Short answer. Either. Article 2041 provides that if one of the parties fails or refuses to abide by the compromise, the other party may enforce the compromise or regard it as rescinded and insist upon his original demand. The choice is yours, and it is worth making deliberately.
What the law says
If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand.
Civil Code, Article 2041 — Breach of Compromise. Read the full provision →
Two roads from the same breach
Article 2041 provides that If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand. This is one of the friendlier provisions in the Code, because it does not trap the innocent party in a bargain the other side has ignored. You are not confined to suing on a settlement that has already proved unreliable, and you are not obliged to abandon it either. What the article gives you is an election, and elections are made once.
What enforcing looks like
Enforcing means holding the other side to the settlement on its own terms: the reduced sum, the instalment schedule, the acts each of you promised. It is usually the simpler action, because the compromise is a short document with a clear obligation and the breach is a matter of arithmetic. The limit is the one Article 2037 sets out. A compromise has upon the parties the effect and authority of res judicata, but there is no execution except in compliance with a judicial compromise, so a settlement never brought before a court is enforced by suit rather than by execution.
What reviving the original demand costs
The second road treats the compromise as rescinded and puts the underlying dispute back where it was. That is attractive where the settlement figure was a deep discount given for prompt payment that never came. It also gives back everything you compromised away: the original claim returns with its original difficulties, its evidence, and the defences the other side had before conceding anything. Weigh what you gave up against what the settlement promised, and account for whatever has already been paid or performed under it before treating the whole arrangement as undone.
Before you choose
Read the settlement itself. Article 2036 provides that a compromise comprises only those objects definitely stated in it, or included by necessary implication from its terms, and that a general renunciation of rights refers only to those connected with the dispute compromised, so a breach of one part may not touch the rest. Check whether the failure is a true refusal or a curable delay, and whether the document sets its own consequences for default. Then communicate the election in writing, clearly, so that the other side and any court can see which of the two rights you exercised and when.
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.
- Reynaldo Inutan, et al. vs. Napar Contracting & Allied Services, G.R. No. 195654, November 25, 2015 — read the decision on LawPhil →
- Crisanta Alcaraz Miguel vs. Jerry D. Montanez, G.R. No. 191336, January 25, 2012 — read the decision on LawPhil →
- Conchita A. Sonley vs. Anchor Savings Bank/Equicom Savings Bank, G.R. No. 205623, August 10, 2016 — read the decision on LawPhil →
- Estate of Salud Jimenez vs. Philippine Export Processing Zone, G.R. No. 137285, January 16, 2001 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 2041 — Breach of Compromise
- Civil Code, Article 2037 — Compromise Has Effect of Res Judicata
- Civil Code, Article 2036 — Scope of a Compromise
- Civil Code, Article 2028 — Compromise Defined