Section 373.- An agreement made in advance exonerating a debtor from his own fraud or gross negligence is void.

 

Section 374.- If a party by a contract agrees to make a performance to a third person, the latter has a right to claim such performance directly from the debtor.

In case of the foregoing paragraph the right of the third person comes into existence at the time when he declares to the debtor his intention to take the benefit of the contract.

 

Section 375.- After the right of the third person has come into existence in accordance with the provisions of the foregoing Section, it cannot be changed or extinguished by the parties to the contract.

 

Section 376.- Defences arising from the contract mentioned in Section 374 can be set up by the debtor against the third person who is to receive the benefit of the contract.

 

CHAPTER III

EARNEST AND STIPULATED PENALTY

 

Section 377.- If, on entering into a contract, something is given as earnest, this is deemed to be proof of the conclusion of the contract. It also serves as a security that the contract shall be performed.

 

Section 378.- In the absence of agreement to the contrary, earnest is ;

                (1) To be returned or treated as pert-payment upon performance ;

                (2) To be forfeited, if the party giving it fails perform, or if the performance becomes impossible in consequence of a circumstance for which he is responsible or if the rescission of the contract  is due to his fault ;

                (3) To be returned, if the party receiving it fails to perform, or, if the performance becomes impossible in consequence of a circumstance for which he is responsible.

 

Section 379.- If the debtor promises the creditor the payment of a sum of money as penalty in case he does not perform his obligation or does not perform it in the proper manner, the penalty is forfeited if he is in default. If the performance due consists in a forbearance, the penalty is forfeited as soon as any act in contravention of the obligation is committed.

 

Section 380.- If the debtor has promised the penalty for the case of his not performing his obligation, his creditor may demand the forfeited penalty in lieu of performance. If the creditor declares to the debtor that he demands the penalty, the claim for performance is barred.

If the creditor has a claim for compensation for non-performance, he may demand the forfeited penalty as the minimum amount of the damage. Proof of further damage is admissible.