Article 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. (1154a)
Penalty may be reduced by courts (NOTE: It is humbly submitted that the term should be "the court," not "the judge) on the basis of the principles of equity when there has already been partial or irregular compliance of the main obligation by the person upon whom the obligation is incumbent. The same goes even when there has actually been no performance or compliance if the penalty is grossly unfair or morally wrong or unreasonable or shocking to the conscience of the courts.
A promised to deliver 200 boxes of high-grade chocolate to B on January 1. It has been stipulated that failure to do so would give rise to the penalty of $200,000. However, A was only able to deliver 180 boxes. B now demands the full $200,000 while A counters that the penalty should be reduced. Decide.
The penalty should be reduced.
The court is allowed by Article 1229 of the Civil Code to reduce the penalty by reasons of equity when there has already been partial fulfillment of the obligation. In the case at bar, A was already able to deliver a part of the promised 200 boxes and only 20 boxes were left. It would be unfair now for B to collect the whole amount of penalty considering the fact that he already benefited from the 180 boxes delivered.
Would your answer be the same if none of the 200 boxes was delivered?
No, the answer would be different. In this case, the $200,000 penalty should not be reduced since there has been no partial or, at least, irregular fulfillment of the obligation.
