How to Amend or Rescind a Compromise Agreement in the Philippines (Adding Payment Deadlines)

This article explains how parties in the Philippines can amend—or, when necessary, rescind—a compromise agreement, with a focus on inserting payment schedules and enforcement mechanisms. It covers both court-approved (judicial) and privately executed (extrajudicial) compromises, cites the Civil Code and basic procedural rules, and offers model clauses.

1) What is a compromise agreement?

A compromise is a contract where parties, by making reciprocal concessions, avoid litigation or end one already begun (Civil Code Art. 2028). Once perfected, it is binding. If the compromise is judicial—i.e., approved by a court—it has the effect of res judicata and is immediately executory as a judgment on compromise (Civil Code Art. 2037; see also the Rules of Court on execution of judgments).

Key takeaways

A compromise is a contract first; a judgment only if approved by the court.
It can’t cover matters legally non-compromisable (e.g., civil status, validity of marriage, future support, future legitime, jurisdiction) (Art. 2035).

2) Why amend to add payment deadlines?

Many compromises state a lump-sum settlement but omit a time for payment, method, or consequences of delay. This invites disputes over when performance is due and whether default has occurred. A narrowly tailored amendment—often called an “Addendum to Compromise Agreement”—solves this by specifying:

Dates for installments,
Place and manner of payment (e.g., bank transfer),
Default/acceleration provisions,
Interest and liquidated damages (subject to limits against unconscionable rates),
Security (e.g., post-dated checks, guaranty, mortgage, or dation-in-payment options),
Cure periods and notice mechanics,
Acknowledgments of outstanding balance, and
Execution undertakings if breach occurs.

3) Can a compromise be amended?

Yes—because it is a contract, it can be amended by mutual consent of the parties (Civil Code principles on freedom of contract and modification). The path depends on whether the compromise is judicial or extrajudicial:

A. If the compromise is judicial (court-approved)

Effect: It is already a judgment on compromise.
How to amend:
1. Execute a written Addendum (signed by the parties with the same or greater formality as the original; notarize).
2. File a Joint Motion (or Manifestation with Motion) to Approve Amended Compromise attaching the Addendum.
3. Ask the court to render an Amended Judgment on Compromise adopting the new terms (especially the payment schedule and default clauses).
Why court approval matters: Without it, you’ll have a new private contract that may co-exist with the old court judgment, potentially complicating enforcement. Court approval keeps the single enforceable judgment aligned with the latest terms.

B. If the compromise is extrajudicial (private, no court approval)

How to amend:
1. Execute a written Addendum referencing the original compromise and replacing or supplementing the payment term.
2. If a case is pending, submit the amended compromise for court approval to obtain a judgment on compromise reflecting the deadlines.
3. If no case is pending, the amended compromise remains enforceable as a contract (action upon a written contract generally prescribes in 10 years, Civil Code Art. 1144). Parties may later sue for specific performance or damages if breached.

4) Enforcing or rescinding a compromise when someone defaults

A. Breach of a judicial compromise

Because it is a judgment, the usual remedy is execution by motion under the Rules of Court (writ of execution/garnishment/levy).
If the compromise contains clear conditions (e.g., “failure to pay any installment after a 10-day grace period accelerates the balance”), the court can execute according to those terms.

B. Breach of an extrajudicial compromise

File an ordinary action for specific performance (to compel payment) or damages.

C. The special option under Civil Code Art. 2041

If one party fails or refuses to abide by the compromise, the other may either:

Enforce the compromise, or
Regard it as rescinded and insist upon the original demand.

Practical use of Art. 2041

Enforce: Seek execution (if judicial) or sue on the contract (if extrajudicial).
Rescind & revive original claim: File an action treating the compromise as rescinded, re-asserting the original cause of action (e.g., the full claim before compromise). Courts expect judicial rescission, not mere unilateral declarations, especially when a compromise has been turned into a judgment.

