Section 5.

DIVISIBLE AND INDIVISIBLE OBLIGATIONS

Art. 1223. The divisibility or indivisibility of the things that are the
object of obligations in which there is only one debtor and only one
creditor does not alter or modify the provisions of Chapter 2 of this
Title.

1.) Distinguish: Divisible v. Indivisible Obligation

a. DIVISIBLE OBLIGATION may be partially performed;

example: to deliver 10 sacks of rice within 5 days
b. INVISIBLE OBLIGATION cannot be performed in parts;
example: to deliver a Doberman dog.

2.) Different Kinds of Indivisibility

a.) LEGAL provided by law

b.) CONVENTIONAL agreed by parties to contract (Art. 1225, 3rd par.)
c.) NATURAL by nature of object of obligation (e.g. contracts - to sing in
a club; to tour Baguio city )

3.) Distinguish Solidarity vs. Indivisibility (see Paras, Vol. IV)

refers to juridical tie bet. Parties - refers to nature of obligation

has two or more debtors - may have only 1 debtor & 1 creditor
fault of one is fault of others fault of one is not fault of others

Art. 1224. A joint indivisible obligation gives rise to indemnity for

damages from the time anyone of the debtors does not comply with
his undertaking. The debtors who may have been ready to fulfill their
promises shall not contribute to the indemnity beyond the
corresponding portion of the price of the thing or of the value of the
service in which the obligation consists.

What are the characteristics of a JOINT INDIVISIBLE OBLIGATION?

o Object is indivisible;
o Parties must collectively perform or deliver, but are bound jointly, NOT
solidarily.
o Debtor who failed to comply his undertaking may be liable for damages,
but not the co-debtor who was ready to fulfill the obligation when due,
except for his actual share in the obligation.

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 ILLUSTRATE: Al & Deo promised to deliver to Vicky a Hermes bag
worth P1.5M upon their return on Feb. 14, 2012, from their trip in
Paris. But Deo lost most of his money in the casino while they were
in Monaco. Al was ready with his share to buy the Hermes bag but
Deo is now broke. Thus, they failed to buy and deliver the Hermes
bag to Vicky as promised.

Legal Effects: The obligation is now converted into monetary

obligation to give P1.5M to Vicky. Al is liable to give Vicky for his share in the obligation
for P750,000, but is not liable for Deos share for while the object of obligation is
indivisible, the performance of the obligation is Joint, not solidary. Deo is now indebted
to Vicky for the sum of P750,000, plus damages if warranted.

Art. 1225. For the purposes of the preceding articles, obligations to

give definite things and those which are not susceptible of partial
performance shall be deemed to be indivisible.

When the obligation has for its object the execution of a certain
number of days of work, the accomplishment of work by metrical
units, or analogous things which by their nature are susceptible of
partial performance, it shall be divisible.

However, even though the object or service may be physically

divisible, an obligation is indivisible if so provided by law or intended
by the parties.

In obligations not to do, divisibility or indivisibility shall be determined

by the character of the prestation in each particular case.

HOW TO DETERMINE DIVISIBILITY OF OBLIGATION:

1.) The divisibility of the object does not determine divisibility of the
obligation.

If the object is divisible, the obligation may be divisible or

indivisible.

1. Example of Divisible Object but Indivisible Performance of prestation:

Contract is for X to deliver at one time on May 1, 2000, all of 60 pieces of
20 yearold mahogany logs harvested from Xs 9-ha. mahogany tree farm
in Digos, for this will be shipped to Manila on May 2, 2000.

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 2. Example of Divisible Object and Divisible Performance of prestation:
Contract is for X to deliver in 2 installments on May 1, 2000, 30 pieces and
another 30 pieces on June 1, 2000 of the 20 yearold mahogany logs
harvested from Xs 9-ha. mahogany tree farm in Digos, for these log-
deliveries will be shipped to Manila on May 2, 2000 and June 2, 2000
respectively.

But if the object is indivisible, then the obligation becomes

indivisible.
(Example: To sing the Lupang Hinirang in the opening of the SEA Games in
Mla.)

