Article 1174.

Except in cases expressly

specified by the law, or when it is
otherwise declared by stipulation, or
when the nature of the obligation
requires the assumption of risk, no
person shall be responsible for those
events which could not be foreseen, or
which, though foreseen, were
inevitable.
 FORTUITOUS EVENT – an
occurrence or happening which could
not be foreseen or even if foreseen, is
inevitable; absolutely independent of
human intervention; act of God.

FORCE MAJEURE - an event

caused by the legitimate or
illegitimate acts of persons other than
the obligor; there is human
General Rule for Fortuitous
Events:

• No liability for a fortuitous event

(caso fortuito) (that which could not
be foreseen, or which even if
foreseen, was inevitable).
Exceptions — The debtor is responsible
for a fortuitous event in the following
cases:
(a) When expressly declared by the law
(b) When expressly declared by stipulation
or contract
(c) When the nature of the obligation
requires the assumption of risk (the
doctrine of CREATED RISK)
Equivalent Terms for
Fortuitous Event:
(a) caso fortuito (literal
translation)
(b) act of God (like lightning)
Essential Characteristics of a
Fortuitous Event:
(a) the cause must be independent of the will of the
debtor (freedom from PARTICIPATION or
AGGRAVATION);
Example: Loss of a fi rearm which fell to the bottom of
the sea when the ship sank during a storm.

(b) impossibility of foreseeing or impossibility of

avoiding it, even if foreseen.
Example: Damage to train passengers when the train
is hit by lightning.
(c) the occurrence must be such as
to render it impossible for the debtor
to fulfi ll his obligation in a normal
manner.
Examples: Armed robbery causing
the loss of a specifi c radio, but not
if money is taken for money is a
generic thing; seizure by the
Japanese military forces, during the
war, of copra deposited in a
warehouse.
FACTS:
• A passenger was hurt when the
car he was riding met an
“accident” caused either by the
driver’s recklessness or car
defects. Is the operator liable?
FACTS:
• In a contract, it was agreed that for
30 years, the planters would deliver
their sugar to a milling company.
However, during the war (4 years)
and during the period of
reconstitution (2 years), the milling
company could not operate its mill.
Issue: In other words, should the
planters be required to deliver for 6
more years their sugar to the same
mill to make up for what had been
lost?
FACTS:
• A was obliged to perform a certain
obligation in B’s favor. But a fortuitous
event happened. Later, A and B agreed
that because of what had happened, A
would be given a new period. But when
the period arrived, A was still not able to
perform.
• Issue: Can A plead fortuitous event as a
defense?
 Article 1175. Usurious
transactions shall be governed by
special laws.

USURY – contracting for or

receiving interest in excess of the
amount allowed by law for the
loan or use of money, goods, etc.
Kinds of Interest
1. MORATORY INTEREST
• Interest given for compensation or use of the money
Example: I borrowed P1 million at 8% interest per
annum for 3 years. (This is the kind of interest
regulated by the Usury Law.)

2. COMPENSATORY INTEREST
• Interest given by way of damages to compensates
the damage caused.

Example: I borrowed P1 million with no interest for 3

years. If I pay at the end of three years, I pay no
interest. If I incur default (do not pay even after
demand), I will now be responsible for interest (by
way of damages) at the rate of 6% per annum, to be
counted from default.
Simple Loan (Mutuum)
• By the contract of simple loan, one
of the parties delivers to another
money or other consumable things
upon the condition that the same
amount of the same kind and quality
shall be paid.
Article 1176. The receipt of the principal
by the creditor without reservation with
respect to the interest, shall give rise to
the presumption that said interest has
been paid.
The receipt of a later installment of a debt
without reservation as to prior
installments, shall likewise raise the
presumption that such installments have
been paid.
Example:

