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1
Q

MODES OF EXTINGUISHMENT OF OBLIGATIONS

A

Payment or Performance
Loss of the thing due
Condonation or remission of debt
Confusion or merger of rights
Compensation
Novation

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2
Q

delivery of money and performance, in any other manner of the obligation

A

PAYMENT / PERFORMANCE

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3
Q

Requisites for Valid Payment / Performance

A

With respect to the prestation
Identity
Integrity or completeness
Indivisibility

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4
Q

REQUISITES FOR VALID PAYMENT

A

With respect to parties - must be made by proper party to proper party.

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5
Q

the one performing, he can be the debtor himself or his heirs or assigns or his agent, or anyone interested in the fulfillment of the obligation; can be anyone as long as it is with the creditor’s consent.

A

Payor

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6
Q

only the creditor’s consent; If performance is done also with debtor’s consent - he takes the place of the debtor.

A

3rd person pays/performs

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7
Q

There is ___ except if the 3rd person intended it to be a donation.

A

subrogation

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8
Q

3rd person pays/performs with consent of creditor but not with debtor’s consent, the repayment is only to the extent that the payment has been beneficial to ___.

A

debtor

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9
Q

REQUISITES FOR VALID PAYMENT

A

3rd person - if any of the ff. concur:
It must have redounded to the obligee’s.
benefit and only to the extent of such benefit.
It falls under article 1241 - the benefit is total so performance is total.

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10
Q

creditor or obligee or successor in interest of transferee, or agent.

A

Payee

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11
Q

Anyone in possession of the credit - but will apply only if debt has not been
previously garnished.

A

REQUISITES FOR VALID PAYMENT

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12
Q

Payment made to an Incapacitated Person, VALID if:

A

Incapacitated person kept the thing delivered, or
Insofar as the payment has been beneficial to him

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13
Q

AYMENT TO 3RD PARTY NOT AUTHORIZED, VALID IF PROVED AND ONLY TO
THE EXTENT OF BENEFIT; PRESUMED IF

A

After payment, 3rd person acquires the creditor’s rights.
Creditor ratifies payment to 3rd person.
By creditor’s conduct, debtor has been led to make the payment (estoppel)

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14
Q

PAYMENT MADE IN GOOD FAITH TO A PERSON IN POSSESSION OF CREDIT SHALL RELEASE DEBTOR; REQUISITES:

A

Payment by debtor must be made in good faith.
Creditor must be in possession of the credit and not merely the evidence of
indebtedness

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15
Q

WHERE PAYMENT MADE

A

In the place designated in the obligation.
If there is no express stipulation and the undertaking is to deliver a specific thing at the place where the thing might be at the moment the obligation was constituted.

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16
Q

In other case - in the place of the domicile of the debtor.

A

Time of payment - time stipulated.
Effect of payment extinguish obligation Except: order to retain debt

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17
Q

SUBSTANTIAL PERFORMANCE: Article 1234

A

Article 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been astrict and complete fulfillment, less damages suffered by the obligee.

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18
Q

SUBSTANTIAL PERFORMANCE: Article 1235

A

Article 1235. When the obligee accepts the performance, knowing its in completeness or irregularity, and without expressing any protestor objection, the obligation is deemed fully complied with.

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19
Q

SUBSTANTIAL PERFORMANCE

A

Attempt in Good Faith to perform without willful or intentional departure
Deviation is slight
Omission/Defect is technical or unimportant
Must not be so material that intention of parties is not attained

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20
Q

Effect of Substantial Performance in Good Faith

A

Obligor may recover as though there has been strict and complete fulfillment, less
damages suffered by the obligee
Right to rescind cannot be used for slight breach

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21
Q

APPLICATION OF PAYMENTS

A

the designation of the debt which payment shall be made, out of 2 or more debts
owing the same creditor
stipulation or application of party given benefit of period - OK
to be valid: must be debtor’s choice or with the consent of debtor

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22
Q

Requisites:
APPLICATION OF PAYMENTS

A

Various debts of the same kind
Same debtor
Same creditor
All debts must be due

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23
Q

Exceptions:
there may be application of payment even if all debts are not yet due if

A

Parties so stipulate
When application of payment is made by the party for whose benefit the term has
been constituted
Payment is not enough to extinguish all debts

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24
Q

HOW APPLICATION IS MADE

A

Debtor makes the designation
If not, creditor makes it by so stating in the receipt that he
issues - unless there is cause for invalidating the contract
If neither the debtor nor creditor has made the application
or if the application is not valid, then application, is made by
operation of law

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25
Q

WHO MAKES APPLICATION OF
DEBTS?