2.) The test of divisibility of an obligation is whether or not it is susceptible

of partial performance. (pars.1 & 2 above.)

3.) Susceptibility of partial performance - refers to whether the

separation of delivery or execution is contrary or not to the intention or
purpose of the parties. It does not necessarily refer to whether the
delivery of the things or execution of acts in parts is impossible or not.

INDIVISIBLE OBLIGATIONS :

1. Obligation to give definite things (Ex: to give a 1950 vintage car)

2. Obligations not susceptible of partial performance (Ex: Render the national
anthem in the SEA Games opening.)
3. Object or thing is divisible but obligation is deemed indivisible due to the
intention of the parties or the law so provides. (Art. 1225, par.3)

DIVISIBLE OBLIGATIONS:

1. When the object of the obligation is the execution of a certain number of

days of work. (Ex: Mason hired to build cement fence for 8 days).
2. When the object of the obligation is the accomplishment of work by
metrical units. (Ex: Laborers hired to build a canal W-1m.xL-100m.)
3. When the object or purpose of obligation is susceptible of partial
compliance (Ex: Delivery of rice supplies to a rice dealer)
4. When the object of obligation is the accomplishment or delivery of
analogous things such as to pay in installments.

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WHAT ARE THE EFFECTS OF ILLEGALITY OF A PART OF A CONTRACT
1.) DIVISIBLE CONTRACT - if a part thereof is illegal, the illegal part is
void & unenforceable. The remaining legal part is valid and
enforceable.
2.) INDIVISIBLE CONTRACT if a part thereof is illegal, the entire
contact is void and unenforceable.

NO PARTIAL PERFORMANCE IN INDIVISIBLE OBLIGATION - it is

tantamount to non-performance. An obligor/debtor who did not finish
his work under the indivisible obligation cannot recover payment for the
partial work done.

Illustrate: A hired B to renovate the entire kitchen in his house for the total sum of P1M
package contract price, with A providing for the materials. B however got fed up by the
various complaints of A re his labourers poor quality of workmanship and revisions that
must be made. B abandoned the renovation of the kitchen leaving its ceramic flooring and
kitchen counters & sink unfinished. However, B demanded to be paid in part for the
kitchen cabinets which he had installed and for the kitchen counter wall half-finished.

Q. Can B legally require A to pay in part the renovation job partially finished?

A. No. A can refuse to pay B as the obligation to renovate the entire kitchen is indivisible.
Partial performance of an indivisible obligation is tantamount to non-performance of the
contract. B cannot recover until he delivers a fully renovated kitchen as specified in the
P1M package contract price.

SECTION 6. - OBLIGATIONS WITH A PENAL CLAUSE

Art. 1226. In obligations with a penal clause, the penalty shall

substitute the indemnity for damages and the payment of interests in
case of noncompliance, if there is no stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay the
penalty or is guilty of fraud in the fulfillment of the obligation.

The penalty may be enforced only when it is demandable in

accordance with the provisions of this Code.

Q. State the CONCEPT OF PENAL CLAUSE

It is an accessory undertaking to assume greater liability in case of
breach.
Attached to an obligation in order to insure performance

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Q. What is the NATURE OF PENALTY?
Penalty generally is paid in sum of money
It can also be any thing stipulated by the parties, or an act or
abstention.
It is a subtstitute for the indemnity for damages and interests in case of
breach of obligation unless there is a contrary stipulation which can even
increase recovery of additional damages

Q. What is the PURPOSE OF PENALTY in a contract or obligation?

To insure faithful compliance and strengthen the coercive force of the

obligation by threat of a greater liability in case of breach.
Provides for liquidated damages
For reparation or punishment for non-performance of obligation

Examples:
1.) A contract whereby obligor will pay a certain sum of money or
compounding of interests on the agreed interests if he fails to perform
his obligation on time.(MDC v. Empire Insurance Co., 20 SCRA 557; Hodges v.
Javellana, 4 SCRA 1128)

2.) Imposition of attorneys fees in case of breach of contract.(Luneta Motor Co.

