CH.4 SEC.1 GENERAL PROVISIONS + PAYMENT OR PERFORMANCE

Question 1

“Art. 1231. Obligations are extinguished:

(1) […];
(2) […];
(3) […];
(4) […];
(5) […];
(6) […].

Other causes of extinguishment of obligations, such as […], […], […], and […], are governed elsewhere in this Code. “

Answer 1

“Art. 1231. Obligations are extinguished:

(1) By payment or perfromance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights creditor and debtor;
(5) By compensation;
(6) By novation.

Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. “

Question 2

What is the first form of extinguishment of an obligation?

Answer 2

Payment or performance (Sec. 1 Ch. 4 Extinguishment of Obligations)

Question 3

Art. 1232. Payment means not only the delivery of money but also […].

Answer 3

Art. 1232. Payment means not only the delivery of money but also the performance, in any other manner, of an obligation.

Question 4

Art. 1232

Answer 4

“Key word: Definition of payment

Art. 1232. Payment means not only the delivery of money but also the performance, in any other manner, of an obligation.”

Question 5

What is the meaning of payment according to the civil code?

Answer 5

“Art. 1232 of the Civil Code provides that payment means:

(1) Delivery of money; or
(2) Performance of an obligation [the giving of a thing, the doing of an act, or not doing of an act].”

Question 6

Art. 1233. A debt shall not be understood to have been paid […], as the case may be.

Answer 6

Art. 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be.

Question 7

Art. 1233.

Answer 7

“Key word: When a debt shall be understood to have been paid

Art. 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be.”

Question 8

What are the requisites of the extinguishment of an obligation?

Answer 8

“The two requisites in extinguishing an obligation are:

(1) Integrity of the prestation - the prestation must be delivered or performed in full (Art. 1233); and
(2) Identity of the prestation - the very prestation due must be delivered or performed (Art. 1244).”

Question 9

Can an obligation be extinguished through partial performance?

Answer 9

It depends. As a general rule, a debt is not understood to have been paid unless the prestation of the obligation has been fully delivered or performed (Art. 1233). However, when the obligor has substantially complied with the prestation, he may recover as if there was strict and complete performance of the obligation, less damages suffered by the creditor (Art. 1234). Furthermore, when the obligee accepts, with full knowledge and no expression of protest, the obligation which is merely partially fulfilled, then the obligation is deemed fully complied with (Art. 1235).

Question 10

To whom does the burden of proof rest that the payment has been made?

Answer 10

“The burden of proving the extinguishment by payment devolves upon the debtor who claims payment.

When the existence of a debt is admitted by the debtor, or established by the evidence of the creditor, the burden of proving extinguishment by payment devolves upon the debtor who claims payment.

Only when the debtor introduces evidence that his obligation has been paid or extinguished does the burden shift to the creditor.”

Question 11

Art. 1234. If the obligation has been substantially performed in good faith, […], less […].

Answer 11

Art. 1234. If the obligation has been substantially performed in good faith, the oblilgor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee.

Question 12

While Art. 1233, the requirement that a prestation must be fully delivered in order to extinguish an obligation, is the general rule. There is an exception established in Art. 1234. What is that exception?

Answer 12

The exception is in case of substantial performance, an obligation is extinguished as if there had been strict and complete fulfillment. In this case, the obligor is entitled to recover whatever is due to him less damages suffered by the obligee (Art. 1234).

Question 13

What are the requisites for substantial performance?

Answer 13

“The requisites for substantial performance are:

(1) There must be substantial performance;
(2) The obligor must be in good faith.”

Question 14

When is there substantial performance in the performance of an obligation?

Answer 14

There is substantial performance when the important or essential part of the contract has been performed and only a small or minor part thereof has not been carried out. [De Leon, 2021 ed., p. 188]

Question 15

Art. 1235. When the obligee […], knowing its incompleteness or irregularity, and […], the obligation is deemed fully complied with.

Answer 15

Art. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with.

Question 16

Another exception to the general rule of complete performance is admitted by Art. 1235. This exception is aside from the doctrine of substantial performance. What is this second exception?

Answer 16

The exception provided by Art. 1235 is when the creditor accepts the performance, even if he knows that it was incomplete or irregular, and he accepts it without any protest or objection, an obligatio is deemed fully complied with. This is an exception to the general rule laid down in Art. 1233 that the prestation must be fully complied with in order to fulfill the obligation.

Question 17

What are the requisites for the application of Art. 1235– acceptance with knowledge of incompleteness?

Answer 17

“The requisites for the application of Art. 1235 are:

(1) The obligee knows that the performance is incomplete or irregular; and
(2) He accepts the performance without expressing any protest or objection. “

Question 18

What is the principle of estoppel?

Answer 18

Oxford languages dictionary: Estoppel is the principle which precludes a person from asserting something contrary to what is implied by a previous action or statement of that person or by a previous pertinent judicial determination.