GR: Debtor
Exceptions: Creditor

A

Debtor without protest accepts receipt in which creditor specified expressly and unmistakably the
obligation to which such payment was to be applied - debtor in this case renounced the right of choice
When monthly statements were made by the bank specifying the application and the debtor signed
said statements approving the status of her account as thus sent to her monthly by the bank

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26
Q

In case no application is made:

A

Apply payment to the most onerous
If debts are of the same nature and burden, application shall be made to all proportionately

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27
Q

mode of extinguishing an obligation whereby the debtor alienates in favor of the creditor property for the satisfaction of monetary debt

A

DACION EN PAGO

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28
Q

extinguish up to amount of property unless there is a contrary stipulation

A

DACION EN PAGO

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29
Q

a special form of payment because 1 element of payment is missing: IDENTITY

A

DACION EN PAGO

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30
Q

CONDITIONS FOR A VALID
DACION

A

If creditor consents, for a sale presupposes the consent
of both parties
If dacion will not prejudice the other creditors
If debtor is not judicially declared insolvent

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31
Q

Dacion en pago is governed by the ___.

A

Law on Sales

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32
Q

the process by which debtor transfer all the properties notsubject to execution in favor of creditors is that the lattermay sell them and thus, apply the proceeds to their credits

A

CESSION/ASSIGNMENT IN FAVOR OF CREDITORS

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33
Q

extinguish up to amount of net proceeds (unless with a contrary stipulation)

A

CESSION / ASSIGNMENT

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34
Q

Kinds of Assignment:

A

Legal. Voluntary

35
Q

ASSIGNMENT, governed by the insolvency law

A

Legal

36
Q

ASSIGNMENT, agreement of creditors

A

Voluntary

37
Q

Requisites of Voluntary Assignment:

A

More than one debt
More than one creditor
Complete or partial insolvency of debtor
Abandonment of all debtor’s property not exempt from execution
Acceptance or consent on the part of the creditors

38
Q

EFFECTS OF ASSIGNMENT

A

Creditors do not become the owner; they are merely
assignees with authority to sell
Debtor is released up to the amount of the net proceeds of
the sale, unless there is a stipulation to the contrary
Creditors will collect credits in the order of preference
agreed upon, or in default of agreement, in the order
ordinarily established by law

39
Q

Dacion

A

One creditor
Not necessarily in state of financial
difficulty
Thing delivered is considered as
equivalent of performance
Payment extinguishes obligation to
the extent of the value of the thing
delivered as agreed upon, proved or
implied from the conduct of the
creditor

40
Q

Cession in Payment

A

Plurality of creditors
Debtor must be partially or
relativelyinsolvent
Universality of property of
debtor iswhat is ceded
Merely releases debtor for net
proceeds of things ceded of, assigned,
unless there is a contrary intention

41
Q

the act of offering the creditor what is due
himtogether with a demand that the creditor accept the
same (When creditor refuses w/o just cause to accept
payment, hebecomes in mora accepiendi and debtor is
released from responsibility if he consigns the thing or sum
due)

A

TENDER

42
Q

the act of depositing the thing due with
the court or judicial authorities whenever the creditor
cannot accept or refuses to accept payment; generally
requires prior tender of payment

A

CONSIGNATION

43
Q

REQUISITES FOR VALID
CONSIGNATION

A

Existence of valid debt
Consignation was made because of some legal cause -
previous valid tender was unjustly refused or circumstances
making previous tender exempt
Prior Notice of Consignation had been given to the person
interested in performance of obligation (1st notice)
Actual deposit / Consignation with proper judicial authorities
Subsequent notice of Consignation (2nd notice)

44
Q

EFFECTS OF CONSIGNATION

A

Debtor may ask judge to order cancellation of obligation
Running of interest is suspended
Before creditor accepts or before judge declares
consignation has been properly made, obligation remains
(debtor bears risk of loss at the meantime, after acceptance
by creditor orafter judge declares that consignation has been
properlymade - risk of loss is shifted to creditor)

45
Q

CONSIGNATION WITHOUT
PRIOR TENDER

A

Allowed when:
Creditor absent or unknown/ does not appear at the place of
payment
Incapacitated to receive payment at the time it is due
Refuses to issue receipt w/o just cause
2 or more creditor claiming the same right to collect
Title of obligation has been lost

