OBLIGATIONS AND CONTRACTS

Based on: Dean Navarro Lecture *On Sources of Obligations: If it is the law itself which establishes the obligation, then it is the law which is the source of the obligation. Parag. 3 of Article 1165 refer to instances wherein caso fortuito is not available as a defense. It is because the moment the thing has been promised to two or more persons who do not have the same interest, it is became impossible for the debtor to fulfill the obligation. The same effect in case of delay. Rights of the creditor: Determinate Thing 1. Right to compel delivery 2. Damages in case of breach Rights of the creditor: Generic Thing 1. Right to compel performance 2. That the obligation be complied with at the expense of the debtor 3. Damages in case of breach There is nothing which will prevent the debtor from delivering superior quality. What is not allowed is for the creditor to deliver a thing of inferior quality and for the creditor to demand a thing, the quality of which, is superior than what was agreed upon. Article 1167: Obligation to do The obligation to do may be performed at the expense of the debtor if the debtor failed to perform or performs an act in contravention of the tenor of the obligation. But the debtor cannot be compelled to perform an act. Personal compulsion is not available in personal obligation to do. In this case, one remedy is: what has been poorly done be undone at the expense of the debtor Article 1169: The general rule under Article 1169 is that NO DEMAND, NO DELAY *Remember that in reciprocal obligations, generally, demand is not necessary. The moment one of the parties complies with what was incumbent upon him, the other party incurs in delay. Exception: When the parties agreed on different dates of performance, then the general rule under par. 1 of Article 1169 will apply. There must be demand in order for there to be delay. *Please take note however, of specific provisions under the law wherein demand is not necessary Ex. Article 1788 of the Civil Code on Partnership which states that a partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation. The same rules applies of any amount he may have taken from the partnership coffers, and his liability shall begin from the time he converted the amount to his own use. *The mere fact that the parties agreed to the date of the performance does not automatically dispense with the requirement of demand.
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Art. 1176 The receipt of the principal by the creditor, without reservation with respect to interest, shall give rise to the presumption that said interest has been paid. (Prima facie presumption) *Reason for the presumption, you are not supposed to pay the principal if you have an outstanding interest; In business transactions, interest is originally paid first. Who has the burden of proof to prove otherwise? Creditor Manila Trading vs. Medina requires to state which month the payment is intended to be paid for KINDS OF OBLIGATIONS Pure demandable at once Past event the past event itself cannot qualify as a condition. It is the proof or ascertainment of a past event which may be considered as a condition or which can qualify as a condition. That fact that it is immediately demandable does not mean immediate compliance or you can be unreasonable in demanding its compliance. Reasonable period should be given to the debtor to comply with his obligation. In determining whether the condition is suspensive, or resolutory, the surrounding circumstances must be taken into consideration. *not legally possible to comply with the obligation Parks vs. Province of Tarlac the condition was held to be resolutory in character Art. 1180 When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Ar. 1197. Simple potestative condition not only based on the will but also manifestation of external facts Art. 1182 (1st parag.) Purely potestative condition In here, the fulfillment of the condition is totally dependent upon the sole will of the debtor, the conditional obligation shall be void. Ex under this article: I will pay you 1 million if I want to. Note: Article 1182 does not apply to pre-existing obligations Security Bank & Trust Co. vs. CA SB entered into a contract with a contract. Stipulation in the contract: In case the contractor incurred additional expense, such shall be paid upon mutual agreement of the parties. SB refused to agree to the payment of additional costs claimed by the contractor. The Court held that this stipulation violates Art. 1182. It depends solely upon the will of the bank. It also violates the rules against mutuality of contracts. Impossible condition: Must be an impossible condition as of the time of the birth of the obligation. If at the time of the birth of the obligation the condition is impossible, the obligation is still void even if the condition will subsequently become possible. Rule on Constructive Fulfillment --there are two requisites: 1. There must be intent to prevent fulfillment 2. Actual prevention