• A creditor of P1,000,000, with 8%

interest, received P1,000,000 in
payment of the principal. Interest
was not referred to in the payment.
It is presumed that the 8% interest
had already been previously paid.
This is because under Art. 1253,
Civil Code, payment of the interest
as a rule precedes payment of the
principal.
Example of Par. 2 (Receipt of a
Later Installment):
• If a creditor receives the fourth
installment of a debt, it is
understood that the fi rst three
installments have been paid.
Article 1177. The creditors, after having
pursued the property in possession of the
debtor to satisfy their claims, may
exercise all the rights and bring all the
actions of the latter for the same purpose,
save those which are inherent in his
person; they may also impugn the acts
which the debtor may have done to
defraud them.
 REMEDIES AVAILABLE TO
CREDITORS FOR THE
SATISFACTION OF THEIR
CLAIMS:
1.Exact fulfillment with right to damages
2.Exhaustion of the debtor’s properties
still in his possession – writ of attachment
(before judgment) or writ of execution
(for final judgment not yet executed)
 3.ACCION SUBROGATORIA – an
action where the creditor whose claims
had not been fully satisfied, may go after
the debtors (3rd person) of the defendant
debtor.
4.ACCION PAULIANA – an action
where the creditor files an action in court
for the RESCISSION of acts or contracts
entered into by the debtor designed to
defraud the former.
Except as otherwise expressly
provided by law, the following
property, and no other, shall be
exempt from execution:

(a) The judgment obligor’s family home as

provided by law, or the homestead in
which he resides, and land necessarily
used in connection therewith;

(b) Ordinary tools and implements

personally used by him in his trade,
employment, or livelihood;
(c) Three horses, or three cows, or three carabaos, or
other beasts of burden, such as the judgment
obligor may select necessarily used by him in his
ordinary occupation;
(d) His necessary clothing and articles for ordinary
personal use, excluding jewelry;
(e) Household furniture and utensils necessary for
housekeeping, and used for that purpose by the
judgment obligor and his family, such as the
judgment obligor may select, of a value not
exceeding one hundred thousand pesos;
(f) Provisions for individual or family use suffi cient for
four months;
(g) The professional libraries and equipment of
judges, lawyers, physicians, pharmacists, dentists,
engineers, surveyors, clergymen, teachers, and
other professionals, not exceeding three hundred
thousand pesos in value;
(h) One fishing boat and accessories not exceeding
the total value of one hundred thousand pesos
owned by a fisherman and by the lawful use of
which he earns his livelihood;
(i) So much of the salaries, wages, or earnings of the
judgment obligor for his personal services within the
four months preceding the levy as are necessary for
the support of his family;
(j) Lettered gravestones;
(k) Monies, benefi ts, privileges, or
annuities accruing or in any manner
growing out of any life insurance;

(l) The right to receive legal support,

or money or property obtained as
such support, or any pension or
gratuity from the Government;

(m) Properties specially exempted by

law.
Examples of Rights Inherent in the Person
of the Debtor and Which Therefore Cannot
Be Exercised by the Creditors:

(a) The right to existence, thereby exempting

from the reach of creditors, whatever he may
be receiving as support.

(b) Rights or relations of a public character (like

positions in the government).

(c) Rights of an honorary character (like a

doctor’s degree, honoris causa).
(d) Rights pertaining to the affairs of
the home and the family (such as
the personal rights of husband and
wife).
(e) Rights granted by law only to the
debtor such as the action to revoke
a donation on the ground of
ingratitude.
(f) The right to appear in court
proceedings, like the settlement of
an estate.
Extent of Debtor’s Liability:
• The debtor is liable with all his
property, present and future, for the
fulfillment of his obligations subject
to the exemptions provided by law.
Article 1178. Subject to the
laws, all rights acquired in
virtue of an obligation are
transmissible, if there has
been no stipulation to the
contrary.
General rule — Rights are transmissible.