46
Q

LOSS OF THE THING DUE

A

partial or total / includes impossibility of performance
When there is loss:
When the object perishes (physically)
When it goes out of commerce
When it disappears in such a way that: its existence
is unknown or it cannot be recovered

47
Q

IMPOSSIBILITY OF PERFORMANCE

A

Physical impossibility

48
Q

IMPOSSIBILITY OF PERFORMANCE, Legal impossibility

A

Directly - caused as when prohibited by law
Indirectly - caused as when debtor is required to enter a military draft

49
Q

LOSS
Obligation to deliver a SPECIFIC thing
GENERAL RULE: Extinguished

A

EXCEPTIONS:
Debtor is at fault
Debtor is made liable for fortuitous event because of a provision of law, contractual stipulation
or the nature of the obligation requires assumption of risk on part of debtor

50
Q

Obligation to deliver a GENERIC thing
GENERAL RULE: Not extinguished

A

EXCEPTIONS:
If the generic thing is delimited
If the generic thing has already been segregated
Monetary obligation

51
Q

LOSS, Obligation TO DO

A

GENERAL RULE: Debtor is released when prestation becomes legally or physically impossible
without fault on part of debtor

52
Q

EFFECTS OF PARTIAL LOSS

A

When loss is significant - may be enough to extinguish obligation
When loss insignificant - not enough to extinguish obligation

NOTE: Judicial determination of extent is necessary

53
Q

When loss is significant -

A

may be enough to extinguish obligation

54
Q

When loss insignificant -

A

not enough to extinguish obligation

55
Q

WHEN THING IS LOST IN THE POSSESSION OF THE DEBTOR

A

Presumption: Loss due to debtor’s fault (disputable)
Exception: natural calamity, earthquake, flood, storm

56
Q

REBUS SIC STANTIBUS

A

agreement is valid only if the same conditions prevailing at time of contracting continue to exist at the time of performance
obligor may be released in whole or in part based on this ground

57
Q

REQUISITES: REBUS SIC STANTIBUS

A

The event or change could not have been foreseen at the time
of the execution of the contract
The performance is extremely difficult, but not impossible
(because if it is impossible, it is extinguished by impossibility)
The event was not due to the act of any of the parties
The contract is for a future prestation

58
Q

CONDONATION / REMISSION

A

Gratuitous abandonment of debt
If donation, rules on donation apply
May be express or implied

59
Q

REQUISITES: CONDONATION

A

There must be an agreement
There must be a subject matter (object of the remission, otherwise there would be
nothing to condone)
Cause of consideration must be liberality (Essentially gratuitous, an act of liberality )
Parties must be capacitated and must consent; requires acceptance by obligor; implied
in mortis causa and expressed inter vivos
Formalities of a donation are required in the case of anexpress remission
Revocable - subject to rule on inofficious donation (excessive, legitime is impaired )
and ingratitude and condition not followed
Obligation remitted must have been demandable at the time of remission
Waivers or remission are not to be presumed generally

60
Q

CONDONATION / REMISSION

A

FORMS EXTENT KINDS
Express - must follow
formalities of donation
Implied - conduct is
sufficient
Total
Partial
Principal - accessory is
also condoned
Accessory - principal is
still outstanding

61
Q

presumption; when evidence of indebtedness is
with the debtor - presumed voluntarily delivery by creditor
(rebuttable)

A

Voluntary delivery

62
Q

Effect of delivery of evidence of indebtedness: debt is already condoned
(conclusion)

A

If in hands of joint debtor - only his share is condoned
If in hands of solidary debtor - whole debt is condoned
Tacit - voluntary destruction of instrument by creditor; madeto
prescribe w/o demanding

63
Q

CONFUSION / MERGER

A

Character of debtor and creditor is merged in same person with respect
to same obligation

64
Q

Requisites: CONFUSION / MERGER

A

It must take place between principal debtor and principal creditor only
Merger must be clear and definite
The obligation involved must be same and identical - one obligation only
Revocable, if reason for confusion ceases, the obligation is revived

65
Q

COMPENSATION

A

Set off
It is a mode of extinguishment to the concurrent amount the obligation of
persons who are in their own right reciprocally debtors or creditors

66
Q

REQUISITES: COMPENSATION

A

Both parties must be mutually creditors and debtors - in their own right and as
principals
Both debts must consist in sum of money or if consumable of the same kind or
quality
Both debts are due
Both debts are liquidated and demandable (determined)
Neither debt must be retained in a controversy commenced by 3rd person and
communicated w/ debtor (neither debt is garnished)

