Section 2. Obligations with a Period

Obligation with a period

• The consequences or effects of an obligation are influenced by or dependent on a timeframe or period. In simpler terms, there is a certain day (a day that will necessarily come) when the obligation shall arise or shall be extinguished.

Period

•  A future and certain event that must occur, even if the specific time is unknown.

Sample Case 1: Ejay, the owner of a beach vacation property, entered into an agreement obligating him to allow Set to stay at the property for a week, starting on July 1, 2022. On July 1, 2022, this obligation becomes demandable as it is tied to the expiration of the specified period. In this case, the period has a suspensive effect known as 'ex die.

Sample Case 2: On March 1, 2022, Ejay granted Set the right to use the beach vacation property only until July 1, 2022. The obligation to allow Set to stay at the property was demandable from March 1, 2022, onward. However, as July 1, 2022, approached, Ejay's obligation to let Set use the property automatically ended due to the expiration of the specified term. Here, the period has a resolutory effect, or it is 'in diem.' Consequently, Set is required to vacate the vacation property.

Period 

As to Fulfillment: 

• A certain event 

As to Time:

• Future

As to Influence on the obligation:

• Fixes the time for the effectiveness of the obligation 

As to Effect, when left to the debtor’s will:

• Empowers the court to fix the duration

As to Retroactivity of Effects:

• No retroactive effect (unless a contrary agreement is specified)

Condition

As to Fulfillment:

• An uncertain event

As to Time:

• Future 

• Past event unknown to the parties

As to Influence on the obligation:

• Causes an obligation to arise or to cease

As to Effect, when left to the debtor's will:

• Invalidated the obligation

As to Retroactivity of effects:

• Has retroactive effects

Kinds of period or term

• According to effect

  • • • • Suspensive period (ex die) – Obligation begins upon arrival of period.

        • Resolutory period (in diem) – Obligation terminates upon arrival of period.

• According to source

  • • • • Legal period – Provided by laws.

        • Conventional or voluntary period – Agreed by parties.

        • Judicial period – Fixed by the court.

• According to definiteness

  • • • • Definite period – Arrival is fixed and known.

        • Indefinite period – Arrival is not fixed or not known. If a period is intended, the courts are empowered

Guidelines from Article 1189 shall be followed within this article. Please proceed to the regulations outlined in Article 1189. (Link)

ART. 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:

•  If the thing is lost without the fault of the debtor, the obligation shall be extinguished;

•  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;

•   When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

•  If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;

• If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;

• If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. (1122)

• This article addresses situations where someone pays or delivers something before it's due.

• In such cases, the person who made the early payment has the right to request a refund of that payment or delivery, along with any additional gains or interest it may have earned.

• This rule only applies to obligations to give. It is impossible to recover service rendered (positive personal obligation), or undo what has not been done (negative personal obligation). 

• The purpose of this rule is to prevent the creditor from unjust enrichment by receiving something before it's legitimately due.

• If the period depends upon the will of the debtor, early payment indicates his determination of arrival of the period. 

• The debtor is presumed to know that the debt was not yet due. Thus, he has the burden of proving that he was unaware of the period.

• Once the actual due date arrives, the debtor cannot recover the principal amount, however, they are still entitled to request the interest accrued during the period of early payment.

Example

Jake borrowed 15,000 pesos from Eve on September 5, 2023. Both parties agreed that Jake would pay back both the principal amount with a 5% interest by the end of the year. Prior to December 31, 2023, Eve cannot demand Jake to pay and prevent him from using the money, neither can Jake compel Eve to accept his payment prematurely, and deprive C from the interest of the remaining balance. 

• As a general rule, the period established is presumed to be created for the benefit of both the debtor and the creditor.

• As a result, until the agreed-upon period arrives, the debtor may not fulfill their obligation, and the creditor may not demand fulfillment without the consent of both parties, especially if it would harm or inconvenience either party involved.

• This presumption is rebuttable.

Exceptions:

The tenor of the obligation or the circumstances may show the intention of establishing the period for the benefit of a single party. 

• For the debtor’s benefit. – He cannot be compelled to pay early unless he chooses to do so.