EXCEPTIONS:
a)Those not transmissible by their nature
like purely personal rights;
b)Those not transmissible by provision of
law;
c)Those not transmissible by stipulation
of parties.
 CHAPTER 3

DIFFERENT KINDS OF
OBLIGATIONS
 PURE AND
CONDITIONAL
OBLIGATIONS
 Article 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.
 PURE OBLIGATION – an obligation
which does not contain any condition or
term upon which the fulfillment is made
to depend; immediately demandable by
the creditors and the debtor cannot be
excused from not complying with his
prestation.
 CONDITIONAL
OBLIGATION – an obligation
which depends upon a future or
uncertain event, or upon a past
event unknown to the contracting
parties.
 – an obligation subject to a condition.
a)Suspensive Obligation – its fulfillment
gives rise to an obligation; the
demandability of the obligation or the
effectivity of the contract can take place
only after the condition has been fulfilled.
b)Resolutory Obligation – its happening
extinguishes the obligation which is
already existing;
Pure Obligation — one without a
condition or a term (hence, demandable
at once, provided there will be no
absurdity).

Examples:
(a) I promise to pay you P1 million.
(b) I’ll pay you P1 million on demand.
(c) When the original period or condition
has been cancelled by the mutual
stipulation of both parties.
Conditional Obligation — when there is a
condition.

Example:
(a) I’ll buy your land for P10 million if you pass
the last bar examinations. (This is suspensive
for the results will be awaited).

(b) I’ll give you my land now, but should you fail
in the last bar examinations, your ownership
will cease and it will be mine again. (This is
resolutory because it ends upon failure.).
Definition of Condition
• It is an uncertain event which
wields an influence on a legal
relationship.
Definition of a Term or Period
• That which necessarily must
come (like 2005) whether the
parties know when it will
happen or not (like death,
since this is sure).
When an Obligation Is
Demandable at Once:
(a) When it is pure;
(b) Or when it has a resolutory
condition.
Problem:

Determine if resolutory or suspensive

condition:
• I’ll give you my car, but you should not
marry Maria this year.
• I’ll give you my car, but only after you
can prove that by the end of this year,
you have not married Maria
Classification of Conditions:
(a) 1) suspensive — the happening of the
condition gives rise to the obligation.
2) resolutory — the happening of the
condition extinguishes the obligation.
(b) 1) potestative — depends upon the will of
the debtor
(Example: I’ll sell you my car if I like.)
2) casual — depends on chance or hazard
or the will of a third person (if I win in the lotto).
3) mixed — depends partly on the will of
one of the parties and partly on chance or the
will of a third person (if I pass the bar).
(c) 1) divisible (capable of partial
performance).
2) indivisible (not capable of partial
performance because of the nature of
the thing, or because of the intention of
the parties).
(d) 1) positive — an act is to be
performed.
2) negative — something will be
omitted.
(e) 1) express — the condition is stated.
2) implied — the condition merely
inferred.
(f) 1) possible — capable of fulfi llment in
nature and in law.
2) impossible — not capable of fulfi
llment due to nature or due to the
operation of the law or morals or public
policy; or due to a contradiction in its
terms.

