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b. Conditional; Kinds of Conditions

Illegal and Impossible Conditions

In simple and remuneratory donations, illegal or impossible conditions shall be considered as not imposed (Art. 727)

In Onerous/Contract an impossible or unlawful condition annuls the obligation which depends upon it; if the obligation is divisible, the part unaffected by the condition remains valid. A condition not to do an impossible thing is considered as not having been agreed upon (Art. 1183)

Performance of Obligations

The obligation arises:

  • Pure obligation: Demandable at once (CIVIL CODE, art. 1179)
  • Obligations with Suspensive Condition/Period

General Rule: An obligation subject to a suspensive condition becomes effective upon fulfillment of the condition. The effects of a conditional obligation to give generally retroact to the day of its constitution. (CIVIL CODE, art. 1187) An obligation subject to a suspensive period becomes demandable upon arrival of the period, without such retroactivity. (CIVIL CODE, art. 1193)

Exception: Regarding fruits and interests in reciprocal obligations (even if the two reciprocal obligations are not of the same value), the parties are deemed as mutually compensated during the pendency of the condition.

Thus, there is no liability to account for fruits and interests in reciprocal obligations. For unilateral obligations, the debtor shall appropriate the fruits and interests received, unless it was intended otherwise.

  • Obligations subject to a Resolutory Condition/Period

An obligation subject to a resolutory condition is demandable at once, without prejudice to the effects of the happening of the condition. (CIVIL CODE, art. 1179)

Conditional Obligations may be further classified into:

  • Suspensive or resolutory
  • Potestative (based on the will of one of the parties), Casual (based upon chance or will of 3rd parties), and Mixed (combination of will of one of the parties + chance and/or will of 3rd persons)
  • Possible or impossible
  • Positive or negative
  • Divisible or indivisible
  • Conjunctive or alternative
  • Express or implied

NOTE: A conditional obligation subject to a suspensive condition dependent solely on the will of the debtor is void under Art. 1182 of the Civil Code. Impossible or unlawful conditions may also annul the obligation dependent on them under Art. 1183.

Example: I’ll give you P1,000,000 next month if I decide to run for the upcoming national elections.

SUSPENSIVE CONDITION

  • The happening of the condition creates the obligation.
  • Not demandable at once
  • Gives rise to the existence of an obligation. For example, in a Contract to Sell, the fulfillment of the suspensive condition, which is the full payment of the purchase price, gives rise to the obligation of the seller to convey the title to the prospective buyer. If the condition was not fulfilled, it only prevents the obligation of the seller to convey title to arise.
  • Also known as “condition precedent”
  • Gives birth to obligations

Rule on fruits in suspensive condition:

  • In suspensive conditions, the effect of a conditional obligation “to give” retroacts to the day of the constitution of the obligation.
  • Nevertheless, when the obligation imposes reciprocal prestations, the fruits and interests during the pendency of the suspensive condition shall be deemed to have been mutually compensated.
  • If the obligation is unilateral, the debtor or obligor 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 is different.

NOTE: Doctrine of constructive fulfillment – Condition shall be deemed fulfilled when the obligor voluntarily prevents fulfillment. (CIVIL CODE, art. 1186)

REQUISITES:

  • Condition is suspensive
  • Obligor prevents fulfillment of condition
  • Obligor acts voluntarily

RESOLUTORY CONDITION

  • Demandable at once
  • Once the condition is established or acknowledged, the right to demand performance immediately exists and therefore the obligation can be demanded at once
  • It is also known as “condition subsequent”
  • The happening of the condition has the effect of extinguishing an obligation

NOTE: In reciprocal obligations, a party faced with the other’s substantial noncompliance may seek fulfillment or resolution, with damages in either case, under Civil Code Article 1191, subject to applicable requirements. Resolution for breach is a remedy, not the automatic operation of a resolutory condition.

Updated: Noncompliance may justify resolution of a reciprocal obligation, but cancellation of a modal or onerous donation requires a substantial and fundamental breach, while the installment-sale cancellation addressed in Danan requires statutory notarial notice (Camarines Sur Teachers v. Province of Camarines Sur, G.R. No. 199666, 7 October 2019; Danan v. Spouses Reyes, G.R. No. 195072, 29 May 2017).

Simple potestative v. Purely potestative suspensive condition

SIMPLE POTESTATIVE PURELY POTESTATIVE
Presupposes not only a manifestation of will but also the realization of an external act (e.g., “if you sell your house”).The simple potestative condition on the part of the debtor does not prevent the formation of a valid obligation. While to a certain extent, it depends on the voluntary act of the obligor, it is still subject, in part, to contingencies over which he has no control. For instance, “I agree to make the first offer to you should I decide to sell my house.” The condition depends upon the will of the offeror, but in consequence of external circumstances which may arise (e.g., the need for money or the advantage of transferring to a different location). Depends solely and exclusively upon the will (e.g., “if I like it” or “If I deem it proper). Destroys the efficacy of the legal tie. If a person says, “I will sell my house if I deem it proper,” there is no seriousness in this undertaking.

