CH.4 SEC.5 COMPENSATION Flashcards
Art. 1278. Compensation shall take place when […].
Art. 1278. Compensation shall take place when two person, in their own right, are creditors and debtors of each other.
It involves the simultaneous balancing of two obligations in order to extinguish them to the extent in which the amount of one is covered by that of the other.
Compensation.
What is the object/ purpose of compensation? How is compensation achieved?
The object of compensation is the prevention of unnecessary litigations and payments. This is accomplished through the mutual extinguishment by operation of law of concurring debts of two (2) persons.
What is simplified payment?
Simplified payment is the other term used to refer to compensation because compensation provides a more convenient and less expensive effectuation of payments between two (2) persons who are reciprocally creditors and debtors.
What are the kinds of compensation as to effect or extent?
“The two kinds of compensation as to effect or extent are: (1) Total; and (2) Partial.
Total - when both obligations are of the same amount and are entirely extinguished;
Partial - when the two (2) obligations are of different ammounts and a balance remains. The extinctive effect of compensation will be partial only as regards the larger debt.”
What are the kinds of compensation as to cause or origin?
“The kinds of compensation as to cause or origin are: (1) Legal; (2) Voluntary; (3) Judicial; (4) Facultative.
Legal - when it take place ipso jure even without the knowledge of the parties;
Voluntary - when it takes place by agreement of the parties;
Judicial - when it takes place by order from a court in a litigation. (it is a form of legal or voluntary compensation declared by the courts by virtue of an action filed by one of the parties against the other party who refuses to admit it)
Facultative - when it can be set up only by one of the parties. “
“Art. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be […], and that he be at the same time a […];
(2) That both debts consist in a […], or if the things due are consumable, they be of the […], and also of the […];
(3) That the two debts be […];
(4) That they be […]
(5) That over neither of them there be any […], commenced by third persons and communicated in due time to the debtor.”
“Art. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.”
Art. 1280. Notwithstanding the provisions of the preceding article, the guarantor may […].
Art. 1280. Notwithstanding the provisions of the preceding article, the guarantor may set up compensation as regards what the creditor may owe the principal debtor.
Art. 1281. Compensation may be […] or […]. When the two debts are of the same amount, there is […].
Art. 1281. Compensation may be total or partial. When the two debts are of the same amount, there is a total compensation.
Art. 1282. The parties may agree upon the […].
Art. 1282. The parties may agree upon the compensation of debts which are not yet due.
What is voluntary compensation?
Voluntary or conventional compensation is the compensation which takes place by agreement of the parties even when all the requisites of legal compensation are not present. This is an exception to the general rule that only debts which are due and demandable can be compensated.
Art. 1283. If one of the parties to a suit over an obligation has a claim for damages against the other, the former may […].
Art. 1283. If one of the parties to a suit over an obligation has a claim for damages against the other, the former may set it off by proving his right to said damages and the amount thereof.
Art. 1284. When one or both debts are rescissible or voidable, they may be […].
Art. 1284. When one or both debts are rescissible or voidable, they may be compensated against each other before they are judicially rescinded or avoided.
“Art. 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person, cannot […], unless the assignor was […].
If the creditor communicated the cession to him but […], the latter may set up the compensation of debts previous to the cession, but not of […].
If the assignment is made without the knowledge of the debtor, he may set up the […] and also later ones until […].”
“Art. 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of a third person, cannot set up against the assignee the compensation which would pertain to him against the assignor, unless the assignor was notified by the debtor at the time he gave his consent, that he reserved his right to the compensation.
If the creditor communicated the cession to him but the debtor did not consent thereto, the latter may set up the compensation of debts previous to the cession, but not of subsequent ones.
If the assignment is made without the knowledge of the debtor, he may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment.”
Art. 1286. Compensation takes place by […], even though the debts may be payable at […], but there shall be an indemnity for […].
Art. 1286. Compensation takes place by operation of law, even though the debts may be payable at different places, but there shall be an indemnity for expenses of exchange or transportation to the place of payment.
