Extinguishment of Obligation Flashcards
(Art. 1231) Name the six factors the extinguish obligation. (PLCCCN)
- Payment or performance
- Loss of the thing due
- Condonation or remission of the debt
- Confusion or merger of the right of creditor and debtor
- compensation
- novation
Other (annulment, rescission, fulfillment of a resolutory condition, and prescription) are governed elsewhere in CC
Apart from the factors given in 1231, name other causes that extinguish obligation
death of a party (personal obligation)
resolutory term
change of civil status
compromises
mutual dissent
impossibility of fulfillment
fortuitous event
What is Art. 1232?
Payment means not only the delivery of money but also the performance, in any other manner, of an obligation.
Mode of extinguishing obligations which consists of delivery of money or performance of an obligation
PAYMENT
What is 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.
Requisites for a valid payment
Identity of prestation-thing or service contemplated must be paid
Integrity-fulfillment must be complete
Unconditional and legally enforceable obligation for the payment of money
INDEBTEDNESS
What is Art. 1234?
If the obligation has been substantially performed in good faith, the obligor may recover as though there has been strict and complete fulfillment, less damages suffered
by the obligee.
When is Art. 1234 applicable?
When obligor admits breaching the contract after honestly and faithfully performing the obligation except some aspect that cause no serious harm to the obliges.
What is 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.
Reason of Art. 1235
Presence of WAIVER and ESTOPPEL
= qualified acceptance
What is 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.
Exception to 1236 par 1
- If there is a stipulation allowing the acceptance of the payment by the third person
- The third person has an interest in the fulfillment of the obligation
(Art 1236) Condition for the payment by a third person
- With the knowledge and consent of the debtor = REIMBURSEMENT and SUBROGATION (guaranty, penalty clause, or mortgage)
- Without the debtor’s knowledge or against his will = BENEFICIAL REIMBURSEMENT
What is 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.
Define subrogation.
Enabling the third person to exercise all the rights and actions that could have been exercised by the creditor.
Differentiate subrogation from reimbursement.
- mortgage, guaranty, or pledge
- creditor’s right
- personal action recovery
What is 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.
Recite 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 1427 under the Title on “Natural
Obligations.”
Exp: 1427 = no right to recover the payment from the obligee who has spent or consumed it in good faith
Recite 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
Recite Art. 1241
Payment to a person who is incapacitated to
administer his property shall be valid if he has 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.
State Art. 1242.
Payment made in good faith to any person in
possession of the credit shall release the debtor.
Requisites of Art. 1242.
- Payment by payor must be in good faith.
- Payee must be in possession of the credit
What is 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.
Under Art. 1243, name the types of judicial order.
- Attachment
- Injunction
- Garnishment
Debtor’s creditor is subjected
to the payment of his own debt to another
Garnishment
Define interpleader
Action in which a certain person
in possession of certain property wants claimants to litigate
among themselves for the same
Judicial process by which a person is ordered to refrain from doing something
INJUNCTION
*Preliminary injunction - prohibition is during the pendency of certain proceedings
What is 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.
When does not Art. 1244 apply?
- In case of facultative obligation
- In another agreement resulting in dation in payment or novation
- waiver by the creditor
What is Art. 1245 about?
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.
Mode of extinguishing an obligation whereby
the debtor alienates in favor of the creditor, property for the
satisfaction of monetary debt.
DATION IN PAYMENT
DATIO IN SOLUTUM
ADJUDICACION EN PAGO
Difference between sales and dation in payment
- pre-existing credit
- obligation
- consideration in pov of seller/debtor and buyer/creditor
- freedom in price
- giving of price/object
Recite 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 obligation and other circumstances shall be taken into consideration.
What is 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.
What is Art. 1248?
Unless there is an express stipulation to that
effect, the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Neither may 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.
Name the exceptions in Art. 1248
- there is a stipulation
- different prestations are subject to different conditions/terms
- debt is in part liquidated and unliquidated
- joint debtor pays his share or the creditor demands the same
- solidary debtor pays only the part demandable
- in case of compensation, one debt is larger than the other
- work is to be done by parts
State 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 in the currency which is legal tender in the Philippines.
The delivery of 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 when 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.
State 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 in the currency which is legal tender in the Philippines.
The delivery of 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 when 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.
In which the debtor may compel the creditor to accept in payment of debt
LEGAL TENDER
True of False. Check is not a legal tender
TRUE. Check is not a legal tender
Recite Art. 1250.
In case an extraordinary inflation or deflation
of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary
Sharp sudden increase of money or credit or both without a corresponding increase in business transaction
INFLATION
Define deflation
decrease in the cost of an economy’s goods and services
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.
What is 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 application 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.
(Art. 1252) Four special forms of payment
- application/imputation of payment
- dation in payment
- assignment in favor of creditors
- tender of payment and consignation
(Art. 1252) Requisites for application of payment
- there must be two or more debts
- debts must be of the same kind
- debts are owed by the same debtor in favor of the same creditor
- payment is not enough to extinguish all debts
(Art. 1252) True or False. The debtor has the right to select which of his debts he will pay.
