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Resolutory Conditions in Obligations and Contracts under Philippine Law

 What are Resolutory Conditions?

  • A resolutory condition is a type of condition attached to a contract or obligation. When this condition is fulfilled, the contract or obligation is automatically extinguished (resolved).
  • Key point: Resolutory conditions undo an existing contract, as if it never happened in the first place.

Resolutory Conditions in Philippine Law

The primary source for understanding resolutory conditions in the Philippines is the New Civil Code (Republic Act 386):

  • Article 1191: Obligations for which a specific date (day certain) is fixed are only demandable when that day arrives. An obligation with a resolutory period takes effect immediately but will end upon the arrival of the specified date.
  • Article 1192: Even if there isn't a specific date, the courts can establish a period if it can be determined from context that a timeframe was intended. The duration of a period can also be established by the courts if it is dependent on the debtor's will.

Important Considerations

  • Retroactive Effect: Unless the parties agree otherwise, a fulfilled resolutory condition acts retroactively. This means both parties have to return any benefits received under the contract, restoring them to their positions before the contract existed.
  • Lawfulness: Conditions must be lawful and possible to be valid.
  • Impaired Goods: If goods involved in the contract deteriorate before the resolutory condition occurs, the creditor has options. They can either terminate the contract retroactively or accept the damaged goods without a price reduction. Additionally, they may still seek damages if the debtor is at fault for the deterioration.

Example of a Resolutory Condition

You buy a piece of land on the condition that you can secure financing within 60 days. If you fail to secure financing in that time, the contract is terminated, and the seller retains any deposit while you lose any claim to the land.

How Resolutory Conditions are Different from Other Conditions

  • Suspensive Condition: A suspensive condition delays the creation of an obligation until the condition is met. The obligation doesn't come into existence until the condition is fulfilled.
  • Resolutive Condition: A resolutory condition causes the termination of an obligation when the future, uncertain event occurs. The obligation exists and is valid until the condition cuts it short.
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Location: Davao City, Davao del Sur, Philippines

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