A provided that X will use it to open a
prostitution house. – This is a void condition.
 X purchases a building from A provided that X will not use the
building to open a prostitution house. – This is a valid condition.
Possible and Impossible Conditions
 Example: (physical limitation)
 X and Y entered into a contract of sale. Under this contract, X will
deliver the house to Y if: (1) Y pays the agreed upon amount; and
(2) Y circles the planet within 24 hours. – The condition is void due
to absurdity and physical impossibility.
 X will sell to Y his Toyota Vios, provided that the sun will not rise
on 5th year of the contract. – The condition is void because of
physical impossibility.
Possible and Impossible Conditions
 Effects of Impossible Conditions:
1. Impossible conditions annul or voids the obligation which
depends upon them.
 This is because there is no intention to comply with the obligation
since the parties know it cannot be done.
2. If the obligation is divisible, then only the obligation with an
impossible condition is rendered void. All other obligations with
possible conditions are valid.
3. If there is a pre-existing obligation, and therefore, does not
depend upon the fulfillment of the impossible condition, then
only the impossible condition is rendered void.
 Example: D borrowed P10,000.00 from C and will pay it back if C will
kill X. – In this example, the condition to kill X is void, but D will still
have to pay back the money he borrowed from C.
Possible and Impossible Conditions
 What if the obligation was legally possible when it was
made, but subsequently became impossible because of a
law?
 The parties will be freed from their obligation without the parties
becoming liable to each other.
 What if the obligation is divisible?
 The part of the obligation that is not affected by the impossible
obligation remains valid.
 Example. X obligates himself to pay P50,000.00 to Y if Y is able to
provide X information as to the location of Z. X will pay an
additional P100,000.00 to Y if Y kills Z.
 In the above example, the first part of the obligation is valid.
Positive and Negative Conditions
 Positive Condition
 When the condition involves the performance of an act or
the fulfillment of an event.
 Examples:

1. Performance of an Act: Juan purchases the house of Pedro.

Juan will pay half of the purchase price now, and will pay the
remaining balance once Pedro transfers the ownership of the
house to Juan.
2. Happening / Fulfillment of an Event: Maria is thinking of
purchasing the car of Benito. Maria obligates herself, through a
contract to sell, to purchase the car if Maria’s daughter
graduates from College.
Positive and Negative Conditions
 Negative Condition
 When the condition involves the non-performance of an act
or the non-fulfillment of an event.
 Examples:

1. Performance of an Act: Juan purchases the house of Pedro. Juan

will pay half of the purchase price now, and will pay the
remaining balance if Pedro does not leave the country in the
next 3 months.
2. Fulfillment of an Event: Maria is thinking of purchasing the car
of Benito. Maria obligates herself, through a contract to sell, to
purchase the car if the gas prices does not rise in the next 3
months.
Effects of Conditions
Effects of Conditions
 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.
 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.
Effects of Conditions
 If a condition is set to happen at a given time, and the event
does not happen, the obligation is extinguished.
 Example 1: Ricky and Gabriel entered into to sell on 1 January 2018.
Under this contract, Ricky promises to buy the laptop of Gabriel if
Gabriel passes his upcoming exam in Business Law.
 In this example, if Gabriel fails his exam, the obligation is extinguished
because the condition has not been fulfilled.
 If a condition is set to happen at a given time, and it
becomes clear that the condition will not be fulfilled or will
not take place. The obligation is extinguished.
 Example 2: Regine promises to pay Cirenne P500,000.00 on 1
December 2018, provided that Cirenne marries her current boyfriend
before the 1 December 2018. On 15th of November 2018, it was
discovered the Cirenne’s boyfriend married another girl.
 In this example, it is clear that the obligation cannot be fulfilled because
it is legally impossible for Cirenne to marry a man who is already married.
Effects of Conditions
 What if the condition is a negative condition?
 If the condition is negative, then the obligation becomes
effective the moment the negative condition does not take
place.
 Example 1: X promised to pickup Z from the office at 6pm if Z is
unable to hail a taxi cab by 5:30pm.
 In this example, if Z was unable to find a taxi by 5:30pm, X will be obligated to
pickup Z at 6pm.