Tip: Draft your payment-default clause to expressly recognize the Art. 2041 option, while also authorizing immediate execution or confession of judgment/consent to execution where allowed, to minimize procedural friction.

5) Annulment vs. rescission of a compromise

Voidability for vices of consent: A compromise is voidable if consent was vitiated by mistake, fraud, violence, intimidation, or undue influence (Civil Code Art. 2038). The action to annul generally prescribes in 4 years (from discovery of fraud or cessation of duress).
Rescission for breach: Distinct from annulment. Under Art. 2041, a party in breach allows the other party to enforce or rescind and go back to the original claim.
Effect on concluded litigation: Even if there were errors in a prior judgment, a post-judgment compromise supersedes those errors (Art. 2040).

6) Authority to sign and formalities

An agent needs special authority to compromise claims (Civil Code Art. 1878). If a representative signed the original compromise, ensure the same or broader authority covers the amendment.
Form: Notarization is strongly recommended. If real property rights or a mortgage are involved, comply with form requirements and register when necessary.
If the compromise was approved by a court, any amendment should be brought back to the same court for approval when you want it to be enforceable as a judgment.

7) Interest, penalties, and unconscionable rates

The Supreme Court has standardized legal interest at 6% per annum for forbearance of money, loans, and judgments (a widely cited benchmark from Nacar v. Gallery Frames, 2013). Parties may stipulate contractual interest, but usury ceilings are effectively lifted subject to the court’s power to strike down unconscionable rates (cases have invalidated exorbitant monthly rates). Keep charges reasonable to reduce the risk of judicial reduction.

8) Step-by-step: Adding payment deadlines

A. For a judicial compromise (already approved by a court)

Audit the judgment: Confirm current obligations, dates, and any default language.
Negotiate specifics: Amounts, dates, grace period, bank details, security, acceleration.
Draft the Addendum:
- Recitals linking to case title, docket number, date of approval.
- Replacement of the entire “Payment” clause with a detailed schedule.
- Default and acceleration provisions; Art. 2041 reservation.
- Execution undertakings (consent to immediate writ upon default).
- Integration clause (the addendum governs in case of conflict).
Sign & notarize.
File Joint Motion: Ask the court to approve and render an amended judgment on compromise.
Secure the order/judgment and serve it. Non-compliance → move for execution.

B. For an extrajudicial compromise (no court approval yet)

Draft and notarize the Addendum.
If a case is pending, submit for judicial approval.
If no case, keep the Addendum with the original as the operative contract. For breach, sue for performance/damages, or invoke Art. 2041 to rescind and pursue the original claim.

9) Checklist of drafting points (payment schedule)

Definitions: “Installment,” “Due Date,” “Business Day,” “Event of Default.”
Schedule: Exact dates (e.g., “15th of each month from 15 October 2025 to 15 March 2026”).
Manner of payment: Bank account name/number; e-wallet; official receipt issuance.
Grace period: Short and definite (e.g., 5–10 days).
Default & Acceleration: Entire balance due upon missed payment after grace period.
Interest: If any, state rate per annum; specify simple/compounded; default interest from date of default until full payment.
Liquidated damages: Reasonable, not punitive.
Security: Post-dated checks; chattel or real estate mortgage; surety; joint and solidary debtor; dación en pago option if agreed.
Art. 2041 clause: Expressly reserve the right to enforce or rescind and revive the original claim.
Execution consent (for judicial compromises): Parties consent to immediate execution upon certification of default.
Notices: Where to send default notices; email allowed; when deemed received.
Integration & survival: Addendum amends and supersedes inconsistent terms; certain provisions survive payment (e.g., confidentiality, costs).
Costs & fees: Who bears filing fees and execution costs upon default.
Venue & governing law: Specify Philippine law and exclusive venue (e.g., Makati/Quezon City courts).

