Obligations with a Period

ART. 1193. Obligations for whose fulfi llment a day certain has been fi xed, 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 neces-sarily 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. (1125a)

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 fulfi llment. — 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;

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(2) As to time. — A period refers only to the future, while a condi-tion may refer also to a past event unknown to the parties;

(3) As to infl uence on the obligation. — A period merely fi xes the time for the effi caciousness of the obligation. If suspensive, it cannot prevent the birth of the obligation in due time; if resolutory, it does not annul, even in fi ction, 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 fi x 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.

ILLUSTRATIVE CASES:

1. A term was fi xed for delivery of goods but both parties recognized that such delivery was so uncertain in view of possible contingencies known to them.

Facts: S and B entered into various contracts whereby the former obligated himself to sell, and the latter, to purchase, steel tanks, electric motors, etc., the same to be shipped from the U.S. within fi xed periods of time. B refused to receive them and pay the prices stipulated as they arrived beyond the time fi xed. In all the contracts there is a fi nal clause that S was not responsible for delays caused by fi res, riots, strikes, or other causes entirely beyond the control of S.

Issue: Is the obligation of S conditional or one with a period?

Held: (1) No defi nite date was fi xed for delivery. — Under these stipulations, it cannot be said that any defi nite date was fi xed for the delivery of the machinery.

At the time of the execution of the contracts, the parties were not unmindful of the contingency of the U.S. not allowing the export of

the goods in view of the world war, or of the fact that other unforeseen circumstances therein stated might prevent it. As the export of the machinery in question was contingent upon S obtaining permission of the U.S. government, the delivery was subject to a condition the fulfi llment of which depended not only on the effort of S but upon the will of third persons who could in no way be compelled to fulfi ll the condition.

(2) Delivery must be made within a reasonable time. — With the above in mind, the term which the parties attempted to fi x was so uncertain that the obligation must be regarded as conditional. In cases like this, the obligor will be deemed to have suffi ciently performed his part of the obligation, if he has done all that was in his power even if the condition has not been fulfi lled in reality. When the time of delivery is not fi xed or is stated in general and indefi nite terms, time is not of the essence of the contract. In such cases, the delivery must be made within a reasonable time.

Taking into account the above circumstances, the goods in question were brought to Manila by S within a reasonable time and consequently, B must pay their price. (Smith Bell & Co. vs. Sotelo Matti, 44 Phil. 875 [1923].)

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2. Existence of obligation to pay is recognized and merely the exact date for payment is undetermined.

Facts: X, owner of a mining claim, appointed Y as attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of said claim on a royalty basis. Y himself embarked upon the exploitation of the claim. Subsequently, X revoked the authority granted by him to Y who assented thereto subject to certain conditions. As a result, a document was executed wherein Y transferred to X all of Y’s rights and interests over the “24 tons of iron ore, more or less”

that Y had already extracted from the mineral claims in consideration of the sum of P75,000.00, P10,000.00 of which was paid upon the signing of the agreement, and “the balance of P65,000.00 will be paid from and out of the fi rst letter of credit covering the fi rst shipment of iron ores and of the fi rst amount derived from the local sale of iron ore” from said claims.

To secure the payment of the balance, X executed in favor of Y a surety bond. No sale of approximately 24,000 tons of iron ore had been made nor had the balance of P65,000.00 been paid to Y.

Issue: Is the shipment or local sale of the iron ore a condition precedent (or suspensive condition) to the payment of the balance, or only a suspensive period or term?

Held: The obligation of X is one with a term. The words of the contract express no contingency in the buyer’s obligation to pay. There is no uncertainty that the payment will have to be made sooner or later;

what is undetermined is merely the exact date at which it will be made.

By the very terms of the contract, therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is deferred.

Furthermore, to subordinate X’s obligation to the sale or shipment of the ore as a condition precedent, would be tantamount to leaving the payment at his discretion (Art. 1182.), for the sale or shipment could not be made unless he took steps to sell the ore. (Gaite vs. Fonacier,¹ 2 SCRA 831 [1961].)

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3. Right of debtor to make use of period made subject to fulfi llment of certain conditions.

Facts: According to the contract entered into between R (mortgagor) and E (mortgagee), the obligation of R was to pay the debt in yearly installments on a fi xed day of each year, until it has been fully satisfi ed but in case of non-fulfi llment of any of the stipulations and conditions of the mortgage, such as the failure to pay the annual installments, E could declare the said stipulations and conditions violated and proceed to the foreclosure of the mortgage in accordance with law.

