Sec. 6 - Obligations w/ a Penal Clause

• 1226 - Obligations w/ a Penal Caluse

  Legal - Imposed by Law

  Penal - Penalty, use to sanction.

  Compensatory - Ensure Performance.

  Joint/Cumulative - Both P + A are demandable.

  Subsidiary - Choose between P + A or PC.

  It is considered as an accessory.

  Stipulation is required, proof of damage is not required for penal clause to pass.
• Purposes of Penal Clause (1226)

  1. Ensure Performance
  2. Punish Debtor
  3. Liquidate Damages
• 1228 - Penalty Demandable w/o Paying actual Damages

  Penalty is already agreed upon.

  • Needs proof of Violation.
  • Only PC is paid/agreed to be paid. (liquidation).
  • cannot recover more than the stipulated penalty if he proves that Damages > Penalty.
• 1227 - Penalty Rules

  • Not Substitute for Performance (It is only to ensure performance)
  • Creditor can only recover either PC or Principal (if subsidiary, XPN: Joint)
  • Penalty cannot be reduced for it is stipulated (XPN: partial compliance)
  • PC becomes void if Principal is void. Accessio Cedit Principali.  
• 1229 - Penalty may be reduced by the Coruts

  1. Partial or Irregular Performance
  2. Penalty agreed is Iniquitous or unconscionable
• 1230 - Nullity of Penal Clause

  GR: Accessio Cedit Principali is applied when principal obligation is void.

  If PC is void but Principal obligation is valid, only PC is void.
• 1226 (Penal Clause) vs. 1170 (Fraud/Delay/Delict)

  1. Stipulation Required vs. Not Required
  2. Proof of damages ; Proof Required
  3. Not Required