Chapter 3 - Section 6 – Obligation with a Penal Clause Flashcards
One which can stand by itself and does not depend for its validity and existence upon another obligation.
PRINCIPAL OBLIGATION
One which is attached to a principal obligation and, therefore, cannot stand alone.
ACCESSORY OBLIGATION
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.
OBLIGATION WITH A PENAL CLAUSE
An accessory undertaking attached to an obligation to assume greater liability in case of breach, i.e., the obligation is not fulfilled, or is partly or irregularly complied with.
Penal Clause
Purposes of Penal Clause
To insure their performanc
To substitute a penalty
To punish the debtor
When the penalty takes the place of damages.
Compensatory Penal Clause
When the penalty is imposed merely as punishment for breach.
Punitive Penal Clause
When only the penalty can be enforced.
Subsidiary or Alternative Penal Clause
When both the principal obligation and the penal clause can be enforced.
Joint or Cumulative Penal Clause
When creditor may recover damages (EXCEPTIONS)
stipulated by the parties
debtor refuses to pay the penalty
obligor is guilty of fraud in the fulfillment of the obligation
When penalty may be reduced by the courts extent of fulfillment
Partial performance
When penalty may be reduced by the courts manner of fulfillment
Irregular performance
When penalty may be reduced by the courts
When the penalty agreed upon is iniquitous or unconscionable
An act or thing that is legally void
Nullity
Effect of nullity of the penal clause and the principal obligation
Penal clause is void, the principal obligation remains valid and demandable
Principal obligation is void, the penal clause is likewise void
