Alternative Obligations, A1199-1206, Civil Code
1. Concepts
a. Alternative obligation
ARTICLE 1199. A person alternatively bound by different prestations shall completely perform one of them. x x x (1131) (CIVIL CODE)
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Alternative obligation – refers to a situation wherein an obligor is “alternatively bound by different prestations” but may choose to “completely perform one of them.” (CIVIL CODE, Article 1199)
The rule on alternative obligations is governed by Article 1199 of the Civil Code. (Arco Pulp and Paper Co., Inc. v. Lim, G.R. No. 206806, June 25, 2014, Per Leonen, J.)
“In an alternative obligation, there is more than one object, and the fulfillment of one is sufficient, determined by the choice of the debtor who generally has the right of election.” The right of election is extinguished when the party who may exercise that option categorically and unequivocally makes his or her choice known. (Arco Pulp and Paper Co., Inc. v. Lim [2014], supra.)
Examples:
1) Obligor is given the choice of delivering a laptop or a mobile phone.
2) Debtor is given the choice of paying in cash, a bank check, or online transfer.
3) Obligor is given the choice of baking a cake or cooking a spaghetti.
Arco Pulp and Paper Co., Inc. v. Lim, G.R. No. 206806, June 25, 2014, Per Leonen, J.:
• According to the factual findings of the trial court and the appellate court, the original contract between the parties was for respondent to deliver scrap papers worth ₱7,220,968.31 to petitioner Arco Pulp and Paper. The payment for this delivery became petitioner Arco Pulp and Paper’s obligation. By agreement, petitioner Arco Pulp and Paper, as the debtor, had the option to either (1) pay the price or(2) deliver the finished products of equivalent value to respondent.
• The appellate court, therefore, correctly identified the obligation between the parties as an alternative obligation, whereby petitioner Arco Pulp and Paper, after receiving the raw materials from respondent, would either pay him the price of the raw materials or, in the alternative, deliver to him the finished products of equivalent value.
• When petitioner Arco Pulp and Paper tendered a check to respondent in partial payment for the scrap papers, they exercised their option to pay the price. Respondent’s receipt of the check and his subsequent act of depositing it constituted his notice of petitioner Arco Pulp and Paper’s option to pay.
• This choice was also shown by the terms of the memorandum of agreement, which was executed on the same day. The memorandum declared in clear terms that the delivery of petitioner Arco Pulp and Paper’s finished products would be to a third person, thereby extinguishing the option to deliver the finished products of equivalent value to respondent.
b. Facultative obligation
Article 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative. x x x (n) (CIVIL CODE)
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Facultative obligation – refers to a situation wherein “only one prestation has been agreed upon” “but the obligor may render another in substitution.” (CIVIL CODE, Article 1206)
Examples:
1) Obligee and obligor agreed that obligor delivers a laptop; however, obligor has the option to provide a substitute of equal value.
2) Creditor and debtor stipulated that payment is via cash in Philippine currency; however, debtor is allowed to pay with a different currency of equal value.
3) Obligee and obligor agreed that obligor bakes a cake; however, obligor is permitted to bake or cook something else of equal value.
1) Loss or deterioration of thing intended as substitute
Article 1206. x x x
The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud. (n) (CIVIL CODE)
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Restated:
1) If a substitution has not been made, the debtor-obligor is not liable for the loss or deterioration of the thing intended as a substitute resulting from the debtor-obligor’s negligence.
2) If a substitution has been made, the debtor-obligor is liable for the loss of the substitute on account of: (a) delay, (b) negligence, or (c) fraud.
NB: The key is whether a substitution has been made or not.
2. Debtor-obligtor
The following rules apply to the debtor-obligor.
a. Right of choice
Article 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor.
The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the object of the obligation. (1132) (CIVIL CODE)
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Restated:
1) General Rule: The right of choice belongs to the debtor.
2) Exception: … unless it has been expressly granted to the creditor.
NB: For the exception, the grant to the creditor cannot be implied.
1) Loss of right of choice
Article 1200. x x x
The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the object of the obligation. (1132) (CIVIL CODE)
Article 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one is practicable. (1134) (CIVIL CODE)
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Notes:
1) The debtor loses the right of choice for:
(a) Prestations which have become impossible;
(b) Prestations which have become unlawful;
(c) Prestations which could not have been the object of the obligation; or
(d) Only one prestation is practicable.
2) In alternative obligations there is no right to choose undertakings that are impossible or illegal. (De Legarda v. Miailhe, En Banc, G.R. No. L03435, April 28, 1951, citing the OLD CIVIL CODE, Article 1132, paragraph 2, which is similar to the CIVIL CODE, Paragraph 2, Article 1200)
2) Communication produces effect
Article 1201. The choice shall produce no effect except from the time it has been communicated. (1133) (CIVIL CODE)
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Restated:
1) General Rule: The choice per se does not produce effect.
2) Exception: … except from the time it has been communicated.
Notes:
1) The choice of the debtor must also be communicated to the creditor who must receive notice of it since: The object of this notice is to give the creditor… opportunity to express his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the creditor, or if impugned by the latter, when declared proper by a competent court. (Arco Pulp and Paper Co., Inc. v. Lim [2014], supra.)
2) NB: Making the choice by itself will not produce any legal effect; rather, it is the communication of the choice by the debtor to the creditor that will produce legal effects.
Ong Guan Can v. The Century Insurance Co., Ltd., En Banc, G.R. No. L-22738, December 2, 1924
(This case cites/applies the old Civil Code provisions on alternative obligations.)
• A building of the plaintiff was insured against fire by the defendant in the sum of P30,000, as well as the goods and merchandise therein contained in the sum of P15,000. The house and merchandise insured were burnt early in the morning of February 28, 1923, while the policies issued by the defendant in favor of the plaintiff were in force.
