Short answer. Only in cases of extraordinary inflation or deflation, and only if the contract does not say otherwise. Article 1250 of the Civil Code provides that when extraordinary currency changes supervene, the value of the currency at the time the obligation was established governs payment — not today's depressed or inflated value.

What the law says

In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.

Civil Code, Article 1250 — Extraordinary Inflation or Deflation. Read the full provision →

What Article 1250 actually does

Article 1250 is often misread as a general inflation-adjustment clause — it is not. It applies only when the inflation (or deflation) is extraordinary: not the ordinary rise in prices over time, but a sudden, severe, and official devaluation of the currency that goes well beyond normal economic fluctuation. When that threshold is met, the obligation is recalculated at the purchasing power the currency held when the contract was signed, not at today's diminished value. Without this rule, a creditor would receive pesos that buy far less than what the debtor promised, effectively reducing the real value of the debt.

The threshold: ordinary versus extraordinary inflation

Ordinary price increases — even steep ones over several years — do not trigger Article 1250. The distinction between ordinary and extraordinary is not defined in the Civil Code by a number, but the standard requires something that dramatically and unusually distorts the value of the currency, typically involving official proclamations or legal declarations recognizing the extraordinary character of the change. Prices rising by 30% over a decade because of normal economic conditions would not qualify. A sudden severe monetary crisis that halves the peso's purchasing power might. Whether any specific situation meets the threshold is a factual question that may ultimately be for a court to decide.

The contract can override the default rule

Article 1250 applies only in the absence of a contrary agreement. Parties are free to stipulate in the contract how inflation will be handled — they can agree that the nominal peso amount controls regardless of inflation, or they can agree to a price-escalation formula, or they can denominate the obligation in a foreign currency. If the contract addresses the currency-value question, that contractual arrangement governs. Article 1250 fills the gap when the contract is silent. So the first thing to check if this issue arises is your contract's own terms on payment amount and currency.

Practical takeaway for parties in long-term obligations

If you are entering a long-term obligation — a lease, a loan, a service contract running several years — and currency stability concerns you, the better strategy is to address it expressly in the contract rather than relying on Article 1250. The extraordinary threshold is high and contested, and litigation over whether it has been met is expensive and uncertain. A properly drafted escalation clause, a foreign-currency peg for certain payments, or a periodic review mechanism gives both parties a clear, agreed answer. Article 1250 exists as a backstop for the catastrophic case, not as routine inflation protection.

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.

Related provisions

Note. Statute text quoted on this page is reproduced from the official enactment and is linked to the full provision. The explanation around it is general legal information from Vivas & Nobles Law Office, not legal advice. Whether it applies to your situation depends on facts only a lawyer reviewing them can assess.