• For the creditor’s benefit. – He may demand early fulfillment of the obligation, but the debtor cannot require him to accept his premature payment.

Computation of term or period

• The Administrative Code of 1987 provision:

• Year – 12 calendar months

• Month – 30 days (if the month is specified, its number of days shall apply)

• Day – 24 hours

• Night – Sunset to sunrise

• A calendar month:

• A month indicated on the calendar, regardless of its specific length in days. It starts on a particular numbered day and concludes before the same numbered day in the next month. However, if the next month’s number of days is insufficient, it shall include the last day of that month. 

• This article refers to a judicial period.

• If an obligation does not specify a period and no period is intended, the court is not authorized to establish the same. 

• Courts do not have the authority to create contracts on behalf of the parties.

Exceptions:

• There are 2 cases where courts are authorized to fix the duration of the period.

• The court is not modifying the contracts but is simply enforcing the parties’ original intent.

• The court cannot arbitrarily choose a period; it must select one that aligns with what the parties likely intended, considering the circumstances.

• No period is fixed but a period was intended. – The obligation does not specify a period, but it can be inferred from its nature and the circumstances that a timeframe was intended.

• Duration of period depends upon the will of the debtor. – See Article 1180 for examples. (Link)

Legal effect where suspensive period/condition depends upon the will of the debtor.

• Existence of obligation. – The existence of the obligation remains unaffected even when the period depends solely on the debtor, only the timing of performance subject to the debtor's will.

• Validity of obligation – If an obligation is subject to a condition controlled by the debtor's will, the conditional obligation is considered void – it is essentially the fulfillment of the obligation that relies on the debtor's will.

Period fixed cannot be changed by the courts

• Period agreed upon by the parties. – If there is a period agreed upon by the parties and it has already lapsed or expired, the court cannot fix another period.

• Period fixed by the courts. – Once both parties accept and consent to the period set by the court, it takes on the character of a covenant, having the same effect as if it were expressly agreed upon by them, essentially becoming a governing law of their contract, thus becoming unchangeable by the court, though the parties may alter it through a new agreement.

RULE: The obligation is not demandable before the lapse of the period. However, if any of  the  five cases stated above,  the  debtor shall lose  his  right to make use  of the  period,  then  the stipulated period is disregarded and the obligation becomes pure and immediately demanded.

This is based on the fact that the debtor might not be able to comply with his obligation.

• When the debtor becomes insolvent.

EXAMPLE:

D owes C P50,000.00 due and payable on December 20. If D becomes   insolvent, say on September 10, C,  can demand immediate payment from D even before maturity unless D gives sufficient guarantee or security.

The insolvency in this case need not be judicially declared. It is sufficient that the assets of D are less than his liabilities or D is unable to pay his debts as they   mature.  

Note: The insolvency of D must occur after the obligation has been contracted.

•  When the debtor does not furnish guaranties or securities promised.

EXAMPLE:

D borrowed P20,000 from C promising to pledge his ring to C to secure the   debt within one month. C gave D one year to pay the loan. However, D failed to pledge his ring within the period agreed upon.

In this case, C can demand immediate payment even before the agreed due date.

• When guaranties or securities given have been impaired or have disappeared.

EXAMPLE:

D obtained a loan from C, the same being secured by a chattel mortgage   on   D’s   car. The loan is payable within one year. In the seventh month, the   car was razed by fire without D’s fault. C can demand   immediate   payment unless D gives   another security that is equally satisfactory. This is true even if  the cause of the loss or impairment was not due to the fault of D.

• When a debtor violates an undertaking.

EXAMPLE:

C granted a loan of P50,000 to D giving D one year   to   pay   provided   D did not engage in any  gambling until he had paid the debt. If D enters a casino to play in the slot machine, say after one month, C can already demand immediate payment.

• When the debtor attempts to abscond.

EXAMPLE:

Before the due date of the obligation, D (debtor) changed his address without informing C (creditor) and with the intention of escaping from his obligation. 

This act of D is a  sign  of bad  faith  which results in the loss of his right to the benefit of the period stipulated. Observe that amere attempt or intent   to abscond is sufficient.