CHAPTER 4 (6) novation

EXTINGUISHMENT OF -old obligation is changed to

OBLIGATIONS new one

-there is a modification and

substitution of an obligation
ART. 1231
Other causes such as
Obligation are extinguished:
annulment , rescission
(1) by payment or fulfillment of resolutory
performance condition, and prescription, are
-you already performed or paid governed elsewhere in this
the obligation Code

(2) loss of thing due Additional causes (FIRMDC)

-If the thing is specific and (1) Fortuitous event

cannot be replaced
(2) Impossibility of fulfillment
Eg. A paper money with a serial
(3) Resolutory period arrival
number
(4) Mutual decision of the party
(3) condonation or remission of
debt (5) Death of the party requiring
personal services
-cancellation of debt
(6) Compromise
(4) confusion or merger of the
rights of creditor and debtor ART. 1232

- happens when the right of Payment means not only

creditor and debtor merged to one the delivery of money but also
person. the performance, in any other
manner, of an obligation
(5) compensation
Payment
- set-off/ quits
- means they are equally
compensated with each other’s Ordina
obligation ry delivery of money
Parlan
Eg. When you were on your kids
ce
age. You tend to play jolen, text
and pogs and ask to borrow if you
already lost. Once you won you
will compensate or give back what giving a thing,
you borrowed. Legal
Mode doing an act, not
doing an act
 Exemption in Article 1233
found in Article 1234:
When there is substantial
ART. 1233 performance and will
considered fulfilled, only
A debt shall not be compensation about breach of
understood to have been paid obligor must be paid
Requisites:
the thing or service in which
the obligation consists has (1) Substantial performance

been completely delivered or - essential or important part

rendered, as the case maybe. of contract have been

Considered as paid performed while minor are

not yet.
(1) Integrity of prestation
- doctrine of substantial
-full performance of the obligation
performance
- If the thing delivered is not the
(2) Obligor must be in good
thing or incomplete under
faith
stipulation, he can refuse to pay.
- presumed in the absence of
(2) Identity of prestation
proof of contrary
- must be delivered
If not performed
- the very and agreed prestation completely but the
seller acted in good
must be delivered faith, the buyer is
Presentation of receipt is a compelled to pay but
decent confirmation of payment. less those that are
In this way, a debtor can request not yet delivered.
the a receipt from the creditor
once his obligation is paid.
ART. 1235

When the obligee accepts

ART. 1234
the performance, knowing
If the obligation has been its incompleteness or
substantially performed in irregularity and without
good faith, the obligor may expressing any protest or
recover as though there had objection, the obligation is
been a strict and complete deemed fully
Exemption incomplied with
Article 1233 found
fulfillment, less damages in

suffered by the oblige Article 1235:

If the payment is
incomplete, creditor may reject
it and in case of acceptance, law
considers he already waive his
 against the will of the debtor,
he can recover only insofar as
the payment has been
beneficial to the debtor.

Requisites:
Persons from whom the
(1) Obligee knows the creditor must accept payment
incompleteness or irregularity of
performance.
(1) debtor
(2) Accept the performance
without expressing a protest or (2)
guarantor
objection.
(3) 3rd person without
When the obligation with irregularity
is known by the debtor, the interest but with stipulation
obligation is considered complied or
extinguished.

UPDATED CIVIL CODE:

Regular On old civil code they cannot

Payments
refuse accept to receive, but on
P -complying on
A new civil code they can choose
what
Y stipulation iswho they want to receive.
M
E Effect of payment by a third
N
Irregular person
T
Payments
-incomplete to(1) Made w/o the knowledge or
ART. 1236 what against the will of the debtor
stipulation is
The creditor is not band - payor can recover only insofar as
to accept payment or the payment beneficial to the
performance by a third party/ latter. Recovery is only up to

person who has no interest in extent of debt at the time of

the fulfillment of the payment

obligation, unless there is a

stipulation to the contrary.
(2) If made with knowledge of the
Whoever pays for another debtor
may demand from the debtor
-shall have rights of
what he has paid, except that if
reimbursement and subrogation of
he paid w/out the knowledge or
amount that is not necessary to
debt.

