Short answer. It is a gift made to reward the donee's merits or past services, or one whose burden is worth less than the thing given. Article 726 treats such transfers as donations too, provided the services rewarded were not a demandable debt. The gratuitous element that remains is what still makes it a donation.
What the law says
When a person gives to another a thing or right on account of the latter's merits or of the services rendered by him to the donor, provided they do not constitute a demandable debt
Civil Code, Article 726 — Remuneratory And Modal Donations. Read the full provision →
What the law says
when the gift imposes upon the donee a burden which is less than the value of the thing given, there is also a donation.
Civil Code, Article 726 — Remuneratory And Modal Donations. Read the full provision →
A gift that also rewards
Not every donation is a purely spontaneous gift given for nothing in return. Article 726 recognises the remuneratory donation, which arises when a person gives to another a thing or right on account of the latter's merits or of the services rendered by him to the donor, provided they do not constitute a demandable debt. Here the donor gives partly out of gratitude, to recognise the recipient's merits or past services. The law still calls it a donation because the donor was under no legal compulsion to give; the transfer rests on liberality prompted by appreciation, not on an enforceable obligation.
The services must not be a demandable debt
The condition in the article is essential. The merits or services being rewarded must not constitute a demandable debt. If the recipient had a legally enforceable claim to payment for the services, then handing over property would be paying a debt, not making a gift, and it would not be a donation at all. What keeps a remuneratory donation a donation is precisely that the donor was not obliged to pay. He chooses to reward services he could have left unrewarded, so the transfer retains the gratuitous character that defines a donation.
When the burden is less than the value given
Article 726 covers a second situation as well: when the gift imposes upon the donee a burden which is less than the value of the thing given, there is also a donation. Sometimes property is transferred subject to a charge or condition the donee must fulfil. As long as that burden is worth less than the thing received, the excess value, the part not covered by the burden, is a gift. The transaction is donative to the extent of that gratuitous surplus, even though the donee must shoulder some obligation in exchange.
Why the classification matters
Identifying a transfer as a remuneratory donation matters because donations carry their own rules, on form, acceptance, revocation, and reduction if they impair the legitime of compulsory heirs. A remuneratory donation is still a donation and is generally governed by those rules, to the extent of its gratuitous value. So a person who transfers property to reward services, or subject to a lesser burden, should treat it with the formalities and consequences of a donation, not as an ordinary sale or payment, since the law regards the liberality in it as a genuine gift.
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.
- Daalco Development Coration vs. Palmas Del Mar Homeowners Association (PDM-HOA), Represented By Gil Fernandez, President, G.R. No. 264652, November 4, 2024 — read the decision on LawPhil →
- National Power Corporation vs. Delta P, Inc, G.R. No. 221709, October 16, 2019 — read the decision on LawPhil →
- Republic of the Philippines, represented by the Department of Public Works and Highways (DPWH) vs. Sps. Francisco R. Llamas and Carmelita C. Llamas, G.R. No. 194190, January 25, 2017 — read the decision on LawPhil →