E.

DIFFERENT KINDS OF OBLIGATIONS

1. Pure and Conditional Obligations

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.
A distinction must be made between the immediate demandability of a pure obligation
and its fulfillment by the obligor who may be granted by the court a reasonable period for
performance. The period remains pure even where such period is fixed by the court.
Example:
D obliges to pay C P10,000.00. The obligation is immediately demandable if there is no
condition and no date is mentioned for its fulfillment.

A conditional obligation is one whose consequences are subject in one way or another to
the fulfillment of a condition.
Condition is 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. — In order to constitute an event a condition, it is not enough that it be
future; it must also be uncertain. The first paragraph of Article 1179 obviously uses the disjunctive
or between “future” and “uncertain” to distinguish pure obligation from both the conditional
obligation and one with a period. Be that as it may, the word “or” should be “and.”
(2) Past but unknown. — A condition may refer to a past event unknown to the parties. (infra.) If
it refers to a future event, both its very occurrence and the time of such occurrence must be
uncertain; otherwise, it is not a condition.
A condition must not be impossible.

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). In other words, the demandability of the obligation
is suspended until the happening of a future and uncertain event which constitutes the condition.
(a) Actually, the birth, perfection or effectivity of the contract subject to a condition can
take place only if and when the condition happens or is fulfilled. If the suspensive
condition does not take place, the parties would stand as if the conditional obligation had
never existed.
(b) It must appear that the performance of an act or the happening of an event was
intended by the parties as a suspensive condition, otherwise, its non-fulfillment will not
prevent the perfection of a contract.Thus, where there is no provision in a contract of sale
declaring it without effect until after the opening of a letter of credit by the buyer as
required by the seller, the omission to so open does not prevent the perfection of the
contract, such opening being only a mode of payment and is not among the essential
requirement of a contract of sale enumerated in Articles 1305 and 1475.
(c) There can be no rescission (see Art. 1191.) of an obligation that is still non-existent,
the suspensive condition not having been fulfilled.

(2) Resolutory condition (condition subsequent) or one the fulfillment of which will extinguish
an obligation (or right) already existing.

Distinctions between suspensive and resolutory conditions:

The difference between the two conditions is very clear; both bear an influence on the
existence of the obligation, but in diametrically opposed manner.

(1) If the suspensive condition is fulfilled, the obligation arises, while if it is the
resolutory condition that is fulfilled, the obligation is extinguished;
(2) If the first does not take place, the tie of law (juridical or legal tie) does not appear,
while if it is the other, the tie of law is consolidated; and
 (3) Until the first takes place, the existence of the obligation is a mere hope, while in the
second, its effects fl ow, but over it, hovers the possibility of termination.

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 per son constituting the same was
different.
In obligations to do and not to do, the courts shall deter mine, in each case, the
retroactive effect of the condition that has been complied with.

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.
The reason is because the condition is only an accidental element of a contract. (see Art.
1318.) An obligation can exist without being subject to a condition. Had the parties known
beforehand that the condition would be fulfilled, they would have bound themselves under a pure
obligation. Hence, the obligation should be considered from the time it is constituted and not from
the time the condition is fulfilled.
It would seem that the rule on retroactivity has no application to real contracts as they are
perfected only by delivery of the object of the obligation.

(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 retroactive
effect or from what date such retroactive effect shall be reckoned.

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.

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. 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.
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
(a) Possible — the condition is 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.

A potestative condition is a condition suspensive in nature and which depends upon the
sole will of one of the contracting parties.

Where suspensive condition depends upon the will of debtor

(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.3 In order not to
be liable, the debtor will not just fulfill the condition. There is no burden on the debtor and
consequently, no juridical tie is created.
Example:
“I will pay you if I want.”

(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.
Example:
D borrowed P10,000.00 from C payable within two (2) months. Subsequently, D
promised to pay C “after D sells his car” to which C agreed. In this case, only the condition is void
but not the pre-existing obligation of D to pay C.

Where suspensive condition depends upon the will of creditor

If the condition depends exclusively upon the will of the creditor, the obligation is valid.
EXAMPLE:
“I will pay you my indebtedness upon your demand.”

The obligation does not become illusory. Normally, the creditor is interested in the
fulfillment of the obligation because it is for his benefit. It is up to him whether to enforce his right
or not.

