chapter 3 section 6- obligations with a penal clause

Art. 1226

Talks about meaning of principal and accessory obligations; penal clause; penalty

Principal obligation

One which can stand hby itself and does not depend for its validity and existence upon another obligation

Accessory obligation

One which is attached to a principal obligation and therefore cannot stand alone

Obligation with a penal clause

One which contains an accessory undertaking to pay a previously stipulated indemnity in case of breach of the principal prestation, intended primarily to induce its fulfillment

Penal clause

Accessory undertaking attached to an obligation to assume greater liability in case of breach ie, the obligation is not fulfilled, or is partly or irregularly complied with

1. To insure performance by creating an effective deterrent against breach

2. To substitute a penalty for the indemnity for damages and interest in case of non-compliance

Purposes of penal clause

1. First constitutes an obligation although accessory, latter does not

2. Former is demandable while latter is never demandable

Penal clause and condition distinguished

Legal and conventional

Kinds of penal clause according to its origin

Legal penal clause

When provided by law

Conventional penal clause

Penal clause When provided by the stipulation of the parties

Compensatory and punitive

Kinds of penal clause as to its purpose

Compensatory penal clause

When penalty takes the place of damages

Punitive penal clause

When the penalty is imposed merely as punishment for breach

subsidiary or alternative and joint or cumulative

Kinds of penal clause as to its demandability or effect

Subsidiary or alternative penal clause

When only penalty can be enforced

Joint or cumulative penal clause

When both principal obligation and the penal clause can be enforced

Penalty takes place of indemnity for damages and payment of interests in case of non-compliance

General rule in an obligation with a penal clause

Not necessary

For penalty substitutes for damages and interests, proof of actual damages suffered by creditor is _ in order that penalty may be enfored

1. When so stipulated by the parties

2. When the obligor refuses to pay penalty

3. When the obligor is guilty of fraud in the fulfillment of obligation

Creditor, in addition to penalty, may recover damages and interests

Demandable

Penalty may be enforced only when it is _ in accordance with the provisions of the Civil code

Iniquitous/unconscionable or partial/irregular fulfillment

Under 1229, penalty may be reduced it it is _

Art. 1230

about effect of nullity of penal clause and that of principal obligation

remains valid and demandable

If only the penal clause is void, the principal obligation

Likewise void

If the principal obligation is void, the penal clause is