Question 19

What are the options of the creditor in case of incomplete and/or irregular performance by the debtor?

Answer 19

“The creditor may:

(1) reject the delivery of the irregular or incomplete prestation (Art. 1233); or
(2) accept it with full knowledge and waive his right to demanding complete performance (Art. 1235).”

Question 20

“Art. 1236. The creditor is not bound to accept payment or performance by a third person […], unless […].

Whoever pays for another may demand from the debtor what he has paid, except that if […], he can recover only […].”

Answer 20

“Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor.”

Question 21

When is a creditor bound to accept the payment of a thrid person who has no interest in the fulfillment of the obligation?

Answer 21

The creditor is bound to accept the payment or performance by a third person who has no interest in the fulfillment of the obligation when there is a stipulation providing for such. (Art. 1236)

Question 22

What is the remedy of the third party who has made payment in behalf of a debtor?

Answer 22

“The third party may:

(1) demand from the debtor what he has paid (provided he paid with the consent of the debtor); or
(2) if payment was made without consent of the debtor, recovery only insofar as the payment had been beneficial to the debtor. (the remaining amount is to be recovered from the creditor). (Art. 1236)”

Question 23

Who are the persons whom the creditor is bound to accept payment or performance?

Answer 23

“The creditor is bound to accept payment or performance from the following:

(1) the debtor;
(2) Any person who has an interest in the obligation (like a guarantor); or
(3) A third person who has no interest in the obligation when there is stipulation that he can make payment (Art. 1236 par. 1)”

Question 24

Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, […], such as those arising from a mortgage, guaranty, or penalty.

Answer 24

Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty.

Question 25

What is the difference between subrogation and reimubrsement?

Answer 25

“In subrogation, the effect is merely a change in creditor. The person who paid the amount in behalf of the debtor is entitled to exercise all the rights of the creditor pertaining to the obligation. The payor may exercise rights against the debtor or against third persons, be they guarantors or possesor of mortgages. The right of the creditor is, in a sense, transmitted to the payor.

In reimbursement, there is no transfer of rights. The payor is only entitled to be repaid for the amount which the debtor has benefited without the right to the guarantees and securities of the obligation.

Lastly, in subrogation, there is no real extinction of the obligation, but only a change of creditor.”

Question 26

Art. 1238. Payment made by a third person who does not intend to be reimbursed by […] is deemed […], which requires […]. But the payment is in any case valid as […].

Answer 26

Art. 1238. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which requires the debtor’s consent. But the payment is in any case valid as to the creditor who has accepted it.

Question 27

What is the legal effect when a third person makes a payment in behalf of a debtor but does not seek reimbursement from the latter?

Answer 27

Payment by a third person who does not seek reimbursement shall be deemed as a donation. However, in order for this donation to be valid, it must require the consent of the debtor. The payment however is binding between the payor and the creditor even if the debtor does not consent. This extinguishes the obligation.

Question 28

What is Art. 1238, and what are the requisites to its application?

Answer 28

“Art. 1238: Keyword: payment made by third person who does not seek reimbursement is deemed a donation (needs debtor’s consent) but always extinguishes the obligation (if paid in full).

The requisites in order for payment to be deemed a donation are:

(1) That a payment was made by a third person on behalf of a debtor;
(2) That the third person does not seek reimbursement for the payment;
(3) That the debtor consents to the payment made.

The requisites in order for the obligation to be extinguished;

(1) That a payment in full was made by a third person on behalf of a debtor;
(2) That the payor does not seek reimbursement for his payment.”

Question 29

What are the remedies of the payor in case the debtor does not consent to his generosity of paying the creditor without reimbursement?

Answer 29

The payor may recover from the debtor the amount paid. He cannot recover from the creditor because the obligation is already extinguished (if the entire obligation was paid). Art. 1236 and 1237 is applied in this case – payment made by third person against the will of the debtor entitles the payor to reimbursement insofar as the debtor benefited from the payment.

Question 30

Art. 1239. In obligations to give, payment made by […] shall not be valid, without prejudice to the provisions of Article 1247 under the Title on “Natural Obligations.”

Answer 30

Art. 1239. In obligations to give, payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid, without prejudice to the provisions of Article 1247 under the Title on “Natural Obligations.”

Question 31

When shall a payment not be valid, in obligations to give?

Answer 31

“According to Article 1239 of the Civil Code, in obligations to give, the payment shall not be valid when the payor:

(1) does not have the free disposal of the thing due (e.g. he is not the owner of the thing); or
(2) capacity to alienate the thing (e.g. he is a minor and cannot enter into contracts).”

Question 32

What is free disposal of the thing due; and capacity to alienate?

