Extinguishment of Obligations

Question 1

Under Article 1231, what are the modes of extinguishing obligations?

Answer 1

The modes of extinguishment under Article 1231 are:

1. ) Payment of performance
2. ) Loss of the thing due
3. ) Condonation or Remission
4. ) Compensation
5. ) Confusion or merger of rights
6. ) Novation

Question 2

How do you define payment?

Answer 2

Under Article 1232, payment is made by the deliver of money on monetary obligations, or the performance of the object of the obligation.

Question 3

When is payment deemed to be paid?

Answer 3

Under Article 1233, the general rule is: a payment is paid if the thing or service consisting the obligation is completely delivered or rendered.

But the exceptions to this rule are found on:
1.) Article 1234 - If the obligation was substantially performed in good faith, it will be treated as if there is a strict and partial fulfillment.

2. ) Articles 1235 - The creditor accepts the performance knowing the irregularities and without expressing any protest or objection. The obligation is deemed to be fully complied with.
3. ) Stipulated by both parties that partial payment is allowed.

Question 4

Who can make payment?

Answer 4

The persons who can make payment are:

1. ) The debtor
2. ) A third party with interest over the obligation
3. ) A third party without interest over the obligation

Question 5

Can a third person compel the creditor to accept payment?

Answer 5

Under Article 1236, the general rule is that the creditor cannot be compelled to accept the payment of a third party.

Exceptions to this rule are:

1. ) If there is stipulation between the debtor and the creditor allowing this
2. ) Payment is made by a third person with interest over the obligation

Question 6

What are the rights of a third person who made payment with the consent and knowledge of the debtor? What about a third person who made payment without the consent and knowledge of the debtor?

Answer 6

Under Article 1237, if a third party made payment with the consent and knowledge of the debtor, he is entitled to subrogation and full reimbursement of what he had paid.

But if the third party made payment without the consent and knowledge of the debtor, he is only entitled to beneficial reimbursement, that is, the third party can only ask from the debtor the amount which have been beneficial to the latter.

Question 7

What if the third person who paid the obligation has no intention of being reimbursed?

Answer 7

Under Article 1238, if received by the creditor, the payment is valid, and it will be deemed to be a donation. But such donation requires the consent of the debtor.

If the debtor consented to the payment, no reimbursement required.
If the debtor did not consent to the payment, the debtor may reimburse the third party.

Question 8

What are the effects of payment by an incapacitated debtor? What about payment to an incapacitated creditor?

Answer 8

The general rule in both cases are: such payments are not valid.

With regards to the incapacitated creditor, It is only valid when (exceptions):

1. ) The incapacitated creditor kept the thing delivered
2. ) Insofar as the payment has been beneficial to the incapacitated creditor

Question 9

What is the effect of a payment who was not authorized to receive such payment?

Answer 9

The general rule is, such payment is not valid.

It will only be valid if the creditor receives such payment.

Question 10

What are the five special forms of payment? Briefly discuss each.

Answer 10

The five special forms of payment are the following:

1. ) Dacio En Pago
2. ) Payment in Cession
3. ) Application of Payment
4. ) Tender of Payment / Consignation

Dacio in Pago or commonly known as Dation in Payment, involves the giving of a thing by the debtor to the creditor. Under this form of payment, there is a transfer of ownership of the thing from the debtor to the creditor.

In Payment in Cession, the debtor lends a property to the creditor. The latter obtains authority to sell the property. If the value is less, the debtor still owes the creditor. If the value is more, the excess amount shall be returned to the debtor.

In Application of Payment

And in Tender of Payment / Consignation, a debtor offers to pay his debt, but the creditor, without justifiable reasons, rejects such payment. So, the debtor deposits the property to the court, to free himself of the obligation.

Question 11

What are the requirements for there to have a valid consignation?

Answer 11

Requirements:

1. ) Valid tender of payment
2. ) Creditor refused to accept it without just cause
3. ) Pre-consignation notice to the creditor
4. ) Actual deposit in court/consignation
5. ) Post-consignation notice

Question 12

What is the effect of the loss or destruction of the object of the prestation in an obligation?

Answer 12

Generally, the obligation will be extinguished and the debtor will not be liable.

Exceptions to this rule are:

1. ) The law provides
2. ) There is stipulation between the two parties
3. ) The nature of the obligation requires the assumption of risk
4. ) If the obligation consists of delivery of an indeterminate / generic thing.
5. ) The debtor incurred delay before the object is lost or destroyed.
6. ) The loss or destruction of the object of the obligation involves the debtor’s fault
7. ) The debtor promised to deliver the same thing to two or more persons who do not have the same interest
8. ) The obligation to deliver a specific thing arose from a criminal action

Question 13

What is a condonation?

Answer 13

Under Article 1270, it is an act of liberality, by virtue of which, without receiving any equivalent, the creditor renounces the enforcement of the obligation, which is extinguished in its entirety or in that part or aspect of the same to which the remission refers.

Question 14

What are the requisites of condonation or remission?

Answer 14

1. ) It must be gratuitous
2. ) It must be accepted by the debtor
3. ) The obligation is demandable
4. ) The parties must have the capacity
5. ) The condonation must not be inofficious
6. ) The condonation must comply with the forms of donations, if it is an express condonation

Question 15

What is a confusion or merger of rights?

Answer 15

Under Article 1275, there is confusion or merger of rights when the characters of creditor and debtor are merged in the same person.

Question 16

What are the requisites of confusion or merger of rights?

Answer 16

1. ) The merger of the characters of creditor and debtor must be in the same person.
2. ) The merger is either in the principal debtor, or the principal creditor
3. ) The merger must be complete and definite

Question 17

What is a compensation?

Answer 17

Under Article 1278, a compensation takes place when two persons, in their own right, are creditors and debtors of each other.

Question 18

What are the six kinds of compensation? Describe each one of them briefly.

Answer 18

As to cause, we have legal and conventional compensation. The former simply states that the compensation takes effect by operation of law, and the latter takes effect by an agreement of both parties to extinguish their credits or compensate their mutual obligations.

As to effect, we have total and partial compensation. The former simply states that there is total compensation when both debts has the same amount, and if both debt do not have the same amount, the latter applies.

Question 19

With regards to the effect of assignment of rights of a creditor to a third person in compensation, what does Article 1285 says?

Answer 19

If the assignment of rights of the creditor to the third person is made with the knowledge and consent of the debtor, the general rule is that, there will be no compensation, but exception to the rule is, the debtor reserved his right of compensation.

If in the assignment rights of the creditor to the third person, the debtor did not consent or made an objection before the assignment, but not for subsequent ones, the general rule is, there can be compensation before the assignment is made.

If in the assignment is made without the knowledge and consent of the debtor, the general rule is that compensation is valid before and after the assignment, until the debtor has knowledge of the same.

Question 20

How is novation made?

Answer 20

Under Article 1293, novation consists of substituting the object of the obligation, substituting a new debtor to the obligation, or subrogating a third person in the rights of the creditor.