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Rule on Retroactive Effect: Once the condition is fulfilled, the effect retroacts to the time of the birth of the obligation. *Take note of mutual compensation The law allows the creditor to bring appropriate actions for the preservation of his rights. Remedies: 1. Judicial character 2. Remedies which are non-judicial in character Ex. Registration or annotation of rights at the back of the title of the land or other things. Payment by mistake may be recovered. *But can the payor recover the fruits and interest of the payment made by mistake? Ans: Yes. Relate the 2nd paragraph of Art. 1188 to Art. 1195 Art. 1188 refers to an obligation with a suspensive condition Art. 1195 payment by mistake before the arrival of the suspensive term or period. The law states that the debtor may recover fruits and interest. Why should Art. 1195 apply to Art. 1188? Because in Art. 1188, the obligation is in a more precarious state. Kung dun nga sa sure na mangyayari, the law allows recovery of fruits & interest, more so with an obligation subject to a condition. Article 1189 You only apply Art. 1189 if ultimately the condition is fulfilled. If the condition does not happen and the thing is lost or deteriorates, the obligation is extinguished. A thing goes out of commerce if it is no longer possible to appropriate the thing, possess the thing or transfer it from one person to another. What if the thing deteriorates through the fault of the debtor: Remedy is rescission + damages Necessary expenses reimburse the rights of a usufructuary Rules to be applied prior to the fulfillment of the obligation: Rules on resolutory condition mutual restitution is absolute. Everything you received must be returned Why? When a resolutory condition is fulfilled, the obligation is extinguished. There is nothing, however, to prevent the parties from applying mutual compensation for practical reasons. Article 1191 Very Important The power to rescind is given to the injured party. Option Rescission or fulfillment with right to damages in either case; this may be resorted to NOTWITHSTANDING the lack of agreement between the parties. This right is impliedly granted. Reciprocal obligations it does not necessarily follow that if two parties are each obliged to each or has obligation to fulfill to the other, the obligations are reciprocal obligations. You only have a reciprocal obligation if the two obligations are conditioned upon each other in the sense that the fulfillment of one is conditioned upon the fulfillment of the other.
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Separate obligations not conditioned upon each other are not reciprocal obligations. Now, if there is an express provision in a contract authorizing the injured party to rescind, then a judicial action is not essential or necessary. If the contract however, does not contain an express provision authorizing the injured to rescind, the injured party will have to go to court, file an action for rescission. Remember, rescission will only be allowed for a substantial breach of obligation. A delay in clearing title to property, as one of the requirements in a contract is not a sufficient ground to warrant rescission of the agreement. ROQUE vs. LAPUZ In this case, the buyer only paid 4 out of 120 installments; this constitutes substantial breach of the obligation. MACEDA LAW Sale of land on installment there is 30 days mandatory grace period for every year of payment before rescission. Rescission must be by notarial act. In relation to Article 1592, demand for rescission of the contract must be either: by judicial or notarial act to rescind. Case: Iringan vs. Court of Appeals Options: 1. Fulfillment + damages 2. Rescission + damages But if he opts for rescission, only damages compatible with the idea of rescission may be recovered Example: a contract for a period of 10 years, X may use the property. X is supposed to pay Y a certain amount every month. After 1 year, X defaulted in payment, Y sued for rescission. Y cannot recover the cost of the lease for the remaining 7 years or the unexpired portion of the contract because he opted to rescind the contract. Also, notice to the other party is required. You cannot have a valid rescission unless notice to the other party was given. Why is that necessary? Because for all you know, the decision to rescind may not be proper under the circumstances. Ayson Simon vs. Adamos The court ruled in this case that Rescission is still available after the aggrieved party has demanded the fulfillment of the obligation, and if the latter should become impossible. Example: A is the owner of a piece of land, he sold it to B. B demands from A the delivery of title to property. A is unable to do so. So B sued to compel A to perform her obligation. Then O files a case against A to be declared the owner of the same real property subject of agreement between A and B. O is later on declared the rightful owner of the property. May B thereafter file an action to rescind the sale of property? Yes, the law allows the rescission. (2 nd parag. of Art. 1191) What will be the consequences once the reciprocal obligation is rescinded? Will there be obligation for mutual rescission although Art. 1191 is silent? Ans: Yes, the court has held in some cases. Ex. Laperal vs. Solid Homes