67
Q

KINDS OF COMPENSATION

A

Legal
Conventional
Facultative
Judicial
Total
Partial

68
Q
  • by operation of law; as long as 5 requisites concur - even if unknown to parties and if
    payable indiff places; indemnity for expense of exchanges; even if not equal debts - only up to
    concurring amount
A

Legal

69
Q

agreement of parties is enough, forget other requirement as long as both
consented

A

Conventional

70
Q

one party has choice of claiming/opposing one who has benefit of period may
choose to compensate:
Not all requisites are present
Depositum; commodatum; criminal offense; claim for future support; taxes

A

Facultative

71
Q

set off; upon order of the court; needs pleading and proof; all requirements must
concur except liquidation

A

Judicial

72
Q

when 2 debts are of the same amount

A

Total

73
Q
  • when 2 debts are not of the same amount
A

Partial

74
Q

EFFECT OF ASSIGNMENT OF
CREDIT TO A 3RD PERSON

A

If made after compensation took place - no effect; compensation already
perfected
If made before compensation took place - it depends:
With consent of debtor - debtor is estopped unless he reserves his right
and gave notice to assignee
With knowledge but w/o consent of debtor - compensation may be set up
as to debts maturing prior to assignment
Without knowledge - compensation may be set-up on all debts prior to
his knowledge

75
Q

NOVATION

A

Extinguishment of obligation by creating/ substituting anew one in its
place
Changing object or principal conditions
Substituting person of debtor
Subrogating 3rdperson in right of creditor

76
Q

REQUISITES: NOVATION

A

Valid obligation
Intent to extinguish old obligation - expressed or implied:
completely/substantially incompatible old and new obligation on
every point
Capacity and consent of parties to the new obligation
Valid new obligation

77
Q

EFFECTS OF NOVATION

A

Extinguishment of the principal carries the accessory, except:
Stipulation to contrary
Stipulation pour autrui unless beneficiary consents
Modificatory novation only; obliged to which is less onerous
Old obligation is void
Old obligation subsists if new obligation is void or voidable but annulled
already (except: intention of parties)
If old obligation has condition
If Resolutory and it occurred - old obligation already extinguished;
no new obligation since nothing to novate

78
Q

EFFECTS OF NOVATION

A

If old obligation has condition, must be compatible with the new
obligation; if new is w/o condition - deemed attached to new
If new obligation has condition
If resolutory: valid
If suspensive and did not materialize: old obligation is enforced

79
Q

KINDS OF NOVATION

A

REAL / OBJECTIVE
PERSONAL / SUBJECTIVE
Substituting person of debtor (passive)
PERSONAL / SUBJECTIVE
Substituting person of debtor (passive)

80
Q

EXPROMISION;

A

initiative is from 3rd person or new debtor; new debtor and creditor to
consent; old debtor released from obligation; subject to full reimbursement and
subrogation if made w/ consent of old debtor; if w/o consent or against will, only
beneficial reimbursement; if new debtor is insolvent, not responsible since w/o his
consent

81
Q

DELEGACION:

A

initiative of old debtor; all parties to consent;full reimbursement; if
insolvent new debtor - not responsibleold debtor because obligation extinguished by
valid novationunless: insolvency already existing and of public knowledgeor know to
him at time of delegacion

82
Q

Delegante, Delegatario , Delegado

A

Delegante - old debtor
Delegatario - creditor
Delegado - new debtor

83
Q

KINDS OF NOVATION

A

PERSONAL / SUBJECTIVE
Subrogating 3rd person to rights of creditor (active)
Conventional - agreement and consent of all parties; clearly
established
Legal - takes place by operation of law; no need for consent; not
presumed except as provided for in law:
PRESUMED WHEN
Creditor pays another preferred creditor even w/o debtor’s knowledge
3rd person not interested in obligation pays w/ approval of debtor
Person interested in fulfillment of obligation pays debt even w/o
knowledge of debtor

84
Q

Novation

A

Difference from Payment by
3rd Person
Change of Debtor
Debtor is not necessarily
released from debt
Can be done without the consent of
the creditor
One obligation
3rd person has no obligation
to pay if insolvent
Debtor is released
Needs consent of the creditor - express
or implied
Two obligations - one is extinguished
and the new one created
New debtor is obliged to pay

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