JOSE MARIA COLLEGE

OBLIGATIONS AND CONTRACTS NOTES

Lesson 6
Obligations with a Period

Art. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when
that day comes.

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A
day certain is understood to be that which must necessarily come, although it may not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional and it shall be
regulated by the rules of the preceding Section.

Period or Term is a future and certain event upon the arrival of which, the obligation subject to it either
arises or is terminated. It is day which must necessarily come (like next Christmas), or although it may
not be known when, but it is certain to come (like the death of a person).

A period is a certain length of time which determines the effectivity or the extinguishment of
obligations.

An Obligation with a period is one whose effects or consequences are subjected in one way or another
to the expiration or arrival of said period or term.

Period vs. Condition

(1) As to fulfillment: Condition is an uncertain event, while a term must necessarily come. [Hence,
to obtain a loan from a bank is a condition, not a term, as it is uncertain]
(2) As to influence on the obligation: While a condition gives rise to an obligation, or extinguishes
one already existing, a period has no effect upon the existence of obligations, but only their
demandability and performance.
(3) As to time: a period always refers to the future, while a condition may refer to a past event
unknown to parties
(4) As to the will of the debtor: a period left to the debtor’s will merely empowers the court to fix
such period, while a condition that exclusively depends upon the will of the debtor annuls the
obligation.

Requisites of a Period: (1) future (2) certain (3) possible.

Kinds of Period

(1) According to effect:

(a) Suspensive Term (term ex die) is one that must lapse before the performance of the obligation
can be demanded.
Examples:
“I will support you, beginning the first day of next year.” Here, the obligation only
becomes effective on the day stipulated.
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“I will pay you 30 days from today.”

(b) Resolutory term (in diem) is the period after which the performance must terminate.
Examples:
“I will support you until January 1 of next year.” Here, the obligation is immediately
demandable and will end only on Jan. 1 of the next year.

“I will give you P10,000 a month until next year.”

(2) According to definiteness:

(a) Definite — the exact date or time is known and given.

(b) Indefinite — something that will surely happen, but the date of happening is unknown (as in the
case of death, movable religious holidays, or the age of majority of a person).

(3) According to source:

(a) Legal — a period granted under the provisions of the law.
(b) Conventional or Voluntary — period agreed upon or stipulated by the parties.
(c) Judicial — the period or term fixed by the courts for the performance of an obligation or for its
termination.

Effect of Period. Obligation with a term are demandable only when the day fixed for their performance
arrives. Hence, the period for prescription must also be counted only from the day of maturity.

Other cases:
- If the terms imposed has been cancelled by mutual agreement of the parties, the obligation is
converted to a pure obligation and is demandable at once.
- Suspension of period does not prevent the running of the time of the period. It only relieves
the parties from the fulfillment of their respective obligations during that time. Example:
o In an obligation with a period of thirty years, if the obligation is suspended by six (6)
years, the period is not extended with another six years. There can be no extension of
term.

Moratorium Laws: a moratorium is a postponement of the fulfillment of an obligation; it is an extension

of the period of performance of the obligation, decreed by a statute. Usually passed during time of
financial distress (such as war). Some of the moratorium laws were declared by the SC as void.

Article 1194
Loss, Deterioration, or Improvement before day certain

Art. 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain,
the rules in Article 1189 shall be observed.
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The same rules in Art. 1189 shall apply in obligations subject to a suspensive or resolutory period.

Article 1195
Debtor May Recover Payment

Art. 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the
period or believing that the obligation has become due and demandable, may be recovered, with the fruits
and interests.

This provision applies only to obligations to give.

The provision is no applicable in obligations to do or not to do because it is physically impossible
to recover a service rendered and as to the latter, as the obligor performs by not doing, he cannot
recover what he has not done.

This is similar to Art. 1188 (2) where a creditor cannot unjustly enrich himself by retaining payment
which is not due.

Burden of proof: The debtor shall have the burden of proof of proving the ignorance of the period.
Debtor is presumed to be aware of the period. He must prove that there was payment by mistake. In Art.
1197 (3), the period

Payment with knowledge of term: if payment is made voluntarily, with knowledge of the term, the
payment cannot be recovered. It is as if he had tacitly waived the benefit of the term.

Rules in recovery:
Recovery before maturity: This article allows recovery of the thing or money itself, plus the fruits and
interest, which must be understood as those accruing from the moment of payment to the date of
recovery.

Recovery after maturity: The payment/money cannot be recovered, but the fruits and interest can be
recovered.

Example:
D owes C P10,000 which was supposed to be paid on December 31 this year. By mistake, B paid
his obligation on December 31 last year.

Assuming that today is June 30, D can recover the P10,000 plus P300 which is the interest for
one half year at the legal rate of 6% or a total of P10,300. But D cannot recover, except the
interest, if the debt had already matured.