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In this case, the Court held that the provision in Art. 1385 applies to Art. 1191. Why? Verba legis... 1191 and 1385 both use rescission. Remember that if the property involves immovable property, you have to apply Art. 1592. Note that Art. 1592 does not apply to contract to sell as held by the SC. In a contract to sell, ownership is retained by the seller until there is compliance with certain conditions. Where the condition is full payment, such is a positive suspensive condition. The failure to comply with it is not a breach, whether serious or causal, but simply an event which prevents the sellers obligation to deliver from acquiring binding force. In Art. 1192, remember that if both parties committed a breach, the liability of the first infractor shall be tempered by the liability of the 2 nd infractor. Obligations with a PERIOD - This is either resolutory or suspensive Remember the effects of an acceleration clauseupon failure to pay an installment, all other installments become due and demandable. *This is a valid provision in a contract. What is the effect of caso fortuito to a term or period? Ans: It does not operate to suspend the term; caso fortuito excuses compliance/performance during the time that there is caso fortuito but it does not extend the term. *You also apply Art. 1189 if anything should happen to the object of the obligation pending the arrival of the term or period. Art. 1196 If there is a period, it is presumed to have been established for the benefit of both the creditor and debtor unless the tenor of the obligation provides otherwise. Art. 1197 If no period was fixed but a period was intended by the parties, the remedy is to ask the court to fix the period. Generally, any action to collect or claim before asking the court to fix the period is premature because the obligation has not yet become due and demandable. The SC has, however, held correctly in some cases that this general rule is subject to an exception. If a separate action will serve no purpose except to delay; if the same evidence will be presented in both proceedings, they may actually be combined. Best Example: Borromeo vs. Court of Appeals There were two friends. The debtor borrowed from the creditor a certain amount of money. A promissory note dated Nov. 29, 1933 was issued by the debtor in favor of the creditor. The two argued that the debt will be paid even beyond the prescriptive period. A complaint was filed only January 7, 1953. Ordinarily, what is the prescriptive period on actions based on documents? It is 10 years. The Court, in this case, held that since the agreement provides the debt may be paid beyond the prescriptive period, we should simply interpret that to mean that for purposes of prescription, the first 10 years should not be counted. Only the next 10 years should be counted. This case was decided only in 1972. If SC would merely fix the period, it will only cause delay. It is in this case that departure from the general rule is justified. Once fixed by the court, the period cannot be changed by the parties.
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When you say the period cannot be changed by the parties it simply means that a party cannot again go to court and ask to fix another period. But the parties can certainly agree between themselves to fix a period other than the one fixed by the court. Art. 1198 - Instances where the debtor shall lose every right to make use of the period: ( IGIVA ) 1.) Debtor becomes INSOLVENT even without a formal record of bankruptcy or insolvency; 2.) Debtor fails to 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.) Debtor VIOLATES any undertaking, in consideration of which the creditor agreed to the period; 5.) When a debtor attempts to ABSCOND mere attempt to abscond is sufficient Alternative Obligations In alternative obligations, there are several prestations which are due but the fulfillment of 1 is sufficient to extinguish the obligation. Facultative Obligations In facultative obligations, there is only one object which is due although the debtor is permitted to deliver another as a substitute. What is the importance of knowing the distinctions? If there should be loss in a facultative obligation due to caso fortuito, the moment the object of the facultative obligation is lost, the result is nothing more and nothing less than the extinguishment of the obligations. It does not matter if the intended substitute is still existing or subsisting because the substitute object is not due. In alternative obligations, there are several objects which are due but you dont have to deliver all of them. The delivery of 1 is sufficient. What should be delivered is any of the objects which are alternatively due. (Delivery of partial object 1 and partial object 2 is not allowed) Who has the right of choice in alternative obligations? Under the Civil Code, in the absence of any agreement between the parties, it is the debtor who has the right of choice. Subject to the agreement by the parties, the creditor may be given the right of choice. Art. 1201 The choice shall produce no legal effect except from the time it has been communicated to the other party. The moment the choice has been communicated to the other party, the effect is radical. The obligation ceases to be alternative. It is transformed to a simple obligation to deliver the thing which has been selected. Example: X obligates himself to deliver to Y a wristwatch, an eyegalasses or a bag on Dec. 1, 2010. On Nov. 28, X communicated to Y the choice to deliver the wristwatch. What if on Nov 30. 2010, Xs wristwatch got lost due to caso fortuito. But the eyeglasses and bag are not lost. Is X obliged to deliver either the bag or eyeglasses to Y? Ans: NO. As early as Nov. 28, 2010, X already communicated the choice to deliver a wristwatch. From such time, the obligation has ceased to be alternative. It is converted to a