Effect of illegal, immoral or impossible condition

TO GIVE / TO DO SOMETHING NOT TO GIVE / NOT TO DO SOMETHING

Both condition and obligation are void, hence, there is no obligation.

Exception: In simple and remuneratory donations, illegal or impossible conditions are considered not imposed (Art. 727), hence condition is deemed not written and the obligation is valid (becomes a pure obligation).

 A condition not to do an impossible thing is considered not agreed upon. Assess an unlawful negative condition under Art. 1183's rule on conditions prohibited by law or contrary to good customs or public policy.

Condition coupled with a Term

The condition that some event will not happen at a determinate time, shall render the obligation effective from the moment (1) the time indicated has elapsed, or (2) if it has become evident that the event cannot occur. (CIVIL CODE, art. 1185)

If no time has been fixed for a negative condition, the condition shall be deemed fulfilled at such time as may have probably been contemplated, bearing in mind the nature of the obligation. (CIVIL CODE, art. 1185)

POSITIVE SUSPENSIVE NEGATIVE SUSPENSIVE
Rule Condition must be fulfilled before stipulated term Condition should NOT happen before stipulated term
Effect if Condition is fulfilled before arrival of the term Obligation arises from fulfillment The parties are released as of the date of the happening of the condition
Effect if Condition is not fulfilled before the arrival of the term Parties are released as of arrival of the term. But Parties may be released even before arrival if it becomes indubitable that the condition will not happen The obligation arises from the time the term arrives.

Obligations with a Period or a Term

Obligations which are demandable on a “day certain”.

Suspensive or resolutory condition v. term

CONDITION TERM
Suspensive It may or may not happen, hence uncertain whether there is an obligation. It is certain that it will happen; just uncertain as to when it will happen.
Resolutory It is not certain if the obligation will terminate at all It is certain that it will terminate at a future time.
Retroactivity Once fulfilled, it will retroact to date the obligation was entered into(NOTE: if it is an obligation to do or not to do, courts will determine retroactivity)EXCEPT:(i) fruits (Art. 1187- when the obligation to deliver arises),(ii) prescription (from fulfillment of condition – when action could have been brought) There is no retroactivity because there is already an obligation from the time the parties enter in the obligation, except only in prescription (where prescriptive period is counted from arrival of the term – i.e., when the action could have been brought)

Effects before the happening/ arrival of condition/ term

  • Obligee: Before fulfillment of a suspensive condition, the creditor may bring appropriate actions to preserve the right under Article 1188 of the Civil Code. If the obligation is subject to a suspensive period, it already exists but is generally not demandable until the period arrives under Article 1193; protective relief requires its own legal basis.
  • Obligor: No obligation to deliver or perform yet at this time.

NOTE: In an obligation to give specific things, these are the effect of loss, impairment or improvement of the specific thing which is the object of the obligation:

CAUSE LOSS IMPAIRMENT IMPROVEMENT
Obligor’s Fault Obligor to pay damages Obligee may choose resolution or fulfillment, with damages Obligor has usufructuary rights only – i.e., can use it but is not entitled to payment, and can remove it only if it will not cause damage
Obligee’s Fault Obligor released Deliver in its impaired state Obligor without right to payment of improvement
Nature/ Fortuitous Events Obligor released Borne by the obligee; cannot ask for damages or refuse to accept impaired object Inures to the benefit of the obligee

Upon fulfillment of a resolutory condition, the parties must return what they received. Under Article 1190 of the Civil Code, the rules in Article 1189 on loss, deterioration, and improvement apply to the party then obliged to return the thing.

RULES ON POTESTATIVE, CASUAL AND MIXED CONDITIONS

RULES ON APPLICABILITY OF CONSTRUCTIVE COMPLIANCE

CASUAL CONDITION MIXED CONDITION
Not Applicable Dependent Partly on Chance Dependent on Will of Third Party
Not Applicable In a conditional institution of an heir, if a person interested in the condition prevents its fulfillment without the heir's fault, the condition is deemed complied with (Art. 883). For obligations generally, a condition is deemed fulfilled when the obligor voluntarily prevents its fulfillment (Art. 1186).

Authorities

  • Civil Code, Art. 1183
  • Civil Code, Art. 727
  • CIVIL CODE, Sec. 1179
  • Civil Code, Sec. 1185
  • CIVIL CODE, Sec. 1186
  • Civil Code, Sec. 1187
  • CIVIL CODE, Sec. 1187
  • Civil Code, Sec. 883