V. Mosa, 73 Phil. 80)

3.) Forfeiture of what has been paid by failure to pay other instalments in
the purchase of lots. (Caridad Estates Inc., v. Santero, 71 Phil. 114)

4.) Stipulation that an employee shall be liable to his employer for damages
if he would engage in a business similar to that of his employer. (Gsell v
Kock, 16 Phil. 1)

5.) A bond is in the nature of a penalty which may be forfeited for its full
amount even if the sum involved in the obligation is so much less
(Lambert v. Fox, 26 Phil. 588)

Q. How is a PENAL CLAUSE in obligations CONSTRUED?

A. Obligations imposing penalties and forfeitures are strictly construed.
Terms of the contract are the measure of the parties liability.

Q. What are some cases where DAMAGES and INTERESTS may be recovered
in addition to penalty?

A. Damages and interests may also be recovered in addition to penalty: (1) if

there is express provision to this effect; (2) if debtor refuses to pay the
penalty; (3) if debtor is guilty of fraud in non-fulfillment of the obligation.
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Q. What are the LIMITATIONS OF A PENAL CLAUSE?
A. It must not be contrary to law, morals, or public order.

NOTE: Please study the differences between PENALTY vs. FACULTATIVE and
ALTERNATIVE Obligations (pp. 258-259 Paras; p.263 Tolentinto)

Art. 1227. The debtor cannot exempt himself from the performance of
the obligation by paying the penalty, save in the case where this right
has been expressly reserved for him. Neither can the creditor demand
the fulfillment of the obligation and the satisfaction of the penalty at
the same time, unless this right has been clearly granted him.
However, if after the creditor has decided to require the fulfillment of
the obligation, the performance thereof should become impossible
without his fault, the penalty may be enforced.

1. GEN. RULE: DEBTOR cannot exempt himself from the performance of

the obligation by offering to pay the penalty.

EXCEPTION: Substitution for performance is however allowed if this

right is expressly reserved or granted to debtor in the contract or
agreement. (Implied reservation is not allowed)

2. GEN. RULE: CREDITOR cannot demand performance of the principal

obligation and the penalty at the same time.

Illustrate: A contracted B to build a chapel for him. B failed to construct according

to specs of contract and the workmanship was bad. Owner A cannot confiscate the
balance of the contract price not yet paid and at the same time claim penalty under
the contract. A set-off was ordered by the court. (Navarro v. Mallari, 45 Phil. 242;
also Vitug v. Coronel, 40 Phil.686)

EXCEPTIONS:
a. Unless this right has been clearly granted to creditor.
(Example: In obligations for payment of sum of money, if a penalty is stipulated
for delay or default , both principal obligation and penalty can de demanded by
creditor) Note: p. 265 Tolentino re - Clearly granted vs. Expressly reserved.

b. Where creditor demanded fulfilment of the principal obligation but its

performance become impossible due to the fault of the debtor. (See
discussion of Tolentino, Vol. IV, p. 266)

NOTE: (p. 187, Pineda, Obligations and Contracts, 2000 ed)

If the fault is due to creditors own act, he cannot claim penalty

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 If impossibility of fulfilment is due to fortuitous events, both principal
obligation and penalty shall be extinguished.

Art. 1228. Proof of actual damages suffered by the creditor is not

necessary in order that the penalty may be demanded. (n)

REASONS:
1.) Penalty stipulated in a contract serves as punishment for the
infraction of the conditions stated in the contract, whether or not
creditor suffered damages (Lambert v. Fox, 26 Phil. 588);
2.) Lawful means to repair or substitute losses or damages.

NOTE: Creditor must however prove

(a) existence of the penal clause in the contract, and;
(b) breach of the term or condition in contract.

Art. 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the
debtor. Even if there has been no performance, the penalty may also
be reduced by the courts if it is iniquitous or unconscionable.

Q. WHEN may the COURT EQUITABLY REDUCED the PENALTY?

1.) When the principal obligation has been partly complied with by the debtor
in good faith.