TRUE, however, is not absolute.
(exp) if there is a stipulation and debtor cannot pay part of the principal ahead of the interest.
(Art. 1252) Can the application of payment be revoked?
NO unless both parties agrees
What is 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.
What interest is supposed to be paid?
- interest by way of compensation
- interest by way of damages due to default
Recite Art. 1254.
When payment cannot be applied in accordance with the preceding rules, or if application cannot be inferred from other circumstances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied.
If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately.
Name some examples of a burdensome (onerous) debts
- older ones in case of running accounts
- interest-bearing debts even if the non-interest bearing debt is older
- Of two interest-bearing debts, that which charges the higher interest
- Debts secured by mortgage or by pledge
- Debts with a penalty clause
- Advances for subsistence
- debt where the debtor is in mora
- exclusive debt
What is 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 from 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.
(Art. 1255) Process by which a debtor transfers all the properties not subject to execution in favor of his creditors so that
the latter may sell them, and thus apply the proceeds to their credits
CESSION OR ASSIGNEMENT
(Art. 1255) Kinds of assignment.
- Legal - governed by Insolvency Law
- Voluntary - Art. 1255
(Art. 1255) Requisites of voluntary assignment
- more than one debt
- more than one creditor
- complete or partial insolvency
- abandonment of debtor’s property
- acceptance or consent of the creditors
Difference between dacion en pago and cession
- all properties
- number of creditors
- creditor’s consent
- solvency/insolvency
- transfer of ownership
- novation
The act of offering the creditor what is due him together with a demand that the creditor accept the same.
TENDER OF PAYMENT
The act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment
CONSIGNATION
What is Art. 1256?
If the creditor to whom tender of payment has
been made refuses without just cause to 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 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.
(Art. 1256) Special Requisites of consignation
- there is a valid debt debt due
- valid prior tender, unless excused
- previous notice of the consignation has
been given to persons interested in the performance
of the obligation - amount or thing due was placed at the
disposal of the court - After the consignation had been made the
persons interested had been notified thereof
(Art. 1256) Exception to requirement for tender of payment (AIR-TT)
- creditor is absent or unknown or does not
appear at place of payment - he is incapacitated to receive payment
- he refuses to give receipt, without just
cause - two or more persons claim same right to
collect - title of the obligation has been lost
(Art. 1256) True or False. Tender of payment without consignation does not extinguish the debt; consignation must follow.
TRUE
Recite 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.
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.
Condition for a properly made consignation
- Thing due must be deposited with the proper judicial authorities
- Proof for tender made and notification of debtor about the made consignation
What is Art. 1259?
The expenses of consignation, when properly
made, shall be charged against the creditor.
What is 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 consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force.
Effects of properly made consignation.
- cancellation of obligation
- suspension of running interest
When can the consignation be withdrawn?
[right] before the creditor accepts the consignation
[right] before there is a judicial declaration
[privilege] creditor authorizes debtor to withdraw
(Art. 1260) True or False. Immediate acceptance of creditor of consignation prevents the right of the debtor to withdraw
TRUE
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.
(Art. 1261) What are the effects of withdrawal by debtor after consignation has been made?
- obligation remains
- creditor loses any preference (priority) over the
thing - co-debtors, guarantors, and sureties are RELEASED
Impossibility of performance.
LOSS
When is there a loss?
- object perishes
- it goes out of commerce
- it disappears (existence unknown or cannot be recovered)
When is there a loss?
- object perishes
- it goes out of commerce
- it disappears (existence unknown or cannot be recovered)
Types of impossibility of performance.
- physical impossibility
- legal impossibility
direct - when prohibited by law
indirect - when required to enter a military draft - moral impossibility
Art. 1262
An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk.
Two kinds of obligations “to give”
- to give a generic thing (not extinguish by fortuitous event)
- to give a specific thing
General rule in the effect of loss on an obligation to deliver a specific thing
Obligation is extinguished.
(con) loss must be after the obligation has been incurred.
(exp)
1. debtor is at fault
2. debtor is made liable for a fortuitous event (provision of law, contractual stipulation, nature of obligation requires risk
When the law requires liability even in the case of a fortuitous event
- when the debtor is in default
- debtor has promised to deliver the same thing
to two or more persons - obligation arises from a crime
- borrower (of an object) has lent the thing to another
who is not a member of his own household
5.thing loaned has been delivered with appraisal
of the value - payee in solutio indebiti is in bad faith
Art. 1263
In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation
Exceptions of Art. 1263
- generic thing is delimited
- generic thing has already been segregated or set
aside
Art. 1264
The courts shall determine whether, under the
circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation.
Art. 1265
Whenever the thing is lost in the possession
of the debtor, it shall be presumed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of Article 1165. This presumption does not apply in case of earthquake, flood, storm, or other natural calamity.
Exception of Art. 1265
in the case of a natural calamity
Art. 1266
The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.
Art. 1267
When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.
