Extinguishment of Obligations

Question 1

According to Article 1231 of the Civil Code of the Philippines, what are the ways in which obligations may be extinguished?

Answer 1

Obligations may be extinguished by:

1. Payment or performance,
2. Loss of the thing due,
3. Condonation or remission of the debt,
4. Confusion or merger of the rights of creditor and debtor,
5. Compensation,
6. Novation.

Other causes of extinguishment include annulment, rescission, fulfillment of a resolutory condition, and prescription.

Question 2

What are the differences between dation in payment and payment by cession?

Answer 2

Dation in payment involves a single creditor; cession involves multiple creditors.

Dation does not presuppose debtor insolvency; cession assumes partial insolvency.

In dation, the creditor becomes the owner; in cession, creditors can only sell the property and apply the proceeds pro rata.

Question 3

What are the elements of payment as a mode of extinguishing obligations?

Answer 3

Who may pay and to whom payment may be made

The thing or object of payment

The cause of the payment

The mode or form of payment

The time and place of payment

Imputation of expenses

Special modifications and effects

Question 4

What are the requisites for substantial performance under Article 1234?

Answer 4

There must be substantial performance (depending on the circumstances of each case).

The obligor must be acting in good faith to perform the obligation.

Question 5

What are the voluntary modes of extinguishing obligations according to Castan?

Answer 5

Performance:
1. Payment
2. Consignation

Substitution:
1. Dacion en pago (conveyance for payment)
2. Novation

Release Agreement:
Mutual or unilateral waiver, remission, resolutory condition, and extinctive period

Question 6

What happens if the debtor pays a third person in possession of the credit?

Answer 6

Payment made in good faith to a person in possession of the credit releases the debtor, even if that person is not the rightful creditor, provided the payer believed they were acting correctly.

Question 7

What is dation in payment (dacion en pago) and its requisites?

Answer 7

Dation in payment is the conveyance of ownership of a thing by the debtor to the creditor as an accepted equivalent of performance of a monetary obligation.

Requisites:
There must be a prestation in lieu of payment.

The prestation given must be different from what is due.

An agreement must exist between creditor and debtor to extinguish the obligation by this prestation.

Question 8

What is required for a payment to a person incapacitated to administer property to be valid?

Answer 8

Payment is valid if the incapacitated person has kept the thing delivered or if the payment has benefited him. If not, the debtor may need to pay again.

Question 9

What is substantial performance, and when does it allow recovery?

Answer 9

Substantial performance occurs when an obligation is largely fulfilled in good faith, even if not strictly complete. The obligor may recover as though there was full performance, less any damages suffered by the obligee.

Question 10

What is the effect of payment made by a third person who does not intend to be reimbursed by the debtor?

Answer 10

If the third person pays without intending reimbursement, the payment is deemed a donation, which requires the debtor’s consent. However, the payment remains valid as to the creditor who accepts it.

Question 11

What is the legal effect of payment made in good faith to any person in possession of the credit?

Answer 11

Payment made in good faith to any person in possession of the credit releases the debtor from the obligation, even if the person was not the creditor, as long as the payer believed they were the rightful payee.

Question 12

What is the principle behind Article 1235 on incomplete performance?

Answer 12

When the obligee accepts an incomplete or irregular performance without protest, the obligation is deemed fully performed. This is based on the principle of estoppel, which implies the creditor waives any objections by accepting the partial performance.

Question 13

When can partial performance of an obligation be allowed?

Answer 13

There is an express stipulation.

Part of the debt is liquidated and the other is not.

Different terms or conditions apply to parts of the obligation.

It is unreasonable to expect full performance at once.

Good faith or prevention of abuse requires it.

Question 14

When is payment valid if made to a person who is incapacitated?

Answer 14

Payment to an incapacitated person is valid if that person has kept the thing delivered, or if the payment benefited them. Otherwise, the debtor may be required to pay again.

Question 15

Under Article 1235 of the Civil Code, when is an obligation considered fully complied with despite incomplete or irregular performance?

Answer 15

An obligation is deemed fully complied with when the obligee accepts the performance, knowing its incompleteness or irregularity, without expressing any protest or objection. This acceptance with knowledge implies a waiver, where the obligee intentionally relinquishes the right to insist on full compliance

Question 16

According to Article 1236 of the Civil Code, is a creditor required to accept payment from a third party with no interest in the obligation?

Answer 16

No, the creditor is not required to accept payment from a third party with no interest in the obligation, unless there is a stipulation allowing it.

Question 17

What are the rights of a third party who pays someone else’s debt according to Article 1236?

Answer 17

A third party who pays another’s debt can demand reimbursement from the debtor for what was paid. However, if the payment was made without the debtor’s knowledge or against their will, the third party can only recover the amount that benefited the debtor.

Question 18

Under Article 1237 of the Civil Code, can a third party who pays a debt without the debtor’s knowledge or against their will compel the creditor to subrogate them in the creditor’s rights?

Answer 18

No, a third party who pays a debt without the debtor’s knowledge or against their will cannot compel the creditor to subrogate them in the creditor’s rights, such as those from a mortgage, guaranty, or penalty. The third party has only a personal right to seek reimbursement from the debtor, without the securities and guaranties held by the original creditor.

Question 19

According to Article 1238, what is the nature of payment made by a third party who does not intend to be reimbursed by the debtor?

Answer 19

Payment made by a third party who does not intend to be reimbursed is considered a donation, which requires the debtor’s consent. However, the payment is valid as to the creditor who accepts it.

Question 20

Under Article 1239, when is payment in obligations to give considered invalid?

Answer 20

Payment in obligations to give is invalid if made by someone who lacks free disposal of the thing due and the capacity to alienate it, except as provided under Article 1427 regarding “Natural Obligations.”