Short answer. Generally no. Article 1227 of the Civil Code states that a debtor cannot escape the main obligation simply by paying the penalty — unless the contract expressly reserved that right for the debtor. Without that express reservation, paying the penalty does not free the debtor from performing the principal obligation.
What the law says
The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time, unless this right has been clearly granted him. However, if after the creditor has decided to require the fulfillment of the obligation, the performance thereof should become impossible without his fault, the penalty may be enforced.
Civil Code, Article 1227 — No Escape by Paying the Penalty. Read the full provision →
The default rule: penalty does not substitute for performance
A penal clause is an accessory obligation — it secures and reinforces the main obligation rather than replacing it. Under Article 1227, paying the penalty does not discharge the debtor from performing what was actually promised. If you contracted to deliver goods by a certain date and a penalty was agreed for late delivery, offering to pay the penalty does not give you the right to simply not deliver. The creditor can still insist on the goods and on the penalty for the delay, unless the contract says otherwise.
When the debtor may pay the penalty instead
The one exception is if the contract expressly reserves the debtor's right to substitute the penalty for performance. This must be clear from the contract's language — courts do not imply this reservation lightly. If your contract says something like 'the debtor may, at their option, pay the penalty in lieu of delivery,' then you can exercise that option. Without such a clause, you cannot unilaterally opt out by tendering the penalty amount.
What the creditor may and may not demand
The flip side of this rule protects the debtor too. Article 1227 equally prevents the creditor from demanding both performance and the penalty at the same time — unless the contract has clearly granted that right. The penalty is ordinarily a substitute for damages caused by the breach, not a bonus on top of full performance. A creditor who wants both must find clear contract language supporting that double claim. In the absence of such language, choosing to demand the penalty forecloses demanding performance, and vice versa.
What happens when performance becomes impossible
Article 1227 addresses one specific situation where the penalty steps in: if the creditor has already demanded performance, and performance later becomes impossible without the creditor's fault, the penalty may then be enforced. For example, if the creditor opted to demand delivery but the goods were destroyed through no fault of the creditor, the creditor is not left without remedy — the penal clause can be invoked. However, if the impossibility was caused by the creditor's own acts, this exception does not apply.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Heirs of Manuel Uy Ek Liong vs. Mauricia Meer Castillo, Heirs of Buenaflor C. Umali, represented by Nancy Umali, et al, G.R. No. 176425, June 5, 2013 — read the decision on LawPhil →