Where resolutory condition depends upon the will of debtor

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.
The position of the debtor when the condition is resolutory is exactly the same as that of
the creditor when the condition is suspensive.
A condition which is both potestative (or facultative) and resolutory may be valid, even
though the condition is left to the will of the obligor.

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.

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.

When Article 1183 applies

Article 1183 refers to suspensive conditions. It applies only to cases where the
impossibility already existed at the time the obligation was constituted.

Two kinds of impossible conditions:

(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. The reason behind the law is that the obligor
knows his obligation cannot be fulfilled. He has no intention to comply with his obligation.
(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.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.

Positive condition
The above article refers to a 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.

Negative condition.
The above provision speaks of a negative condition that an event will not happen at a
determinate time. (see Art. 879.) 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 can not occur, although the time
indicated has not yet elapsed.

If no time is fixed, the circumstances shall be considered to determine the intention of the
parties. This rule may also be applied to a positive condition.

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.

Requisites for application of Article 1189.

Article 1189 applies only if:
(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. Loss in civil law may be:

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

Rules in case of loss, etc. of thing during pendency of suspensive condition.

(1) Loss of thing without debtor’s fault.
EXAMPLE:
D obliged himself to give C his car worth P100,000.00 if C sells D’s property. The car was lost
without the fault of D. The obligation is extinguished and D is not liable to C even if C sells the
property. A person, as a general rule, is not liable for a fortuitous event. (Art. 1174.)

(2) Loss of thing through debtor’s fault.

EXAMPLE:
In the same example, if the loss occurred because of the negligence of D, C will be entitled to
demand damages (Art. 1170.), i.e., P100,000.00 plus incidental damages, if any.

(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.
EXAMPLE:
If the car figured in an accident, as a result of which its windshield was broken and some of its
paints were scratched away without the fault of D, thereby reducing its value to P80,000.00, C will
have to suffer the deterioration of impairment in the amount of P20,000.00.

ART. 1191.
The power to rescind 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.

Kinds of obligation according to the person obliged:

(1) Unilateral — when only one party is obliged to comply with a prestation.
EXAMPLES:
Donation; In a contract of loan, the lender has the obligation to give. After the lender has complied
with his obligation, the debtor has the obligation to pay.

(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 are 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. The general rule is that they are to
be performed simultaneously or at the same time such that each party may treat the fulfillment of
what is incumbent upon the other as a suspensive condition to his obligation (see Art. 1169, last
par.), and its non-fulfillment, as a tacit or implied resolutory condition, giving him the right to
demand the rescission of the contract, i.e., it may be exercised even if it is not provided in the
agreement of the parties.
(b) Non-reciprocal obligations are 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. (see Ong vs.
Court of Appeals, 310 SCRA 1 [1999]; Information Techno logy Foundation vs. Commission on
Elections, 419 SCRA 626 [2004].) It would, of course, be useless to rescind a contract that is no
longer in existence. (Yaneza vs. Court of Appeals, 572 SCRA 413 [2008].)

Choice of remedy by injured party.

In case one of the obligors does not comply with what is incumbent upon him, the injured
or aggrieved party may choose between two remedies:
(1) action for specific performance (fulfillment) of the obligation with damages; or
(2) action for rescission10 of the obligation also with damages. (see Soorajimul Nagarmull vs.
Binalbagan Isabela Sugar Company, Inc., 33 SCRA 46 [1970].)

Rescission applicable to reciprocal obligations is to be distinguished from rescission for

lesion contemplated in Article 1380, et seq. and from cancellation of a contract based, for example,
on defect in the consent (see Arts. 1318, 1330.), and not on the breach by a party of his obligation.
When a party asks for the rescission of a contract, he impliedly recognizes its existence.

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].) While the right of choice remains with the plaintiff, an
alternative prayer in the complaint for fulfillment or rescission is permissible in the discretion of
the court for in such case it cannot be said that the plaintiff is availing of both remedies.

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.

Meaning of obligation with a period.