Neither can there be a right of recovery if D had knowledge of the period. The theory under
solutio indebiti will not apply. D is deemed to have impliedly renounced the period.
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Exception – No recovery of fruits and interest if:

(1) The obligation is reciprocal and there has been premature performance on both sides;
(2) When the obligation is a loan on which the debtor is bound to pay interest;
(3) When the period is exclusively for the benefit of the creditor;

Article 1196
Benefit of Term

Art. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for
the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it
should appear that the period has been established in favor of one or of the other.

Benefit of Term
General Rule: The presumption is that the period is for the benefit of both parties.
The creditor cannot demand payment and the debtor may not fulfill the obligation nor can he make an
effective tender and consignation of payment before the period stipulated.

Example:
On January 1, D borrowed from C P10,000 payable on December 31 at 15% interest.

D cannot pay before December 31 without the consent of C. Neither can C compel D to pay
before the expiration of the period.

Exception: When the nature of the obligation or stipulation of the parties shows that the period was for
the benefit of either party.

For the benefit of the creditor alone:

May demand performance at any time, but the debtor cannot compel him to accept payment before the
period starts.

Reasons for terms for the benefit of the creditor:

The creditor may want to keep his money invested safely instead of having it in his hands
or fixing the period may help himself from sudden decline in the purchasing power of the
currency loaned.

Example:
D borrowed from C P1,000 to be paid within one (1) year without interest.
In this case, the period of one (1) 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 the one (1) year.

D promised to pay his debt “one or before December 31, 2008”

Here, the payment is to be made within a stipulated period. D can pay before said date.
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For the benefit of the debtor alone:

Debtor may oppose a premature demand for payment but may validly pay at any time before the period
expires.

Example:
D borrowed from C P1,000 payable on December 31 with the stipulation that D cannot make
payment before the lapse of the period, but C can demand fulfillment even before the 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 stipulation granting the benefit of the term to only the creditor.

Additional note:
 The benefit of the period may be waived by the person in whose favor it was constituted.

Example:
Where the obligor informed the oblige that he will make an early delivery of the subject portions
of the shipment, the obligor was made liable for failure to make such delivery. Use of the period
was effectively waived.

Computation of the period:

(1) The Administrative Code of 1987 provides:

Legal periods – “Year” shall be understood to be twelve (12) calendar months; “month” of thirty
(30) days, unless it refers to a specific calendar month in which case it shall be computed
according to the number of days the specific month contains; “day” to a day of twenty-four (24)
hours; and “night” from sunset to sunrise.

(2) A calendar month is a month designated in the calendar without regard to the number of days it
may contain. “It is the period of time running from the beginning of a certain numbered day up
to, but not if there is not sufficient number of days in the next month, then up to and including the
last day of that month.

Illustration:
One calendar month from December 31, 2019 will be from January 1, 2020 to January 31, 2020;
one calendar month from January 31, 2020 will be from February 1, 2020 until February 29,
2020.

Article 1197
Courts may fix a period

Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be
inferred that a period was intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will of the debtor.
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In every case the courts shall determine such period as may under the circumstances have been probably
contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.

Related Articles:
 Art. 1180 – when the debtor binds himself to pay when his means permit him to do so.
 Art. 1191 (3) – instead of choosing rescission, the court may authorize the fixing of the period
when there is just cause.

General Rule: The courts do not have power to fix the period.

If the obligation does not state a period and no period is intended, the court is not authorized to fix a
period because it has no right to make contracts for parties.

Exceptions: When may the courts fix a period

(a) When the duration depends upon the will of the debtor. Example: “when my means permit
me to do so” (Art. 1180, Civil Code)

(b) When although the obligation does not fix a period, it can be inferred that a period was
intended.

Example:
D agreed to construct the house of C. The parties failed to fix the period within which the
construction is to be made.
Here the court can fix the term for it is evident that the parties intended that D should
construct the house within a certain period.

Two-step Process (Gregorio Araneta Inc. vs. Philippine Sugar Estates Development Co. Ltd)
(1) The court must first determine that the obligation does not fix a period or that a period is made to
depend upon the will of the debtor, but from the nature and circumstances it can be inferred that a
period was intended.
(2) The court must decide what period was probably contemplated by the parties.

Effect of Term Fixed by Court:

(1) If there is an agreed period and it has already lapsed, the courts cannot fix another period.
(2) Once the period has been fixed by court, it becomes part of the contract, and it cannot be
subsequently changed or extended by the court without the consent of both of the parties.

Article 1198
Loss of Term

Art. 1198. The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty
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OBLIGATIONS AND CONTRACTS NOTES

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.

When the Debtor Loses the Benefit of the Period. “The debtor shall lose every right to make use of the
period” — the term is extinguished, and the obligation is demandable at once.

1. Insolvency of the debtor:

Insolvency need not be judicially declared in an insolvency proceeding.
It is enough that he is in such state of financial difficulty that he is unable to pay his debts. Such
insolvency should occur after the obligation was constituted.