 Example 2: A promised to pay B P100,000.00 on 1 December 2018,

provided that B does not die on or before 30 September 2018.
 In this example. If B is still alive by the 1st of October 2018, A’s obligation to
pay B will arise, however, A will only be compelled to pay on 1 December 2018.
This means that even if B dies after September 30, A will still be obligated to
pay the agreed upon amount (payment will be made to the heirs).
Effects of Conditions
 Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
 Note: The creditor/obligor must have actually prevented the oblige/debtor
from fulfilling or complying with his obligations. Additionally, such an act must
be voluntary and willful on the part of the creditor/obligor.
 Example: PLDT vs Jeturian
 PLDT had a pension plan in place for its employees. To avail of this retirement plan,
the employees must be at least 50 years of age and has rendered 20 years of service
for PLDT. Due to the outbreak of World War 2, PLDT incurred financial losses. After
the war, PLDT decided to abandon its pension plan. The employees who met the
condition, or who were about to complete the condition, demanded that they be
granted the pension plan. PLDT refused.
 The Supreme Court ruled that PLDT is liable to give the pension plan to the
employees.
 The Supreme Court also ruled that PLDT cannot invoke the rule on Fortuitous Event
because the pension plan involves the payment of money (a generic obligation).
Effects of Conditions
 Rules in case the object of a conditional obligation is lost/improved
before the fulfillment of the condition.
1. If the specific thing is lost without the fault of the debtor. = Obligation is
extinguished.
2. If the generic thing is lost without the fault of the debtor. = Obligation
remains.
3. If the thing is lost due to the fault of the debtor. = Debtor liable for
damages.
4. If the thing deteriorates without the fault of the debtor. = The impairment is
to be borne by the creditor. Debtor is not liable.
5. If the thing deteriorates due to the fault of the debtor. = The creditor may
choose between rescission of the obligation and its fulfillment. Debtor is
liable for damages either way.
6. If the thing is improved by its nature, or by time. = Benefit in favor of the
creditor.
7. If the thing is improved at the expense of the debtor. = No other right than
that granted to a usufructuary.
Effects of Conditions
 Other important rules:
 When the condition involves the extinguishment of an obligation to
give, the fulfillment of such condition will oblige the parties to
return to each other what they have received.
 Example: X lends his car to Y until Y’s son graduates from high school. – In
this example, once Y’s son graduates from high school, Y will be obliged to
return the car to X.
 Where one party is not able to comply with his obligation, the
injured party may choose between rescission of the obligation or
performance, with the payment of damages in either case.
 Example: X sold his house to Y. X delivered the house to Y. Y paid the
down payment but failed to pay the balance despite demand.
 In this example, X has two options:
1. Rescind the contract - i.e. X will return Y’s down payment, and Y will return
the house plus payment of damages.
2. Demand performance – i.e. X will go to court and force Y to pay the
remaining balance plus damages.
Effects of Conditions
 If no period was agreed upon, the courts may impose a date.
 If the thing or object of the obligation is already in the hands of a
bona-fide third-party, who is in good faith, then that third-party’s
rights cannot be violated.
 Example:
• X sold his house to Y for P5 Million Pesos.
• Y paid a down payment of P1 Million Pesos and the balance will
be paid on 1 December 2018.
• Y sold the house to Z on 1 November 2018.
• On 1 December 2018, X demanded payment. Y refused to pay.
• In this case, X cannot demand the return of the house because it
was already sold to Z who is in good faith (in other words,
rescission is no longer an option). X, however, can demand full
payment from Y plus damages (X can demand performance
through court action).
Effects of Conditions
 If both parties breached their obligations:
 The court will check who breached first and will appropriately reduce
the damages that be claimed by that party.
 If the court cannot determine who breached first, the court will leave
the parties as is.
Thank you.