Answer 32

“Free disposal of the thing due means that the thing to be delivered must not be subject to any claim or lien or encumbrance (e.g. mortgage, pledge) of a third person;

Capacity to alienate means that the person is not incapacitated to enter into contracts (Arts. 1327, 1329) and for that matter, to make a disposition of the thing due. “

Question 33

Art. 1240. Payment shall be made to the person […] or […], or […].

Answer 33

Art. 1240. Payment shall be made to the person in whose favor the obligation has been constituted or his successor in interest, or any person authorized to receive it.

Question 34

“Art. 1241. Payment to a person who is […] shall be valid if […], or insofar as […].

Payment made to a third person shall also be valid insofar as […]. Such benefit to the creditor need not be proved in the following cases:

(1) […];
(2) […];
(3) […].”

Answer 34

“Art. 1241. Payment to a person who is incapacitated to administer his property shall be valid if he kept the thing delivered, or insofar as the payment has been beneficial to him.

Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. Such benefit to the creditor need not be proved in the following cases:

(1) If after the payment, the third person acquires the creditor’s rights;
(2) If the creditor ratifies the payment to the third person;
(3) If by the creditor’s conduct, the debtor has been led to believe that the third person had authority to receive the payment.”

Question 35

Art. 1242. Payment made in […] to any person […] shall release the debtor.

Answer 35

Art. 1242. Payment made in ngood faith to any person in possession of the credit shall release the debtor.

Question 36

Art. 1243. Payment made to the creditor by the debtor after […] shall not be valid.

Answer 36

Art. 1243. Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid.

Question 37

“Art. 1244. The debtor of a thing cannot compel the creditor to […], although the latter may be of the same value as, or more valuable than that which is due.

In obligations to do or not to do, an act or forbearance cannot […].”

Answer 37

“Art. 1244. The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due.

In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee’s will.”

Question 38

Art. 1245. Dation in payment, […], shall be governed by the […].

Answer 38

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales.

Question 39

Art. 1246. When the obligation consists in the delivery of an […], whose […] have not been stated, the creditor cannot demand […]. Neither can the debtor deliver […]. The purpose of the obigation and other circumstances shall be taken into consideration.

Answer 39

Art. 1246. When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obigation and other circumstances shall be taken into consideration.

Question 40

What is the principle laid down in Art. 1246?

Answer 40

The principle laid down in Art. 1246 is the Rule of Medium Quality.

Question 41

Art. 1247. Unless it is otherwise stipulated, the extrajudicial expenses […]. With regard to judicial costs, the […] shall govern.

Answer 41

Art. 1247. Unless it is otherwise stipulated, the extrajudicial expenses required by the payment shall be for the account of the debtor. With regard to judicial costs, the Rules of Court shall govern.

Question 42

“Art. 1248. Unless there is an express stipulation ot that effect, the creditor cannot be […]. Neither may the debtor […].

However, when the debt is in […], the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter.”

Answer 42

“Art. 1248. Unless there is an express stipulation ot that effect, the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Neither mamy the debtor be required to make partial payments.

However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter.”

Question 43

When is partial performance allowed?

Answer 43

“Partial performance is allowed when:

(1) there is a stipulation by the parties allowing partial performance (Art. 1248 par.1);
(2) The debt is in part liquidated and unliquidated (Art. 1248 par.2);
(3) When the prestations are subjected to different terms and conditions (in case of conjunctive obligations where there are different terms or period each prestation);
(4) When the obligation comprehends several distinct prestations (De Leon p. 205 2021ed.)”

Question 44

“Art. 1249. The payment of debts in money shall be made in the […], and if it is not possible to deliver such currency, then it is the currency which is […].

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment […], or whe through […].

In the meantime, the action derived from the original obligation shall be held in abeyance.”

Answer 44

“Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then it is the currency which is legal tender in the Philippines.

The deliver yof promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or whe through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance.”

Question 45

Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, […], unless there is […].

Answer 45

Art. 1250. In case an extraordinary inflation or deflation of the currency is stipulated should supervene, the value of hte currency at the time of the estalishment of hte obligation shall be the basis of payment, unless there is an agreement to the contrary.

Question 46

“Art. 1251. Payment shall be made in […].

There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be made […].

In any other case the place of payment shall be the […].

If the debtor changes his domicile in bad faith or after he has incurred in delay, the […].

These provisions are without prejudice to venue under the Rules of Court.”

Answer 46

“Art. 1251. Payment shall be made in the place designated in the obligation.

There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be made wherever the thing might be at the moment the obligation was constituted.

In any other case the place of payment shall be the domicile of the debtor.

If the debtor changes his domicile in bad faith or after he has incurred in delay, the additional expenses shall be borne by him.

These provisions are without prejudice to venue under the Rules of Court.”

Question 47

“Art. 1252. He who has various debts of the same kind in favor of one and the same creditor, may […]. Unless the parties so […], or when the applicaiton of payment is […], application shall not be made as to debts which are not yet due.