An obligation with a period is one whose consequences are subjected in one way or
another to the expiration of said period or term. (8 Manresa 158; see Lirag Textiles, Inc. vs. Court
of Appeals, 63 SCRA 374 [1975].)
Meaning of period or term.
A period is a future and certain event upon the arrival of which the obligation (or right)
subject to it either arises or is terminated. It is a day certain which must necessarily come (like the
year 2005; next Christmas), although it may not be known when, like the death of a person. (Art.
1193, par. 3.)

Period and condition distinguished. The differences are as follows:

(1) As to fulfillment. — A period is a certain event which must happen sooner or later at a date
known beforehand, or at a time which cannot be determined, while a condition is an uncertain
event;
(2) As to time. — A period refers only to the future, while a condition may refer also to a past
event unknown to the parties;
(3) As to influence on the obligation. — A period merely fixes the time for the efficaciousness of
the obligation. If suspensive, it cannot prevent the birth of the obligation in due time; if resolutory,
it does not annul, even in fiction, the fact of its existence. On the other hand, a condition causes an
obligation to arise or to cease. Because of this difference, a period does not carry with it, except
when there is a stipulation expressly made by the parties, the same retroactive consequences that
follow a condition (see 8 Manresa 159-160.);
(4) As to effect, when left to debtor’s will. — A period which depends upon the will of the debtor
empowers the court to fix the duration thereof (Art. 1197, par. 2.), while a condition which
depends upon the sole will of the debtor invalidates the obligation (Art. 1182.); and
(5) As to retroactivity of effects. — Unless there is an agreement to the contrary, the arrival of a
period does not have any retroactive effect, while the happening of a condition has retroactive
effect.

Like a condition (see Art. 1183.), a period must be possible. If the period is impossible (e.g.,
February 30, because it will never come; within 24 hours to deliver a ship in foreign country
because it is too short), the obligation is void.

Kinds of period or term:

(1) According to effect:
(a) Suspensive period (ex die). — The obligation begins only from a day certain upon the
arrival of the period (Art. 1193, par. 1.); and
(b) Resolutory period (in diem). — The obligation is valid up to a day certain and
terminates upon the arrival of the period. (par. 2.)

(2) According to source:

(a) Legal period. — When it is provided for by law;
(b) Conventional or voluntary period. — When it is agreed to by the parties (Art. 1196.);
and
(c) Judicial period. — When it is fixed by the court. (Art. 1197.)

(3) According to definiteness:

(a) Definite period. — When it is fixed or it is known when it will come (Art. 1193, par.
3.); and
(b) Indefinite period. — When it is not fixed or it is not known when it will come. Where
the period is not fixed but a period is intended, the courts are usually empowered by law to fix the
same.
GAITE VS. FONACIER

FACTS
Fonacier, owner of mining claims, constituted Gaite as his attorney-in-fact. Gaite was
authorized to enter into a contract with other persons with respect to the mining claims.

Gaite then entered into a contract with Larap Iron Mines, a company Gaite solely owned, to
develop the mining claims. Later, Fonacier abruptly decided to revoke Gaite’s authority as
attorney-in-fact.

Afterwards, Gaite sold the developments his company made in the mining claims areas and
the ore already mined for a sum of money to Fonacier. Fonacier secured the sale with a surety
company. Part of the money was paid upon sale while the other part was payable out of the
first loan of credit covering the first shipment of iron ore and the first amount derived from
the local sale of the iron ore.

After the surety expired, Gaite demanded payment of the remainder of the purchase price but
Fonacier refused arguing no sale of iron ore had yet taken place.

ISSUE

WHETHER OR NOT THE SELLING OF THE IRON ORES IS A SUSPENSIVE

CONDITION FOR PAYING GAITE

HELD: NO.

The sale isn’t a suspensive condition but is only a suspensive period or term. This
interpretation is supported by:
1. The contract expresses no contingency in the buyer’s obligation to pay. The contract
recognizes the existence of an obligation to pay and only the maturity is deferred

2. Gaite never desired or assumed to run the risk of losing his right over the ore without
getting paid for it as shown by his insistence on a surety

3. Treating the condition as a suspensive condition would leave payment at the debtor’s
discretion because the ore will be sold only when the debtor wants it to be sold.

4. In onerous contracts the rules of interpretation favor the greater reciprocity of interest
and because sale is onerous this rule applies. Greater reciprocity is obtained if the buyer’s
obligation to pay is deemed existing compared to such obligation non-existing until the
ore was sold.