SECTION 3. - Alternative Obligations
Art. 1199. A person alternatively bound by different prestations shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131)
This article focuses on Alternative Obligations. In an alternative obligations, there is more than one prestations or object, but the fullfillment of one is sufficient to extinguish the obligation.
To demonstrate, here's the case of ARCO PULP vs Lim.
Lim is engaged in the business of supplying scrap papers, cartons and other raw materials to factories engage in paper mill business. In one of ita transactions, Lim delivered to Arco Pulp a scrap materials amounting to 7 million. Allegedly, they had an agreement of either to pay Lim in the amount of 7 million or to pay him through finished products with the equivalent value. Later on, Arci Pulp issued check in the amount of 1.4 million as initial payment to Lim.
Unknown to Lim, Arco Pulp entered into a MOA with another company citing Lim as the supplier. In other words, the obligation of paying Lim was transferred from Arco Pulp to the said company.
Hence, Lim sued ARCO Pulp.
The RTC ruled in favor of Arco Pulp. Accordingly, when ARCO Pulp entered into MOA with another company, novation took place.
The CA reversed the decision and ruled in favor of Lim. According to them, the obligation between the parties was alternative obligation.
Hence, the petition went to the Supreme Court.
Weather or not the obligation between the parties was alternative obligation.
The obligation between Lim and Arco Pulp was indeed an alternative obligations. This could be manifested in their agreement of either to pay Lim in the amount of 7 million or to pay him through finished products with the equivalent value.
Furthermore, Arci Pulp issuance of check in the amount of 1.4 million as initial payment to Lim waa a manifestation that they have opted to pay Lim in cash. Therefore, they are obliged to completely perform their chosen mode of payment pursuant to Article 1199 of the Civil Code.
Thus, the decision of Court of Appeals was AFFIRMED.