(g) 1) conjunctive — if all the conditions

must be performed.
2) alternative — if only a few of the
conditions have to be performed.
 Article 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.
PERIOD – a future and certain
event upon the arrival of which,
the obligation subject to it either
arises or is extinguished.
INDICATIONS OF A TERM OR
PERIOD:
When the debtor binds himself to pay–
a.when his means permit him to do so
b.little by little
c.as soon as possible
d.from time to time
e.as soon as I have the money
f.in partial payment
g.when in the position to pay
Similar Phrases:
(a) when my means permit to do so
(b) when I can afford it
(c) when I am able to
(d) when I have money
 Article 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.
 Suspensive Condition – the
acquisition of rights by the creditor
depends upon the happening of the
event which constitutes the condition;
if such condition does not take place,
it would be as of the conditional
obligation had never existed.
(e.g. promise to give a car after
graduating from law school as cum
laude)
 Resolutory Condition – the rights
and obligations already existing are
under threat of extinction upon the
happening or fulfillment of such
condition.
(e.g. donation by reason of marriage –
the celebration of marriage is a
resolutory condition; if the marriage
did not push through, the donation
may be revoked)
Problem:
• Z donated land to the province of Samar on
condition that the latter would build upon the
land a schoolhouse and a park, the work to
begin within 6 months from the date the
parties ratify the donation. The province
accepted the donation, and the land was
registered in the name of the donee. Several
years later, noticing that the province had not
performed the conditions, the donors sold the
land to Mr. Parks. Now Parks sued to recover
the land from the province. Will the action of
Parks prosper? Is the condition resolutory or
suspensive?
Conditional Perfection of a
Contract:
• If the perfection of a contract
depends upon the fulfillment of a
condition, non-fulfillment thereof
means the non-perfection of the
contract since the suspensive
condition should have been first
fulfilled.
Article 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.
 3 KINDS OF CONDITIONS UNDER
THIS ARTICLE:
1.POTESTATIVE – a suspensive
condition which depends upon the will of
one of the contracting parties = if at the
sole will of the debtor, it is void; if at the
creditor’s, still valid. this is to prevent the
establishment of illusory obligations.
2.CASUAL – the condition depends
upon chance or the will of a third
person;(e.g. cellphone warranty)

3.MIXED – the condition depends

partly upon the will of the parties and
partly upon chance or the will of a
third person; (example passing the
bar)
 Article 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 CONDITION –
if it is capable of realization or
actualization according to
nature, law, public policy or
good customs.
 2 KINDS OF IMPOSSIBLE
CONDITIONS:
1.Physically Impossible – cannot
exist or cannot be done in its nature
Example: I’ll sell you my land if you
can make a dead
man live again.
2. Legally Impossible – contrary to law, good
customs, or public policy.

Only the affected obligation is void, if the

obligation is divisible, and the part thereof
not affected by the impossible condition is
valid.
Only the condition is void if there is already
a pre-existing obligation and it does not
depend upon the fulfillment of the condition
which is impossible.
Effects:
(a) If the condition is to do an impossible or
illegal thing, BOTH the condition and the
obligation are VOID (because the debtor
knows that no fulfi llment can be done and
therefore is not serious about being liable).

Example: I’ll sell you my land if you can make a

dead man live again.
(b) If the condition is NEGATIVE, that is,
not to do the impossible, just disregard
the condition BUT the obligation
remains.

Example: I’ll sell you my land if you

cannot make a circle that is at the same
time a square. (This becomes a pure
and valid obligation. As a matter of fact,
the condition here can always be
fulfilled.)
(c) If the condition is
NEGATIVE, i.e., not to do an
illegal thing, both the condition
and the obligation are VALID.
Example: I’ll sell you my land if
you do not kill X. (This is valid.
If X is killed by you, you have
no right to buy my land.)
Problem:
• A filed a suit against B, and asked for a
writ to attach B’s properties. The writ
was granted, but B asked for its
cancellation, and for this purpose
offered a bond, secured by two sureties.
The bond contained a statement that in
case A should WIN, the sureties would
answer for B’s liability. Because of this
bond, the writ was dissolved. Later, A
lost the case, it having been dismissed.
Issue: Are B’s sureties still bound?
Problem:
• Seller owned a piece of land
mortgaged to X. Land was sold to
buyer on the condition that the
mortgage would first be cancelled.
Seller, however, could not have
contact with X.
• Issue: Is he still bound to sell?
 Article 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 – refers to the
fulfillment of an event or
performance of an act