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simple obligation. Since the wristwatch has been lost, the net result is the extinguishment of the obligation. If through the creditors acts, the debtor cannot make a choice, the debtor is given the right to rescind the contract with damages. Hypo example: Three objects are due; object 1, object 2, and object 3. The right of choice of course belongs to the debtor. If all the three objects are lost through caso fortuito, there is no problem, the obligation is extinguished. What if all the three are lost through the fault of the debtor, what will be the right of the parties? All three lost, the right choice still belongs to the debtor. The creditor, however may recover damages from the debtor. How to determine damages? The value of the last object lost or the last prestation which became impossible. Why the value of the last object? Because as long as there was one remaining object, as long as there was one remaining prestation, it was still possible for the debtor to comply with his obligation. If the right of choice belongs to the creditor, and all three objects or prestations are lost, same rule applies, the obligation is extinguished. What if all the three are lost through the fault of the debtor? Since the right of choice belongs to the creditor, the creditor has the right to select which object shall be used as the basis for determining damages. Suppose: 1 object is lost due to the fault of the debtor; objects 2 & 3 remain. The creditor has the right to choose. What are the remaining rights of the creditor? Since the creditor has the right of choice, he may choose the value of the thing lost + damages or the creditor may choose any of the things which remain and if D delivers, C can no longer seek or recover damages. Joint and Solidary Obligations: Generally, obligation is joint. Solidarity only when the obligation so expressly state or only when the law or the obligation by its nature, requires solidarity. Joint, the debt is divided into as many equal parts are there are debtors. Debtor Debt is P12,000 Solidary Person Joint A B C 4,000 4,000 4,000 Either A, B, or C may be required to pay the entire amount of debt Creditor Perso Share n X 6,000 Y 6,000

If ABC agreed to pay jointly and severally to X and Y; in such a case, obligation is solidary.
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Remember, if the obligation is Joint = KKB If it is solidary = ALL FOR ONE, ONE FOR ALL Indivisible Obligation: The mere fact that the object of the obligation is indivisible will not make solidary. This would be a case of joint indivisible obligation. But if the agreement is solidary obligation, then it is considered as a solidary indivisible obligation. Indivisible in case the obligation is indivisible, the remedy of the creditor is to proceed to all the debtors; this is particularly true in the obligation is joint. If the obligation is indivisible and solidary, it shall be sufficient if the creditor shall proceed against one of the debtors. Hypo: If in the example given, A B C are the debtors and X and Y are the creditors; for purposes of preventing prescription of the action, is the filing of action against A alone in an obligation which is joint and indivisible sufficient to toll the running of the prescriptive period? Art. 1209 If the division is impossible, the rights of the creditors may be prejudiced only by their collective acts and the action may be enforced only by filing against all the debtors. The better view according to Prof. Tolentino is that none of the creditors may do acts in representation of the other creditors. They should always act together if they want to enforce the obligation and they should proceed against all the debtors. Suppose that the obligation to give a car could not be complied with because of the fault of C. What will be the effect? The debtors shall be liable for the value of the car but for damages, only C may be held liable because it was his fault. What if C is unable to pay damages? Can the creditors run after A & B? Ans: No, because it is a joint obligation. Is it possible to have solidarity only on the part of the debtors? Or only on the part of the creditors? Hypo Example: Debtors A, B, and C; the obligation is Php 12,000 Joint Debtors Solidary Creditors Person Obligation to creditor X entitled to: A pay X 2k, pay Y 2k A 2,000, B 2,000 B pay X 2k, pay y 2K C 2,000 C pay X 2k, pay Y 2k Y entitled to: A 2,000, B 2,000 and C 2,000 How much can X collect from A? X can only collect P4,000 from A. What if let us reverse the situation: Solidary Debtors Joint Creditors Person Obligation to creditor X may collect: A pay 12,000 to creditors A or B or C = P6,000 B pay 12,000 to creditors Y may collect: C pay 12,000 to creditors A or B or C = P6,000
