Contractual Penalty Clause Explained
Summary
A penalty clause in a contract imposes a fixed amount for delays, while liquidated damages are pre-agreed sums for breaches. In the given scenario, the 1,000 pesos per day is a penalty clause. Both penalty clauses and liquidated damages can coexist in a contract if they do not contradict each other. Relevant articles from the Philippine Civil Code include Article 1226, which states that penalties replace damages unless otherwise specified, Article 2226, which allows liquidated damages without proof of actual loss, and Article 2227, which permits both clauses in a contract if they adhere to legal standards.Full Conversation
please include articles from philippine civil code
Sure! Here are the relevant articles from the Philippine Civil Code:
- Article *: In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.
- Article *: Liquidated damages shall be equivalent to the amount agreed upon by the parties. However, proof of actual damages suffered by the obligee is not necessary in order that liquidated damages may be demanded.
- Article *: Penalty clauses and liquidated damages may be stipulated together in a contract, provided they are not contrary to law, morals, good customs, public order, or public policy.
Would you like more details on any specific article or further clarification?
please simplified the answer with simple term
Sure! Here’s a simplified version:
-
Obligation with a penalty clause: A has to pay *,* pesos for each day of delay. This is a penalty for not finishing on time.
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Liquidated damages: Pre-agreed amount to be paid if the contract is breached.
In your case, the *,* pesos per day is a
penalty clause.
Key Points:
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Penalty Clause: Punishment for delay.
-
Liquidated Damages: Agreed amount for contract breach.
- Both can be in a contract if they don’t contradict each other.
Relevant Articles from Philippine Civil Code:
- Article *: Penalty replaces damages and interest unless stated otherwise.
- Article *: Liquidated damages need no proof of actual loss.
- Article *: Penalty and liquidated damages can be in the same contract if they follow the law.
Need more details or have other questions?
A borrowed * million for B. The loan was secured by a mortgage of A’s land in favor
of B. Without the knowledge of A, C paid B the sum of of * million for A’s debt. May C
claim reimbursement from A?
Case Rating: *
In general, C may seek reimbursement from A for the payment made. Here's a simplified explanation based on the Philippine Civil Code:
- Article *: A third person who pays another's debt can recover what they have paid if the payment benefits the debtor.
- Article *: If the third person paid without the debtor's knowledge or against the debtor's will, they can only recover from the debtor the amount that the latter benefited.
Would you like more details or have another question about this situation?
What are the modes of extinguishing an obligation?
Case Rating: *
There are several modes of extinguishing an obligation under the Philippine Civil Code:
- Payment or Performance (Article *): Fulfillment of the obligation.
- Loss of the Thing Due (Article *): Destruction of the subject matter.
- Condonation or Remission of Debt (Article *): Voluntary forgiveness by the creditor.
- Confusion or Merger of Rights (Article *): When creditor and debtor become the same person.
- Compensation (Article *): When two parties owe each other.
- Novation (Article *): Substitution of a new obligation or creditor/debtor.
Is there a specific mode you need more details on?
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