Issue: What is the effect of the non-fulfi llment of the conditions of the contract?

Held: It renders the period ineffective, and makes the obligation demandable at the will of E, the creditor. (Phil. National Bank vs. Lopez Vito, 52 Phil. 41 [1928]; see Art. 1198.)

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4. Effect of happening of fortuitous event on the running of period agreed upon for fulfi llment of obligation.

Facts: X and Y entered into a milling contract whereby X agreed that the sugarcane which Y will produce will be milled by X for a period of thirty years. It was stipulated that in case of a fortuitous event, the contract shall be deemed suspended during said term.

Y failed to deliver sugarcane to X for six years, four years during the war and two years when his mill was being rebuilt.

Issue: May Y be compelled to deliver sugar cane to X for six more

1Also cited under Articles 1198 and 1378.

years after the expiration of thirty years to make up for what Y failed to deliver?

Held: No. The stipulation does not mean that the happening of a fortuitous event stops the running of the period agreed upon. It only relieves the parties from the fulfi llment of their respective obligations during that time. X, not being entitled to demand from Y the performance of the latter’s part of the contract which was impossible at the time it became due, cannot later on demand its fulfi llment. The prayer of X, if granted, would in effect be an extension of the term of the contract entered into by them. (Victorias Planters vs. Victorias Milling Co., 97 Phil.

318 [1955].)

Kinds of period or term.

They are:

(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.)

EXAMPLES:

Ex die:

(1) “I will pay you 30 days from today.” (or on Jan. 1 next year, or at the end of this month.) Here, what is suspended is not the obligation itself (or right acquired) but merely its demandability.

(2) “I will support you from the time your father dies.” Here, the uncertainty consists not in whether the day (death) will come or not, but only in the exact date or time of its taking place. (pars. 3 and 4, Art.

1193.)

(3) “I will pay you when my means permit me to do so.” This is considered by law as an obligation with a period. (Art. 1180.)

In diem:

(1) “I will give you P1,000.00 a month until the end of the year.”

(2) “I will support you until you die.”

(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 fi xed by the court. (Art. 1197.) (3) According to defi niteness:

(a) Defi nite period. — When it is fi xed or it is known when it will come (Art. 1193, par. 3.); and

(b) Indefi nite period. — When it is not fi xed or it is not known when it will come. Where the period is not fi xed but a period is intended, the courts are usually empowered by law to fi x the same.

(see Art. 1197.)

ART. 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in Article 1189 shall be observed. (n)

Effect of loss, deterioration, or improvement before arrival of period.

See comments under Article 1189.

ART. 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests. (1126a)

Payment before arrival of period.

Article 1195 applies only to obligations to give. It is similar to Article 1188, paragraph 2, which allows the recovery of what has been paid by mistake before the fulfi llment of a suspensive condition. The creditor cannot unjustly enrich himself by retaining the thing or money received before the arrival of the period.

Under the former provision, the debtor could recover only the fruits or interests but not the thing or sum given or paid in advance.

This rule was deemed unjust and “contrary to the manifest intention of the parties.’’ (see Report of the Code Commission, pp. 130-131.) Debtor presumed aware of period.

The presumption, however, is that the debtor knew that the debt was not yet due. He has the burden of proving that he was unaware of the period. Where the duration of the period depends upon the will of

the debtor (see Art. 1197, par. 3.), payment by him amounts, in effect, to his determination of the arrival of the period.

The obligor may no longer recover the thing or money once the period has arrived but he can recover the fruits or interests thereof from the date of premature performance to the date of maturity of the obligation.

EXAMPLE:

D owes C P2,000.00 which was supposed to be paid on December 31 this year. By mistake, D paid his obligation on December 31 last year.

Assuming that today is June 30, D can recover the P2,000.00 plus P120.00, which is the interest for one half year at the legal rate of 12%² or a total of P2,120.00. But D cannot recover, except the interest, if the debt had already matured.

Neither can there be a right to recovery if D had knowledge of the period. The theory under solutio indebiti obviously will not apply. (Art.

2154.) D is deemed to have impliedly renounced the period.

No recovery in personal obligations.

Article 1195 has no application to obligations to do or not to do because as to the former, it is physically impossible to recover the service rendered, and as to the latter, as the obligor performs by not doing, he cannot, of course, recover what he has not done. (see 8 Manresa 166.)

ART. 1196. Whenever in an obligation a period is designat-ed, it is presumed to have been established for the benefi t of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. (1127)

Presumption as to benefi t of period.