Negative condition – refers to

the non-fulfillment or non-
performance of an act.
Positive Conditions
Example: I’ll give you my land if
you marry Maria X this year. If by
the end of the year, Maria X is
already dead, or you have not
yet married her, the obligation is
extinguished.
 POSITIVE SUSPENSIVE
CONDITION
The obligation is extinguished:
1.As soon as the TIME EXPIRES
without the event taking place;
2.As soon as it has become certain that the
EVENT WILL NOT TAKE PLACE
although the time specified has not yet
expired.
Problem:
• A sold B a parcel of land on
condition that the price would be
paid as soon as B had paid off
the mortgage and other debts of
the estate. A waited for some
time, but since B had not yet
succeeded in paying off the
debts, A brought an action to
cancel the sale. Will the action
prosper?
 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
The obligation shall become effective
and binding:
a)From the moment the time indicated
has elapsed without the event taking
place;
b)From the moment it has become
evident that the event cannot occur,
although the time indicated has not yet
elapsed.
Negative Conditions

Example
“I’ll give you P1,000,000 if by Oct. 1, 2005
you have not yet married Maria X.” If by
said date, you are not yet married, or if
prior thereto, Maria X had died, the
obligation is effective — in the fi rst
case, from Oct. 1, 2005; and in the
second case, from Maria’s death.
Article 1186. The condition shall be
deemed fulfilled when the obligor
voluntarily prevents its fulfillment.

This provision speaks of the

DOCTRINE OF CONSTRUCTIVE
FULFILLMENT
REQUISITES:
1.The condition is SUSPENSIVE;
2.The obligor ACTUALLY
PREVENTS the fulfillment of the
condition;
3.He acts VOLUNTARILY.
Example
• A promised to sell to B a car if C
could pass the bar. On the day of
the examination, A caused C to be
poisoned and be hospitalized. A is
still bound to sell the car. (If,
however, it turns out that C was
really disqualifi ed to take the bar,
as when he had not fi nished high
school, or had taken his fi rst year
law in the prohibited special class, A
is not bound.)
Problem:
• A hired B to construct a road for him
up to a desired length. But without
justifi cation, A ordered the
construction stopped when half-fi
nished. B asked for the complete
price. A refused on the ground that
the project was only half-finished.
• Is A liable for full payment?
 Article 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.
Effects of Fulfi llment of Suspensive
Conditions:
(a) RETROACTS — (as a general rule) to the
day the obligation was constituted.
(b) No retroactivity with reference only to:
1) fruits or interests. (Art. 1187, Civil Code).
2) period of prescription. (Hermosa case, GR L-
5267, Oct. 27, 1953). Here the period runs
from the day the condition was fulfi lled,
because it can be enforced only from said
date.
Examples of Retroactive Effects
• Jose in 2004 promised to sell to
Maria his land provided Maria
passes the bar in 2006. Maria
passed the bar in 2006.
No Retroactive Effects as to Fruits
and Interests:

• Example: In 2005, A promised to

give B his (A’s) land if B passes the
bar in 2006. If the condition is
fulfilled,does A also give the fruits for
the period of one year? NO, by
express provision of the law unless
there is a contrary intent.
Problem:
Example: In 1999, A agreed to sell B his
land and B agreed to pay if C passes
the bar of 2006. C passed. A must now
give the land, and B must pay. The fruits
of the land for the one-year period will
remain with A, i.e., A does not have to
give said fruits. Upon the other hand, B
will keep the 6% legal interest on his
money. This is true even if the interests
be greater or lesser than the fruits.
 Article 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.
 Actions available to the creditor:
Action for prohibition restraining the alienation of
the thing pending the happening of the suspensive
condition;
Action to demand security if the debtor has
become insolvent;
Action to set aside alienations made by the debtor
in fraud of creditors;
Actions against adverse possessors to interrupt
the running prescriptive period.
To have his rights annotated in the registry.
Rights of the DEBTOR – entitled
to recover what has been paid by
mistake prior to the happening of
the suspensive condition.
 Article 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 fulfi llment, 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 benefi t 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.
It is understood that the thing is
lost:
(a) when it perishes (as when a house is burnt to
ashes)
(b) when it goes out of commerce (as when the object
heretofore unprohibited becomes prohibited)
(c) when it disappears in such a way that its existence
is unknown (as when a particular car has been
missing for some time)
(d) when it disappears in such a way that it cannot be
recovered (as when a particular diamond ring is
dropped in the middle of the Pacifi c Ocean).
 LOSS
(1)debtor without fault – obligation
is extinguished
(2)debtor with fault – obligation to
pay damages
DETERIORATION
(1)debtor without fault – impairment
is to be borne by the creditor
(2)debtor with fault – creditor
chooses: rescission of obligation,
Problem:
• A promised to give B his car if B passes
the bar. Pending the results of the bar
exams, the car is destroyed by a
fortuitous event, without any fault at all
on the part of the debtor. When B
passes the bar, does A have to give B
anything?
Problem:
• A promised to give B P1,000,000 if
B passes the bar. Pending the
results of the bar, A’s money is
destroyed by fire,not imputable to A.
When B passes the bar, does A still
have to give him P1,000,000?
• Suppose the loss occurred through
the fault of the debtor, is the debtor
liable?
Deterioration
• Suppose pending the fulfillment of the
suspensive condition, the object, say a
particular car, deteriorates without the fault of
the debtor, is the debtor bound to make up for
the depreciation, or should the creditor bear
the deterioration suffered?
• Suppose the thing deteriorates through the
fault of debtor?
Improvement:

Suppose the thing is improved by nature or by

time, who gets the benefit of the
improvement?

• Suppose the thing has improved, not through

time or by its nature but through the expense
of the debtor, what will be the rights of said
debtor?

• Suppose the improvement is due partly to the

expenses made by the debtor and partly due
to its nature or by time, who gets the benefi t?
 IMPROVEMENT
(1)by nature or time –
improvement: inure to the benefit
of the creditor
(2)at the expense of the debtor –
granted to the usufructuary
 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
As for the 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.
 resolutory condition.
-When the resolutory condition
happened, the obligation is considered
as if it did not exist.
-The parties are bound to return or
restore whatever they have received
from each other – “reciprocal
restitution”
-Donation by reason of marriage – if
the marriage does not happen, such
Problem:
• A gave B a parcel of land on the
condition that B will never go to the
casino. A month later, B went to the
casino. What happens to A’s
obligation?
• Suppose in the meantime, the land
had been improved through its
nature or by time, who benefi ts from
such improvements?
 Article 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 rescission of the
obligation, with the payment of damages
in either case.
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.
RECIPROCAL – each is a debtor and creditor of
the other
RESCISSION – resolution or cancellation of the
contract
-Applies only to reciprocal obligations where two
parties are mutually debtor and creditor of each
other in the same transaction. The cause must be
identical and the obligations must arise
simultaneously.
-The party who can demand rescission should be
the party who is ready, willing, and able to comply
with his own obligations while the other is not
capable to perform his own.
REMEDIES:
1.Specific performance or
fulfillment of obligation with
damages;
2.Rescission of contract with
damages.
 Effect of rescission:
the parties must surrender whatever they
have received from the other, and the
obligation to pay is extinguished.

If there is an express stipulation of

automatic rescission between parties –
such resolution shall take place only after
the creditor has notified the debtor of his
choice of rescission subject to judicial
scrutiny.
Problem:
• John failed to comply with his
obligation to pay the balance of
the purchase price to Peter. Can
the latter rescind the contract?
Problem:
• A sold to B some properties. It was
agreed that B, the buyer, should take
care of perfecting within 6 months the
title papers to the property. This duty B
was not able to do.
Issue: Despite the fact that B has already
paid the price, may A, the seller, resolve
the contract on the ground that B had
not complied with the obligation referred
to above?
 Article1192. 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 first
violated the contract, the same shall
be deemed extinguished, and each
shall bear his own damages.
 FIRST INFRACTOR KNOWN
The liability of the first infractor should
be equitably reduced. – equitably offset
each other’s damages.

FIRST INFRACTOR CANNOT BE

DETERMINED
The court shall declare the
extinguishment of the obligation and
each shall bear his own damages.