Art. 1268
When the debt of a thing certain and determinate
proceeds from a criminal offense, the debtor shall not
be exempted from the payment of its price, whatever may be the cause for the loss, unless the thing having been offered by him to the person who should receive it, the latter refused without justification to accept it.
Exception in Art. 1268
creditor id in more accipiendi
Art. 1269
The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by
reason of the loss.
Art. 1270
Condonation or remission is essentially gratuitous,
and requires the acceptance by the obligor. It may be
made expressly or impliedly.
One and the other kinds shall be subject to the rules
which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation.
The gratuitous abandonment by the creditor of his
right
CONDONATION OR REMISSION
Essential requisites for Remission
- there must be an agreement
- parties must be capacitated and must consent
- there must be subject matter
- cause or consideration must be liberality
- obligation remitted must have been demandable at the time of remission
- remission must not be inofficious
- Formalities of a donation are required in the case of an express remission
- Waivers or remissions are not to be presumed generally
Classes of remission
effect or extent
1. total
2. partial
date of effectivity
1. inter vivos (during life)
2. mortis causa (after death)
form
1. implied or tacit
2. express or formal
Effect if remission is not accepted by the debtor
Debt may be said to have been extinguished
by PRESCRIPTION
Art. 1271
The delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor, implies the renunciation of the action which the former had
against the latter.
If in order to nullify this waiver it should be claimed to
be inofficious, the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt.
Art . 1272
Whenever the private document in which the debt appears is found in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved.
Art. 1273
The renunciation of the principal debt shall extinguish the accessory obligation; but the waiver of the latter shall leave the former in force.
Art. 1274
It is presumed that the accessory obligation
of pledge has been remitted when the thing pledged, after
its delivery to the creditor, is found in the possession of the
debtor, or of a third person who owns the thing.
Art. 1275
Obligation is extinguished from the time the characters of the creditor and debtor merged
(Art. 1275) Meeting in one person the qualities of creditor and debtor with respect to the same obligation
MERGER or CONFUSION
(Art. 1275) Requisites for a valid merger
- Principal debtor and creditor
- Must be clear and definite
- Obligation involved must be the same or identical
(Art. 1275) True or False. Real rights (usufruct) may not be extinguished by merger when the naked owner becomes usufructuary
False. Real rights will be extinguished
(Art. 1275) True or False. If the reason for confusion ceases, obligation is revived
True
Art. 1276
Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. Confusion
which takes place in the person of any of the latter does not extinguish the obligation.
“Accessory follows the principal.”
Art. 1277
Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur
Art. 1278
Compensation shall take place when two persons,
in their own right, are creditors and debtors of each other.
Sort of balancing (cum ponder) between two obligations; extinguishment in the concurrent amount of the obligations of those persons who are reciprocally debtors
and creditors of each other.
COMPENSATION
(Art. 1278) Differentiate payment from compensation
payment must be complete and indivisible as a rule, in compensation, partial extinguishment is always permitted.
payment involves action or delivery, true compensation
(legal compensation) takes place by operation of law
(Art. 1278) Difference between confusion and compensation
Confusion - one person in whom the qualities of creditor and debtor are merged; only one obligation
Compensation - two person are involved who are mutually creditor and debtor of each other; two obligations
(Art. 1278) Compensation distinguished from counterclaim or set-off
Set-off or counterclaim: pleaded to be effectual; sort of judicial compensation provided ROC is observed
Compensation: operation of law and extinguished reciprocally the two debts
Art. 1278 Kinds of compensation according to effect or extent
Total - if both obligations are completely extinguished
Partial - when a balance remains
Art. 1278 Kinds of compensation according to origin or source
Legal - takes place by operation of law, and need not be pleaded
Voluntary or conventional - due to the agreement of the parties
Judicial (“set-off”) - must be pleaded; it can be made effective only by an order from the court
Facultative - one of the parties has the choice of
claiming the compensation or of opposing it
Art. 1278 when a compensation cannot exist
debtor of a corporation cannot compensate his debt with his share of stock in the corporation,
since the corporation is not considered his debtor. different had
the corporation really been his debtor as when he had paid it a
sum greater than the value of his shares.
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.
FOR LEGAL COMPENSATION
Affirmative: 1 2 3 4
Negative: 5
(Art. 1279) Requisites for first affirmative
- there must be a relationship of debtor and creditor
- there must be two debts and two credits
- they must generally be bound as principals
(Art. 1279) Requisites for second affirmative
“consumable” must be taken to mean “fungible”
(susceptible of substitution)
(Art. 1279) Requisites for third affirmative
“Due” means that the period has arrived, or the condition
has been fulfilled. “demandable” may
refer to the fact that neither of the debts has prescribed, or that the obligation is not invalid or illegal.
(Art. 1279) Requisites for fourth affirmative
Demandable same to the third
“Liquidated” debts are those where the exact amount has already been determined, though not necessarily in figures since capacity of being arrived at by simple arithmetical
processes would be enough
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 total or partial. When then two debts are of the same amount, there is a total compensation