• The appellant contends that under clause 14 of the conditions of the policies, it may rebuild the house burnt, and although the house may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by him.
• The clause cites by the appellant is as follows:
The Company may at its option reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss of damages, or may join with any other Company or insurers in so doing, but the Company shall not be bound to reinstate exactly or completely, but only as circumstances permit and in reasonable sufficient manner, and in no case shall the Company be bound to expend more in reinstatement that it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage, nor more than the sum insured by the Company thereon.
• If this clause of the policies is valid, its effect is to make the obligation of the insurance company an alternative one, that is to say, that it may either pay the insured value of house, or rebuild it. It must be noted that in alternative obligations, the debtor, the insurance company in this case, must notify the creditor of his election, stating which of the two prestations he is disposed to fulfill, in accordance with article 1133 of the Civil Code. The object of this notice is to give the creditor, that is, the plaintiff in the instant case, opportunity to express his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the creditor, or if impugned by the latter, when declared proper by a competent court. In the instance case, the record shows that the appellant company did not give a formal notice of its election to rebuild, and while the witnesses, Cedrun and Cacho, speak of the proposed reconstruction of the house destroyed, yet the plaintiff did not give his assent to the proposition, for the reason that the new house would be smaller and of materials of lower kind than those employed in the construction of the house destroyed. Upon this point the trial judge very aptly says in his decision: “It would be an imposition unequitable, as well as unjust, to compel the plaintiff to accept the rebuilding of a smaller house than the one burnt, with a lower kind of materials than those of said house, without offering him an additional indemnity for the difference in size between the two house, which circumstances were taken into account when the insurance applied for by the plaintiff was accepted by the defendant.” And we may add: Without tendering either the insured value of the merchandise contained in the house destroyed, which amounts to the sum of P15,000.
b. Right to rescind
Article 1203. If through the creditor’s acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages. (n) (CIVIL CODE)
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Notes:
1) The debtor has the right to rescind the contract with damages if the debtor cannot make a choice according to the terms of the obligations due to the acts of the creditor.
3. Creditor
The following rules apply to the creditor-obligee.
a. Right of choice
Article 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor. x x x (1132) (CIVIL CODE)
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Notes:
1) If expressly granted, the creditor may have the right of choice.
2) Express means it clear and categorical, i.e., parties stipulated on it.
3) Granting of the right of choice to the creditor cannot be implied or by implication.
1) Communication of choice
Article 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. x x x (1136a) (CIVIL CODE)
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Notes:
1) The granting of the choice to the creditor should be express, and not implied.
2) If the right of choice is expressly granted to the creditor, and the creditor has communicated the choice to the debtor, then the obligation stops becoming an alternative obligation on the day such communication was made.
a) Debtor’s responsibilities
Article 1205. x x x
Until [the creditor communicates his/her choice to the debtor] the responsibility of the debtor shall be governed by the following rules:
(1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that which the creditor should choose from among the remainder, or that which remains if only one subsists;
(2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the former, has disappeared, with a right to damages;
(3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any one of them, also with indemnity for damages.
The same rules shall be applied to obligations to do or not to do in case one, some or all of the prestations should become impossible. (1136a) (CIVIL CODE, Paragraph 2)
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Notes:
1) See below (a), (b), and (c) for discussions of each responsibility.
2) While Article 1205 contemplates obligations to deliver, it also covers obligations to do or not do as provided for in the last paragraph.
a) Loss of one of the things due to fortuitous event
If prior to the creditor’s communication of his/her choice, one of the things is lost due to a fortuitous event, the creditor shall choose from the remaining ones, including that which remains if one is subsisting. (See CIVIL CODE, Article 1205[1])
Once the creditor makes such a choice, the debtor shall perform the chosen obligation. (Ibid.)
b) Loss of one of the things due to debtor’s fault
If prior to the creditor’s communication of his/her choice, one of the things is lost due to the debtor’s fault, the creditor has the following rights:
1) Claim from any of the subsisting ones;
2) Price for the thing that disappeared from debtor’s fault;
3) Damages in addition to Nos. (1) and (2). (See CIVIL CODE, Article 1205[2])
c) Loss of all the things due to debtor’s fault
If prior to the creditor’s communication of his/her choice, all the things are lost due to the debtor’s fault, the choice by the creditor shall fall upon the price of any one of them, also with indemnity for damages.
b. Right to refuse partial performance
ARTICLE 1199. x x x
The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131) (CIVIL CODE)
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Notes:
1) Under Article 1199, the creditor cannot be compelled to receive incomplete performance by the debtor of one undertaking/obligation and of that of another.
2) Thus, the creditor has the right to refuse to receive partial performance by the debtor of one undertaking and partial performance of another obligation.
3) Conversely, the debtor has no right to perform a part of an undertaking and that of another and thereafter compel the creditor to receive such performance.
c. Right to indemnity
Article 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the compliance of the obligation has become impossible. x x x (1135a) (CIVIL CODE)
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Notes:
1) The creditor has the right to indemnity for damages against the debtor when through the debtor’s fault:
(a) All the things which are alternatively the object of the obligation have been lost; or
(b) Compliance of the obligation has become impossible.
2) Indemnity
Article 1204. x x x
The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service which last became impossible. x x x (1135a) (CIVIL CODE)
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Notes:
1) The indemnity is determined either via:
(a) The value of the last thing which disappeared; or
(2) The value of the last service which last became impossible.
2) Damages
Article 1204. x x x
Damages other than the value of the last thing or service may also be awarded. (1135a) (CIVIL CODE)
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Notes:
1) Damages may be awarded in addition to or on top of the value of the last thing or service.
References
• Chapter 1 – General Provisions, Title I, Book IV, Republic Act No. 386, Civil Code