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How much can X collect from A? Since X cannot represent Y because they are merely joint creditors, X can only collect P6,000 from A or B or C. Rule of Thumb: If ever you are asked a problem about mixed solidarity, just remember, the total amount which can be collected should be divided by the number of parties who are jointly bound. If there is solidarity on both sides, the entire amount may be collected against any debtor by any creditor. If in a solidary obligation between A, B, and C, A has paid the entire obligation, he may collect or seek reimbursement from the other parties, B and C. Supposing that B is insolvent, what is the remedy of A? A and C will now share in the obligation of B who is insolvent. SC Case: 2 debtors, debt is P12,000; One of the debtors paid P6,000 to the creditor. He is claiming reimbursement against the co-debtor. The Court held that such debtor is not entitled to reimbursement of the P6,000 because such debtor has not paid the entire amount. In reality, he paid only his own share. Solidarity may exist even if the parties are not bound by the same terms and conditions. (Article 1211) Case: Inchausti vs. Yulo EXTINGUISHMENT OF OBLIGATIONS: Payment or performance under the Civil Code refers to the normal and voluntary fulfillment of the obligation. Art. 1233 Rule on Completeness of Payment (For payment to be valid, it must be complete) Exceptions: 1. Substantial Compliance in good faith (Art. 1234) 2. Estoppel (Art. 1235) if the creditor, accepts the payment or performance, knowing its incompleteness and irregularity, the debt is considered paid. Diesel Construction Co. vs. UPSI Property Holdings In this case, 97% of the work was completed, the Court held that there is substantial compliance. Who may pay? It does not necessarily follow that anybody can pay the obligation. The law says that the creditor is not bound to accept payment from a third person who has interest in the fulfillment of the obligation unless there is a stipulation to the contrary. What will be the consequence if a 3 rd person pays the creditor without the knowledge or without the consent of the debtor? Ans: The 3rd person has the right to claim reimbursement from the debtor to the extent that the payment benefitted the debtor. Hypothetical example:
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D (debtor), C (creditor), and G (guarantor) and X 3 rd (person) X pays Ds debt without Ds consent to C. D is therefore unable to pay back X. Can X enforce the guaranty against G? Ans: No. In such a case, the third person acquires only one right. A limited right of reimbursement. It is limited only up to the extent that the debtor was benefitted. So let us assume that D indebted to C to the amount of 12,000 already may partial payment of 4,000 to C. Such payment was unknown to X. X paid C the entire amount of the debt of D. C accepted. How much can X collect from D? Ans: Only 8,000 because it is only up to 8,000 that D was benefitted by the payment of X. Rights of a third person who pays the creditor with the knowledge and/or consent of the debtor. The 3rd person has two basic rights: 1. Full reimbursement 2. Subrogation to the rights of the creditor even against third persons such as guarantor, mortgagor...etc. General rule: The creditor cannot be compelled to accept payment from third persons who have no interest in the fulfillment of the obligation. Who would qualify as persons interested in the fulfillment of the obligation? Co-debtors, co-joint debtors, guarantors, persons who have mortgaged their properties to secure their obligations Example: X paid C the loan in the amount of P12,000 obtained by D from C. X however, does not intend to collect from D the payment he made to C. D, however, told X that he did not have to do that and refused. Can X return to C and recover the amount paid (P12,000) on the ground that D refused to accept the payment made by X to C on his behalf? No. The law is clear, the payment is valid as to the creditor who accepted it. So will there now be a valid donation from X to C? No, one basic underlying principle in our law is no person can force you to accept a gift from another. There can be no valid donation without acceptance of the beneficiary. Can X return to D and recover the amount he paid to C? Ans: Yes, X can claim reimbursement up to the extent that D has been benefitted. To whom should payment be made? 1. The person in whose favor the obligation was constituted 2. To his successors-in-interest 3. Any person authorized to receive it The law says any person authorized to receive it. - Remember that the authority to receive need not come from the creditor; the authority to receive payment may come from the law (basis is the law) If you give payment to a person other than those authorized by law to receive payment, that is not a valid payment. In one case: A certain person wearing the uniform of a company came to the house of the debtor to collect payment. The debtor paid said collector not knowing that his representation as a collector for the company is false. This is not a valid payment and the debtor may be compelled to pay again to the company.