In an obligation subject to a period fi xed by the parties, the period is presumed to have been established for the benefi t of both the creditor and the debtor. This means that before the expiration of the period, the debtor may not fulfi ll the obligation and neither may the creditor demand its fulfi llment without the consent of the other especially if the latter would be prejudiced or inconvenienced thereby.

2See C.B. Circular No. 416, cited under Article 1175.

In a reciprocal contract like a lease, the period must be deemed to have been agreed upon for the benefi t of both parties, absent language showing that the term was deliberately set for the benefi t of the lessee or the lessor alone. (Fernandez vs. Court of Appeals, 160 SCRA 577 [1988]; Buce vs. Court of Appeals, 332 SCRA 151 [2000].)

The presumption, of course, is rebuttable. (Osorio vs. Salutillo, 87 Phil. 356 [1950].)

EXAMPLE:

On January 1, D borrowed from C P10,000.00 payable on December 31 at 18% interest.

D cannot pay before December 31 without the consent of C. Neither can C compel D to pay before the expiration of the term. It is presumed that the period designated, which is December 31, has been established for the benefi t of both. D is benefi ted because he can use the money for one year. C is also benefi ted because of the interest the money would earn for one year.

In a contract of loan with interest, the term is generally for the benefi t of both the lender and the borrower. (see Bachrach Garage & Taxicab Co.

vs. Golingco, 39 Phil. 912 [1919].) This is also the case even where there is no interest stipulated but the creditor receives, in place of interest, other benefi ts by reason of the period. (Osorio vs. Salutillo, supra.)

Obviously in the above example, D can pay C before December 31 provided the payment includes the interest for one (1) year. (see, however, De Leon vs. Santiago Syjuco, Inc., 90 Phil. 311 [1951]; Nicolas vs. Matias, 89 Phil. 126 [1951].) Where, however, the obligation of D is to deliver say, 100 cavans of rice, C cannot be compelled to accept performance before the expiration of the period especially if he would be prejudiced or inconvenienced thereby.

ILLUSTRATIVE CASES:

1. Prescriptive period where term is for the benefi t of both creditor and debtor.

Facts: D secured a loan from C with interest, the term of which was one (1) year. As security, D pledged his jewelry in writing to C. Within 11 years from the execution of the pledge, D brought action against C to recover the jewelry, tendering the corresponding principal and the corresponding interests.

C contended that the action has prescribed since it was brought after 10 years from date of the execution of the pledge inasmuch as D could

have paid the loan and recovered the jewelry within the one-year term.

If the contention of C be sustained, then D’s action was already barred although it was brought within ten (10) years from the expiration of the one-year term.

Issue: Is the theory of C tenable?

Held: No. This is a case of a loan wherein the term benefi ts D by the use of the money as well as C by the interest. Therefore, the action for the recovery of the jewelry pledged arose only after the lapse of the one (1) year period for purposes of the computation of the period of prescription of said action. It follows that C is in error. (Sarmiento and Villasenor vs.

Javellana, 43 Phil. 880 [1920].)

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2. Under the contract of lease for a period of 15 years, the lease shall be

“subject to renewal for another ten (10) years.’’

Facts: Petitioner B leased a parcel of land, for a period of 15 years to commence on June 1, 1979 and to end on June 1, 1994 “subject to renewal for another ten (10) years, under the same terms and conditions.’’ B then constructed and paid the required monthly rental. Private respondent T, lessor, demanded gradual increases in the rental which B paid. In 1993, B refused to pay any more increase in rental.

According to T, the phrase in the lease contract authorizing renewal for another 10 years does not mean automatic renewal, rather, it contemplates a mutual agreement between the parties. On the other hand, B maintains the stipulation in the contract allowing the lessee to construct buildings and improvements, her fi ling of the complaint before the expiration of the initial 15-years term, for specifi c performance with consignation with prayer to accept the rentals in accordance with the lease contract, and T’s acceptance of the increased rental are contemporaneous and subsequent acts that signify the intention of the parties to renew the contract.

Issue: The basic issue is the correct interpretation of the contract provision in question.

Held: (1) Provision on renewal unclear. — “The phrase “subject to renewal for another ten (10) years’’ is unclear on whether the parties contemplated an automatic renewal or extension of the term, or just an option to renew the contract; and if what exists is the latter, who may exercise the same or for whose benefi t it was stipulated.

In this jurisdiction, a fi ne delineation exists between renewal of the contract and extension of its period. Generally, the renewal of a contract connotes the death of the old contract and the birth or emergence of a new

one. A clause in a lease providing for an extension operates of its own

one. A clause in a lease providing for an extension operates of its own