If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former […]. “

Answer 47

“Art. 1252. He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the applicaiton of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due.

If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract. “

Question 48

What are the requisites of application of payments?

Answer 48

“The requisites for application of payments are:

(1) There must be one (1) debtor and one (1) creditor;
(2) There must be two (2) or more debts;
(3) The debts must be of the same kind;
(4) The debts to which payment made by the debtor has been applied must be due; and
(5) The payment made must not be sufficient to cover all the debts.”

Question 49

Art. 1253. If the debt produces interest, […].

Answer 49

Art. 1253. If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.

Question 50

“Art. 1254. When the payment cannot be applied in accordance with the preceding rules, or if application cannot be inferred from other cirucmstances, […].

If the debts due are of the same nature and burden, […]. “

Answer 50

“Art. 1254. When the payment cannot be applied in accordance with the preceding rules, or if application cannot be inferred from other cirucmstances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfided.

If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately. “

Question 51

Art. 1255. The debtor may […] to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from […]. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws.

Answer 51

Art. 1255. The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor fromm responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws.

Question 52

“Art. 1256. If the creditor to whom tender of payment has been made […], the debtor shall be released from responsibility by the consignation of the thing or sum due.

Consignation alone shall produce the same effect in the following cases:

(1) […];
(2) […];
(3) […];
(4) […];
(5) […]. “

Answer 52

“Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.

Consignation alone shall produce the same effect in the following cases:

(1) When the creditor is absent or unknown, or does not appear at the place of the payment;
(2) When he is incapacitated to receive the payment at the time it is due;
(3) When, without just cause, he refuses to give a receipt;
(4) When two or more persons claim the same right to collect;
(5) When the title of the obligation has been lost. “

Question 53

“Art. 1257. In order that the consignation of the thing due may release the obligor, it must first […].

The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.”

Answer 53

“Art. 1257. In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation.

The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.”

Question 54

“Art. 1258. Consignation shall be made by […], before whom the […], in a proper case, and the […] in other cases.

The consignation having been made, the interested parties shall also be notified thereof.”

Answer 54

“Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.

The consignation having been made, the interested parties shall also be notified thereof.”

Question 55

How is consignation made?

Answer 55

Under Art. 1258, consignation shall be made by depositing the things due at the disposal of judicial authority.

Question 56

Art. 1259. The expenses of consignation, when properly made, shall […].

Answer 56

Art. 1259. The expenses of consignation, when properly made, shall be charged against the creditor.

Question 57

Who shall bear the expenses of consignation?

Answer 57

When the consignation is properly made, the expenses of consignation shall be charged to the creditor (Art. 1259)

Question 58

“Art. 1260. Once the consignation has been duly made, the debtor may […].

Before the creditor has accepted the consigantion, or before a judicial declaration that the consigantion has been properly made, the debtor may […], allowing the obligation to remain in force.”

Answer 58

“Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation.

Before the creditor has accepted the consigantion, or before a judicial declaration that the consigantion has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force.”

Question 59

Art. 1261. If, the consignation having been made, the creditor should authorize the debtor to withdraw the same, he shall […]. The co-debtors, guarantors and sureties shall be released.

Answer 59

Art. 1261. If, the consignation having been made, the creditor should authorize the debtor to withdraw the same, he shall lose every preference which he may have over the thing. The co-debtors, guarantors and sureties shall be released.

Question 60

What is the definition of payment?

Answer 60

Under the Art. 1232 of the Civil Code, payment means not only the delivery of momney but also the performance, in any other manner, of an obligation (ie. the giving of a thing, the doing of an act, or the not doing of an act).

Question 61

What is dation in payment?

Answer 61

Dation in payment (or adjudication, or dacion en pago) is the conveyance of ownership of a thing as an acepted equivalent of performance. It is a special form of payment because it is not the ordinary way of extinguishing an obligation. In dation in payment, an existing debt in money is satisfied, not by money (Art. 1244) but by the alienation of property. [De Leon p. 201, 2021ed.]

Question 62

What is the definition of application of payment?

Answer 62

Application of payment is the designation of the debt to which should be applied the payment made by a debtor who has various debts of the same kind in favor of one (1) and the same creditor. (par.1, Art. 1252).

Question 63

What is the definition of payment by cession?

Answer 63

Payment by cession is another form of payment. It is the assignment of all the properties of the debtor for the benefit of his creditors in order that the latter may sell the same and apply the proceeds thereof to the satisfation of their credits. [De Leon p. 215, 2021ed]

Question 64

What is the definition of consignation?

Answer 64

Consignation is the act of depositing the thing or amount due with the proper court when the creditor does not desire or cannot receive it, after complying with the formalities required by law. [De Leon p.218, 2021ed.]