10) Model language (sample clauses)

Replacement Payment Clause

Amount; Schedule. The Settlement Amount of ₱[amount] shall be paid in [n] monthly installments of ₱[amount] each, due on the 15th day of each month, starting 15 October 2025 and ending 15 March 2026.

Manner of Payment. Payments shall be made by bank transfer to [Bank, Account Name & No.] or via [e-wallet details]. The Creditor shall issue an official receipt for each payment.

Grace Period; Default. A 10-day grace period applies after each Due Date. Failure to pay the full installment within the grace period constitutes an Event of Default.

Acceleration. Upon an Event of Default, the entire unpaid balance shall become immediately due and demandable without further notice.

Interest & Charges. The unpaid balance shall earn interest at 6% per annum from default until full payment, plus reasonable collection costs and attorney’s fees at [x]% of the amount due, if referred to counsel.

Security. As continuing security, the Debtor delivers post-dated checks and [describe mortgage/surety, if any] under separate instruments incorporated herein by reference.

Art. 2041 Reservation. In case of default, the Creditor may (i) enforce this Compromise/Amended Judgment by execution or appropriate action, or (ii) regard the Compromise as rescinded and insist upon the original demand under Civil Code Art. 2041.

Certification for Execution. For court-approved compromises, a sworn certification of default by the Creditor (with proof of non-payment) shall be sufficient basis for immediate execution subject to the court’s approval.

Integration Clause This Addendum forms part of and amends the Compromise Agreement dated [date]. In case of inconsistency, this Addendum prevails. All other terms remain in full force.

Notices Notices related to payment and default shall be sent to the addresses and emails below and shall be deemed received on the business day following transmission by registered mail or email with delivery/read confirmation.

Venue & Law This Compromise and Addendum shall be governed by Philippine law. The parties agree to the exclusive jurisdiction of the courts of [City].

11) Timelines and prescription

Enforcement of judgment (judicial compromise): action upon a judgment generally 10 years (Civil Code Art. 1144).
Enforcement of extrajudicial compromise: action upon a written contract, 10 years (Art. 1144).
Annulment for vitiated consent: generally 4 years (Art. 1391, in relation to Art. 2038).
Execution timelines follow the Rules of Court (file for writ within the enforceable period and renew as permitted).

12) Costs, taxes, and notarization

Notarial fees and documentary stamp tax (if applicable to certain secured instruments) may apply.
If you create or amend mortgages, suretyships, or assignments, observe registration and tax/fee requirements to ensure perfection and priority.

13) Common pitfalls (and how to avoid them)

Amending only by email: Use a formal, notarized addendum; informal emails can spur evidentiary fights.
No court approval for judicial compromises: If you want the court to enforce the new deadlines, bring the addendum back to the court.
Ambiguous dates: Use calendar dates, not “30 days from signing,” unless you define the start date precisely.
Over-penalizing default: Excessive penalties risk being struck down or reduced; keep them reasonable.
Agent without authority: Verify special authority to compromise under Art. 1878 (and to amend it).
Forgetting Art. 2041: Always reserve the enforce-or-rescind option in case the debtor defaults.
Silence on notices: Specify where and how notices are given, and when they are deemed received.

14) Practical roadmap (at a glance)

Identify: judicial vs. extrajudicial compromise.
Draft: clear payment schedule + default remedies + Art. 2041 reservation.
Formalize: sign and notarize; attach security if any.
Submit (if judicial): Joint Motion for approval; obtain Amended Judgment.
Monitor: calendar due dates; send reminders and default notices.
Enforce or rescind on default: execute (if judicial) or sue, or treat as rescinded and revive original claim under Art. 2041.

Final note

This is general information on Philippine law. Particular facts (e.g., prior defaults, the presence of collateral, the status of any case, or special regulations in your sector) can materially change the strategy and paperwork. For a live dispute or to tailor a bullet-proof addendum, consult counsel and align the draft with the exact court branch’s practice if judicial approval is sought.