2.) When the principal obligation has been complied with by the debtor, but
not in accordance with the tenor of the agreement thus rendering the
compliance irregular.

3.) Even if there has been no performance, the penalty is iniquitous or

unconscionable. (i.e. penalty is revolting to conscience or common sense; grossly
disproportionate to damage suffered by creditor)

NOTE: Courts will rigidly apply strict construction against enforcement of the
penalty in its entirety in the above cases.

CASES WHEN PENALTY CANNOT BE ENFORCED:

1. When the principal obligation has become impossible due to fortuitous
event;
2. When debtor is prevented by creditor to fulfil the obligation
3. When penalty agreed upon is contrary to morals or good customs.
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 4. When both parties are guilty of breach of contract.
5. When none of the parties committed any willfull or culpable violation of
the agreement, no one can invoke penalty clause against each other.
6. When breach of contract is committed by creditor.

Art. 1230. The nullity of the penal clause does not carry with it that of
the principal obligation.
The nullity of the principal obligation carries with it that of the penal
clause.

Q. When does the NULLITY OF PENAL CLAUSE ARISE?

A. NULLITY OF PENAL CLAUSE arises because it is contrary to law, morals,

good customs, public order or public policy.

Par. 1 Rule - Reason: Efficacy of principal obligation does not depend

upon the effectivity of the penal clause.

Valencia v. RFC, 103 Phil.444 If the penal clause is void such as when it is contrary to law,
morals or good customs, public or public policy, the principal will remain subsisting.

Par. 2 Rule - Reason: Penal clause is an accessory to the principal

obligation. Penal clause cannot exist alone, while Principal Obligation
can.

Mun. Of Hagonoy, Bulacan v. Evangelista, 73 Phil. 586 The contract of lease entered by Mun.
Of Hagonoy being void, it carries with it the nullity of the penal clause attached to it.

Example: LGU X leased for 20 years to Y, 1 kilometer long the white beach fronts of the sea, where
Y build small nipa houses, hotel, restaurant and cabanas for rent to the public within 2 meters of
the seashore. Failure to pay the monthly rent of P100K/mo. will make Y liable liable for a penalty
clause of P50K/mo. of delay and automatic termination of the contract of lease. The lessee Y failed
to pay the rent on the 3rd year, and LGU X sued to collect the lease and penalty and terminate the
contract. Decide.

The contract of Lease is void as the property leased is part of public domain (Art. 424). Since the
principal lease contract is void, the penalty clause is also deemed void. LGU X cannot collect the
lease nor the penalty. But the LGU-X can recover the public domain property leased subject to its
return to Y of the rents collected. (Mun. of Cavite v. Rojas, En Banc -G.R. No. L-9069, March 31,
1915)

Q. What are some of the EXCEPTIONS to the rule that nullity of principal
obligations carries with it nullity of penal clause?

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1.) When the penalty is undertaken by a 3rd party for an obligation which is
unenforceable, voidable or natural, like a guaranty under Art. 2052.

Example: Creditor A, 21 yrs. old, entered into a loan contract of P30K with debtor B, who is 16
yrs old., with a penal clause that B will forfeit his new apple ipad & iphone should B fail to pay
the loan within one week. C, uncle of B, who owns an appliance/electronics store, served as
guarantor of the penal clause in writing to deliver a new apple ipad & iphone should B fail to
pay the loan within the week.

B failed to pay A the debt of P30K within the period. Contract is unenforceable as debtor B is a
minor, deemed incapable of giving consent [Art. 1403, (3)]. But the guaranty of Bs uncle in
writing may subsist and creditor A can enforce this against C.

2.) When the nullity of the principal obligation itself gives rise to liability
of debtor for damages, such as when vendor knew that the thing to
be delivered did not exist at the time of contract.

In this case, the vendor becomes liable for damages, although the contract itself is
declared void. The penalty becomes a substitute for damages, thus enforceable
against obligor. (see: Tolentino, Vol. IV)