Alternative and Optional Obligations: Key Differences
Alternative Obligations
An alternative obligation is one in which the object of the provision is not initially determined. At the time of its creation, several possibilities exist. Any of these possibilities can be subject to enforcement by the debtor, but only one is ultimately required. For example, “I’ll sell you my watch, my car, or my bike.” This is similar to options on a restaurant menu.
There is only one obligation, not a plurality. Multiple benefits are *possible*, but only one is *due*. We must distinguish two stages:
Constitution of the Obligation
The obligation arises with several options for delivery, and there is a relative uncertainty of the specific benefit.
Concentration of the Provision
This stage determines which of the benefits is to be met by the debtor. The concentration must occur before compliance, although it could be paid in advance or simultaneously. The concentration takes place when:
- All but one of the benefits disappear without the fault of the debtor or the creditor (see Civil Code Sections 1134, 1182). The debtor loses the right of choice when only one option is realizable. The obligation is extinguished if the object is lost or destroyed through no fault of the debtor or creditor.
- There is a right of choice. Power is granted to a party, or a third party, to determine which provision should be enforceable (see Civil Code Section 1132). If no agreement exists, the choice defaults to the debtor.
The right of election is exercised through a unilateral declaration of intent, which must be communicated to the other party (see Civil Code Sections 1133 and 1136.1). It has effect only after notification.
Loss or Destruction of Services Before Election
In the phase between formation and concentration, a problem arises concerning the loss or destruction of services, whether through fault or accident, before the election takes place. A distinction must be made depending on who owns the right to choose:
1. The Choice is for the Debtor (see Civil Code Sections 1134 and 1135)
- If all things are destroyed, through no fault of the debtor, except one, the concentration occurs on the remaining item. The right of choice is eliminated.
- If all things were gone because of the debtor, the creditor is entitled to compensation for damages (see Civil Code Section 1135).
- If some of the benefits disappear because of the debtor, the debtor’s right of choice is reduced to the remaining options.
2. The Choice is for the Creditor
- If some things had been lost by accident, the creditor can choose from the remaining items. If only one remains, the obligation is concentrated on that item.
- If some things are lost because of the debtor, the creditor can choose from the remaining items or the *value* of the item that had disappeared.
- If all items are lost due to the fault of the debtor, the creditor may choose the economic value of any of them.
Optional Obligations
An optional obligation, or one with the power of substitution, is the possibility that the creditor gives the debtor to be released from the obligation by performing a *different* provision than the one originally committed. This must be agreed upon *before* completion.
If the originally agreed-upon delivery disappears, but the power of substitution exists, the debtor must still comply with the alternative provision (see Civil Code Sections 1153 and 1166).
Difference Between Alternative and Optional Obligations
- Alternative Obligations: Multiple benefits are possible, but only one is ultimately due.
- Optional Obligations: Only one service is initially due, but the debtor can deliver a different one to fulfill the obligation.