7. Ways of Extinguishing Obligations Other than Payment

Question 1

Obligations are extinguished by:

Answer 1

1. Payment/performance.
2. Loss of the thing due/sudden impossibility of performance.
3. Remission of the debt.
4. Confusion of creditor and debtor.
5. Novation.

Cases missed:
Parties mutual agreement.
Action to claim payment is time barred.
Subject-to-a-term obligations.
Obligations subject to a condition.

Question 2

Explain loss of the thing due:

Answer 2

(Obligations to give something).
If the thing that has to be delivered disappears, the obligation shall be extinguished and the debtor liberated.

Question 3

Is the debtor liberated if the thing lost is generic?

Answer 3

No, he can still perform by delivering a thing of the same kind and quality.

Question 4

Explain sudden impossibility:

Answer 4

(Obligations to do or refrain from doing something).
The obligation was validly constituted but impossibility arises after the constitution. The debtor is completely liberated if he does not act with fault and is not in state of delinquency.

Question 5

Requirements to really extinguish the obligation in the cases of loss of the thing/sudden impossibility; do both requirements have to be met?

Answer 5

Yes, both have to be met.
1. The fault is not due to the debtor’s fault.
2. It takes place before debtor’s delinquency.

Question 6

What is considered to be debtor’s fault?

Answer 6

If the thing due is lost while in his possession.

Question 7

Explain what remission is:

Answer 7

The renounce of the creditor to his right of credit which entails the extinction of the debtor’s obligation.

Question 8

What are the types of remission regarding its object?

Answer 8

1. Total: the whole obligation is extinguished.
2. Partial: Only one part. If the main obligation is remitted, the subordinated are also, but not the other way around.

Question 9

What are the types of remission regarding the way it’s done?

Answer 9

1. Express: the declaration of the will of the creditor renouncing his right of credit.
2. Implied or tacit: inferred from the creditor’s behaviour; when the creditor delivers the document that justifies the creditor to the debtor; when the document from which the debt results is in possession of the debtor.

Question 10

Formal requirements of express remission:

Answer 10

1. Adjustment to forms governing donations: follow the form required.
2. Immovable goods: public deed + acceptance may be given.
3. Movable goods: orally or in writing; if orally, it requires simultaneous delivery of the object given.

For 2. and 3. the remission cannot exceed the amount that the creditor can donate through testament.

In all cases: licit consideration + acceptance are necessary.

Question 11

In joint and several obligations, what remission can be carried out?

Answer 11

Remission on totality.

Question 12

In joint obligations, what remission can be carried out?

Answer 12

Remission can only be done partially.

Question 13

Explain confusion:

Answer 13

The concurrence in one person of the concept of creditor and debtor.

Question 14

When is an obligation extinguished by confusion?

Answer 14

From the moment the concepts of accipiens and solvens merge.

Question 15

How can confusion take place?

Answer 15

Inter vivos and mortis causa.

Question 16

How are obligations extinguished through confusion in the case of joint and several obligations?

Answer 16

Confusion made by any of the joint and several creditors or with any of the debtors of the same class shall extinguish the obligation.

Question 17

How are obligations extinguished through confusion in the case of joint obligations?

Answer 17

Not extinguished by confusion, but only in proportion corresponding to the creditor or debtor in whom both concepts occur.

Question 18

Explain compensation:

Answer 18

When two debts are extinguished because the persons obliged are reciprocally debtor and creditor of each other.

Question 19

Types of compensations regarding its effects:

Answer 19

1. Total: If the debts are of the same amount, they are both extinguished in full.
2. Partial: debts of different amounts; the bigger debts is extinguished in the amount concurrent with the smaller.

Question 20

Types of compensations regarding its source:

Answer 20

1. Judicial.
2. Voluntary: agreed by both parties.
3. Legal: it shall operate automatically. The effect is to extinguish both debts in the coinciding amount, even if the creditors and debtors were unaware of it.

Question 21

What are the requirements of extinguishment of obligations through legal compensation?

Answer 21

1. Reciprocity between the creditor and debtor, and both being in their own right.
2. Objects of both debts are fungible things of the same kind and quality and homogenous (consisting both of money).
3. They are liquid/payable, expired/due and undisputed.
4. The title from which the debts arise have to be different.