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Payments which are made to incapacitated persons: (Art. 1241) - Will be valid only if they kept the thing or insofar as the payment has benefitted them A paid the amount of P1Million which he borrowed from Mr. X. Unknown to A, X was already insane when he received the payment.. He looked normal though. A left the house of X. After A left, Mr. X cooked his meal and he used the money (bills) paid by A as panggatong. Can A be required to pay again? Ans: Yes, because A is an incapacitated person. What about the benefit obtained by Y in using the money as panggatong? Ans: Such is not the benefit contemplated. It is the benefit for rational purpose. Is good faith a defense? Ans: No. Good faith is not a defense. The law is intended for the protection of the incapacitated. Article 1241(2) the law enumerates three situations where payment made to a person other than those enumerated is still valid: 1. If after the payment, the 3rd person acquires the rights of the creditor 2. If the creditor ratifies the payment 3. If through the creditors conduct he has lead the debtor to believe that the third person was authorized to receive payment (based on estoppel) *In these three cases, the payment made to third persons is deemed beneficial to the creditor and to that extent would be considered valid. *Payment will also be valid if made in good faith to the person in possession of the credit is also a valid payment. Who is a person in possession of a credit? Example: D borrowed P1Million from X. When the debt was about to become due, X assigned his credit to A but D was not notified of such assignment. Will D be justified in thinking that X is the creditor? Ans: Yes, D is justified in thinking that X is the creditor because there is nothing in the circumstances which would make D believe that X is not the creditor. Is Ds payment to X a valid payment? Ans: Yes, Ds payment to X is valid. As far as D is concerned, X is the person in possession of the credit. It is payment made in good faith. To be considered in possession of the credit: - There must be factual circumstance in which the belief is justifiably or reasonably based. If there is a court order, ordering the debtor to refrain from paying a certain obligation to his creditor, such court order must be followed. If the debtor disregards such court order and still paid the creditor, such debtor may be compelled to pay again. It will not be considered as a valid payment. *Dacion en Pago Things to remember: 1. Remember that before you can have a dacion en pago, there must be an agreement. There must always be an agreement regarding dacion en pago between the creditor and the debtor. 2. No Dacion En Pago if ownership is not actually transferred to the creditor. You can only have dacion en pago if ownership is transferred to the creditor. Example: I owe you P1M. You went to me to collect the amount. I said I have no money today. Would
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you agree that instead of paying P1M, bigay ko na lang sayo yung kotse ko? You agreed, so I transferred ownership of my car to you. That is dacion en pago. What will be used in paying debt in money? Of course, it will be in the currency stipulated. We no longer have the Uniform Currency Act. Parties are now allowed to stipulate on the currency to be used in paying a debt. If no stipulation as to the currency used or delivery in the agreed currency is impossible, the default currency is the currency which is the legal tender in the Philippines. Legal tender notes, bills issued by the BSP. Coins under BSP Circular 537: P1, P5, P10 are legal tender up to P1,000. Less than P1 coin are legal tender only up to P100. A check, no matter what kind of check it is, is not legal tender. Hence, the creditor may refuse to accept check as payment. *Although a check is legal tender, the creditor is not prohibited from accepting the check. However, it shall only have the effect of payment when the check has been cashed or when through the fault of the creditor, it has been impaired. Generally, a check becomes stale after 6 months. Example: If D pays C P1M through a check. C only deposited the check only after 8 months. Is the debt of D to C extinguished? No. Did the said check after 8 months had the effect of a valid payment or being encashed? No, because although there was impairment, there was no damage or prejudice as far as the debtor is concerned. Besides, I believe most authorities would agree that the rule on impairment does not apply to checks to issued by the debtor himself...EXCEPT, in one possible situation, with the same facts as given above, if in the meantime, the bank has closed. In such a case, the obligation of D should be considered paid. But generally, the rule on impairment should apply only to instruments issued by third persons not to those issued by the debtor himself. Extraordinary inflation or deflation You have the rule under Art. 1250. When is there extraordinary inflation? If there is a decrease in the purchasing power of the public way beyond the contemplation of the parties; You do not apply Art. 1250 in normal fluctuations in the exchange rate. Also, there must be a Government declaration before there can be extraordinary inflation. Note: Article 1250 cannot be applied to obligations arising from quasi-delicts...Why? Because the Art. Itself says currency stipulated. You can only have a currency stipulated in obligations arising from contracts and no in quasi-delicts. Place of Payment: Art. 1251: 1. Place stipulated 2. If no stipulation, and obligation consists of delivery of a determinate thing; payment should be made at a place where the thing might be at the time of constitution of the obligation. This, however, should not be interpreted literally. Example, I sold my car today. At the exact moment that I sold my car, my brother was driving the car somewhere in Makati. It does not mean that we need to identify the exact location where the car is driven as the place where payment should be made. 3. In any other case, the place of payment should be at the place or domicile of the debtor.

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