Article 1267 of Obligations and Contracts

 by Nil Jay Perolina

CHAPTER 4 – EXTINGUISHMENT OF OBLIGATIONS

Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. (n)

What is Article 1267 all about?

It is about the effect of difficulty of performance.

What is the meaning of Article 1267?

It means that when the performance of the service has become so difficult as to be manifestly beyond the contemplation of both parties, the court is authorized to release the obligor in whole or in part. It would be doing violence to the intention of the parties to hold the obligor still responsible. There is an element of the unforeseen or fortuitous event in the situation covered by Article 1267.

What is the reason behind Article 1267?

The parties to the contract must be presumed to have assumed the risk of unfavorable developments. It is therefore only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor. 

What is effect of difficulty of performance?

Difficulty of service or performance authorizes the release of the obligor but does not authorize the courts to remake, modify or revise the contract stipulated with the force of law, so as to substitute its own terms for those covenanted by the parties themselves.

What is the doctrine of unforeseen events?

This is said to be based on the discredited theory of rebus sic stantibus  in public international law; under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist the contract also ceases to exist.

What are the requirements for doctrine of unforeseen event to apply in an obligation?

It requires that:

• Prestation has become so difficult to render;

• Service has become manifestly beyond the contemplation of the parties.

Illustrations/Examples

Illustration 1:

X agreed to construct a road near a mountain. A very strong typhoon caused an avalanche making the construction of the road dangerous to human lives. (Note: The obligation is not impossible of performance.)

In this case, X may be released, in whole or in part, from his obligation to continue with the construction. (see Labayen vs. Talisay Silay Milling Co., 52 Phil. 440 [1928]

Illustration 2:

If A contracted B to construct deep well at P 50 000.00 but for some reasons A was not satisfied with the water source of the deep well. B explained that he cannot extract deeper than 100 feet anymore. Since the contracted price was only P 50 000.00 it was not enough to cover all expenses for reconstruction, B is released from the obligation.

Case Digest from Original Case

Citation:

Occena vs Jabson

Case Docket:

G.R. No. L-44349

Date:

October 29, 1976

Petitioners:

JESUS V. OCCEÑA and EFIGENIA C. OCCEÑA

Respondents:

HON. RAMON V. JABSON, Presiding Judge of the Court of First Instance of Rizal, Branch XXVI; COURT OF APPEALS and TROPICAL HOMES, INC.

Petitioner's Counsel:

Occeña Law Office

Respondent's Counsel:

Serrano, Diokno & Serrano

Ponente:

TEEHANKEE, J.

FACTS:

On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint for modification of the terms and conditions of its subdivision contract with petitioners (landowners of a 55,330 square meter parcel of land in Davao City), making the following allegations:

"That due to the increase in price of oil and its derivatives and the concomitant worldwide spiraling of prices, which are not within the control of plaintiff, of all commodities including basis raw materials required for such development work, the cost of development has risen to levels which are unanticipated, unimagined and not within the remotest contemplation of the parties at the time said agreement was entered into and to such a degree that the conditions and factors which formed the original basis of said contract, Annex ‘A’, have been totally changed.

ISSUE:

Whether or not Courts are authorized to modify or revise contracts between parties.

RULING:

The resolution of respondent appellate court is reversed and the petition for certiorari is granted and private respondent’s complaint in the lower court is ordered dismissed for failure to state a sufficient cause of action. With costs in all instances against private Respondent.

The Civil Code authorizes the release of an obligor when the service has become so difficult as to be manifestly beyond the contemplation of the parties but does not authorize the courts to modify or revise the subdivision contract between the parties or fix a different sharing ratio from that contractually stipulated with the force of law between the parties. Private respondent’s complaint for modification of the contract manifestly has no basis in law and must therefore be dismissed for failure to state a cause of action.

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