Unless the debtor gives a guaranty or security for the debt – the debtor may ask a third person to
guarantee his debt or put up his house as collateral.

2. Does not furnish the promised guaranties or securities.

3. Loss of Securities given.
Unless the debtor immediately gives new ones equally satisfactory.
The disappearance or impairment of the securities need not be total when it is caused by he acts
of the debtor. But if the cause is fortuitous event, there must be a total disappearance in order to
deprive the debtor the benefit of the term.
4. Debtor’s violation of any undertaking
5. Attempts to abscond
A mere attempt by the debtor to flee from his obligations, or to move away to evade payment of
his indebtedness, is sufficient ground to demand from him immediately.

Review Questions
1. Give the meaning of the following:
a. Obligation with a period
b. Period
c. Indefinite period
2. Does the debtor have the right to recover that he has paid to the creditor before the arrival of the
period agreed upon? Explain.
3. If an obligation does not state a period for its performance, does a party have the right to ask the
court to fix a period or the duration thereof? Explain.
4. Give the cases when the oblige can demand the performance of an obligation even before the
arrival of the period agreed upon.
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Name: Score:
Block: Date:

Exercise 1. Multiple Choice. Read and analyze each items carefully. Write the letter of your which
corresponds to your choice on the space before the number.

1. The obligation is demandable on the date of the obligation and shall continue to be in force up to
the arrival of the day certain
a. Resolutory Period
b. Suspensive Period
c. Indefinite Period
d. Legal Period

2. A period with a suspensive effect -

a. Ex die
b. In diem
c. Per diem
d. Sine die

3. When the debtor binds himself to pay when his means permit him to do so, the obligation is -
a. Conditional
b. Pure
c. Simple
d. With a period

4. I will give you my car one month after your death. The obligation is -
a. Valid, because the event is sure to come
b. Valid, the obligation is conditional
c. Valid, but disregard the condition
d. Void, not legally possible

5. Whenever an obligation with a period is designated, it is presumed to have been established for
the benefit of:
a. Both the creditor and the debtor.
b. The third party.
c. The debtor.
d. The creditor.

6. The debtor loses the benefit of the period, and his obligation becomes demandable when?
a. demand by the creditor would be useless.
b. the guarantees as promised and delivered by the debtor are not acceptable to the creditor.
c. after contracting the obligation, the creditor suspects that the debtor is becoming
insolvent.
d. the debtor attempts to abscond.

7. Which of the following is not an obligation with a period?

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a. payable “within 2 years from today”

b. an obligation payable “little by little”
c. will pay you P10,000 “if I like”
d. payable soonest

8. One of the following is not an obligation with a period

a. “When my means permit to do so”
b. “When I have the money”
c. “On demand”
d. “When I can afford it”

9. A owes B P10,000 demandable and due on March 20, 2017. B, on the other hand, owes A
P10,000 demandable and due on or before March 30, 2017. If B claims compensation on March
20, 2017, can A rightfully oppose?
a. Yes, A can properly oppose because for compensation to take place, mutual consent of
both parties is necessary.
b. No. B who was given the benefit of the term, may claim compensation because he could
then choose to pay his debt on March 20 which is actually “on or before March 30, 2017”
c. Yes, A can properly oppose and if B still refuses to accept his payment made on March
20, 2017, A can deposit his payment in court.
d. It may refer to a past event unknown to the parties.

10. On December 20, 2016, Primo signs a promissory note and binds himself to pay Dasma P50,000
plus 12% interest per annum on December 20, 2018.
a. Before December 20, 2018, Dasma can demand payment.
b. If on December 20, 2017, Primo is paying Dasma, he cannot refuse the payment.
c. Because the period is for the benefit of the debtor and creditor, Dasma can refuse any
tendered payment before December 20, 2018.
d. Because the period is for the benefit of the debtor, Primo can compel Dasma to accept
payment any date before December 20, 2018.
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Name: Score:
Block: Date:

Exercise 2. Problems. Explain or state briefly the rule or reason for your answer.

1. D (debtor) borrowed P10,000 from C (creditor) at 15% interest per annum payable on December
31. Can D require C to accept payment before December 31?

2. D binds himself to give P10,000 to C upon the death of the father of D. Is the obligation of D
conditional or one with a period?

3. D obtained a loan from C in the amount of P50,000, payable on August 10. As security for his
debt, D mortgaged his car in favor of C. The car, however, was substantially damaged without the
fault of D. What rights, if any, does C have under the law? May C demand payment from D even
before August 10?

References:

De Leon, H. S. (2014). The Law on Obligations and Contracts. Manila: REX Book Store.

Suarez, C. B and Suarez, A. Q. (2006). The Law on Obligations and Contracts. Davao City: GIC
Enterprises & Co., Inc.

Sta. Maria Jr., M. S(2003). Obligations and Contracts, Text and Cases. Manila: REX Book Store.