Question 22

What does novation mean?

Answer 22

Change.

Question 23

What are the types of novation?

Answer 23

Extinctive novation and modification.

Question 24

Explain what extinctive novation means:

Answer 24

There is a change of an obligation for a new one that extinguished the previous one. It can take place in case there is a change in the subject or in its object or in its main circumstances.

Question 25

Requirements for extinctive novation:

Answer 25

1. A valid obligation that is extinguished.
2. The conclusion of a new obligation different from the first one.
3. The parties have the capacity to dispose of the credit.
4. There is a clear will of the parties to extinguish the first obligation.

Question 26

What happens if the will of the parties to extinguish the first obligation through extinctive novation is not clear?

Answer 26

It shall be presumed that the parties only want to modify it, thus being modification.

Question 27

Explain modification:

Answer 27

When there is a change in the obligation that doesn’t procedure its extinction, only modifies the obligation.

Question 28

What are the types of modifications?

Answer 28

a) Objective: there are changes in the object or the main circumstance of the obligation (e.g. time, place).
b) Subjective: there are changes in the subjects of the obligation, either the person of the creditor or the debtor when the creditor does not consent change. (basically change of debtor or creditor).

Question 29

When does the assignment of credits exists?

Answer 29

When the creditor transfers to another person his right of credit. This person acquires the same position as the original, and has the same rights and guarantees than the assignor of the credit.

Question 30

Does the debtor have to accept the assignment of credits?

Answer 30

No, but him having knowledge of the assignment is convenient for the new creditor.

Question 31

In the assignment of credits, if the debtor is not notified of the assignment and pays his debt to the original creditor, what happens?

Answer 31

The creditor can no longer go against him asking for payment.

His claims can only be directed against the assignor of his credit, probably based on breach of contract or unjust enrichment.

Question 32

For the assignment to be possible, the credit has to be…

Answer 32

subject to transfer.

Question 33

Does the assignment of credits need special form?

Answer 33

No, except in the following cases:
a) Public Deed for the assignment of credits that come from an act recorded in a Public Deed.
b) Public Deed and registration is needed for mortgage backed claims.

Question 34

Who is responsible for the existence and lawfulness of the credit at the moment of assignment? Are there any exceptions?

Answer 34

The original creditor.

Yes:
In the case of onerous assignments, he is not responsible in the case that it was sold as a doubtful claim for the existence and lawfulness thereof.
In the case of gratuitous assignments, the assignor is not responsible even if the credit cannot be collected.

Question 35

Who is responsible for the public insolvency of the debtor previous to the assignment?

Answer 35

The original creditor/assignor.
If he acted in bad faith, knowing that the debtor is insolvent, he is liable for all the expenses and damages therefrom.

If he acts in good faith, he is not responsible.

Question 36

In the case of litigious credits (in assignment of credits), how can the debtor extinguish the credit?

Answer 36

By paying the buyer of the credit the price he paid for it + the court costs + the interests since the day of payment.

Question 37

Can the debtor oppose to the new creditor all the exceptions he could have opposed to the assignor? What about with regard to the exception of compensation?

Answer 37

Yes.

Regarding the exception of compensation:
a) If he accepted the assignment of credits, he can’t oppose to the assignee the compensation he could oppose to the assignor.
b) If he did not consent, he could oppose the compensation of the debts prior to the agreement.
c) If he did not know, he could oppose the compensation of all debts he had with the assignor until the knowledge of the assignment.

Question 38

When does the subrogation of credit (payment with subrogation) exist?

Answer 38

When a third party pays to the creditor and turns himself into the new creditor, acquiring the guarantees of the creditor.

Question 39

When is subrogation of credit presumed to happen?

Answer 39

a) If a creditor pays the preferred creditor.
b) When a non-interested third party pays with the agreement of the debtor.
c) When a third party interested in the fulfilment of the obligation pays.

Question 40

Who needs to agree in order to be a transfer of debts (change of debtor)?

Answer 40

The creditor. It can be done without the first debtor’s knowledge.