- acquire all the nights of the

creditor

ART. 1237

Whoever pays on behalf of

the debtor w/out the knowledge
or against the will of the latter Art. 1239
cannot compel the creditor to
In obligations to give,
subrogate him in his rights,
payment made by one who does
such as those arising from a
not have the free disposal of
mortgage, guaranty or penalty.
the thing due and capacity to
Third party subrogation right alienate it shall not be valid,

- Whoever pays on behalf of the w/out prejudice to the provision

debtor with consent is entitled to if Art. 1427, under the title on

subrogation Natural obligations

- If no consent, 3rd person cannot

compel Free disposal of the thing due

- Even if the creditor giver right - thing to be delivered must not

Art. 1237 focus on the right of subject to any claim of 3rd person
debtor
Capacity to alienate
Subrogation Reimbursement

ART. 1238
-gets all the right - entitled to
Payment made by a third of the creditor; refund to the
person who does not intend to change of creditor extent without
be reimbursed by the debtor is guarantees and
deemed to be a donation, which securities
requires the debtor consent.
But the payment is in any case
valid as to the creditor who has -person is not incapacitated to

accepted it . enter into contracts

- If no one is compelled to accept

generosity of another

- if the person is not intended to

be reimbursed it is considered as
those payments that don’t have NOT Be AUTHORIZED TO
free disposal and capacity are RECEIVE THE PAYMENT
invalid.
Art. 1241
thing paid can be recovered
Payment to a person who is
creditor cannot compel to accept incapacitated to administer his
payment where there is no property shall be valid if he has
capacity to make it kept the thing delivered, or insofar
as payment has been beneficial to
 once the thing is
him.
consumable he cannot
recover the same because Payment made to a third person
it has been consumed shall also be valid insofar as it has
 minor has no power to redounded to the benefit of the
alienate a contract creditor.

Such benefit to the creditor need

not be proved in the following
Art. 1240
cases:
Payment shall be made to
(1) after payment, 3rd person
the person in whose favor the
acquires creditors right
obligation has been constituted or
his successor in interest, or any (2) creditor ratifies the payment to
person authorized to receive it 3rd person

Person to whom payment shall (3) creditors conduct, debtor

be made believed that it has an authority to
received
(1) creditor or obligee
Effect of payment to an
(2) successor
incapacitated person
(3) person authorized to receive it
- invalid unless the thing Is kept or
-authorized by creditor and law benefited by the payment

 if a person is subrogated - pay to the guardian

payment should be made to
- absence of benefit can result on
him
paying again
 PAYMENT IN GOOD FAITH
TO ANY PERSON IS VALID Effect of payment to a third

ALTHOUGH PERSON MAY person

- invalid except if it has redounded
to the benefit of the creditor
- there must be proof of benefit, in
absence it can be an error
When benefits to creditor need
not be proved by debtor
(1) subrogation in creditors right
(2) ratification by the creditor
(3) estoppel on the part of the
creditor
- payment by debtor-stranger shall
not be valid if plaintiff wins the
case, considered as bad faith
- debtor who is creditor of another,
the court may retain the debt until
the right of plaintiff
Art. 1244
The debtor of a thing cannot
compel the creditor to receive a
diff. one. although the latter may
be of the same value as, or more

- cannot be denied valuable than that which is due. In

obligation to do or hot to do, an
Art. 1242
act or forbearance cannot be
Payment made in good faith substituted by another act or
to any person in possession on of forbearance against the obligee's
the credit shall release the debtor will

-valid payment of third person Very prestation due must be

complied w/
- honest that he is making a valid
payment and payee is the owner of (1) refers to real obligation to
the credit deliver a specific thing cannot be
offered against the will of creditor
-possession of instrument does not
or debtor
entitle the holder to payment or
release the debtor (2) refers to personal obligations.
cannot be substituted against the
Art. 1243
creditor's will
Payment made to the
creditor by the debtor after the
latter has been judicially ordered
to retain the debt shall not be valid
Art. 1245

Dation in payment whereby

Payment to creditor not valid property is alienated to the
creditor in satisfaction of a debt in
money, shall be governed by the
law of sales
Special form of payment  waived to creditor, accepting
inferior quality or by debtor
(1) Dation in payment
delivering superior quality
(adjudication)
 this article focus on the right
- is a conveyance of ownership of a
value of amount delivered
thing as an accepted equivalent
according to intention and
- hot an ordinary way of payment
extinguishment
Art. 1247
Ex: not money but property
Unless it is otherwise
(2) application of payment stipulated, the extrajudicial
expenses required by the payment
- not special form of payments
shall be for the account of the
(3) payment by cession debtor. With regard to judicial

(4) lenter of payment and costs, the rules of court shall

consignation govern

 law of sales governs because Extrajudicial expenses - shall be

dation is considered a specie account to debtor

of sale, where debt becomes  obligation is extinguished

price of thing alienated when payment is made so

Art. 1246 debtor is the primary

beneficial
When the obligation consists
 if there is stipulation, it
in the delivery of an indeterminate
must be followed
or generic thing, whose quality
 does not apply to expenses
and circumstances have not been
by the creditor
stated, the creditor cannot
demand a thing of superior Judicial cost
quality. Neither can the debtor - statutory amounts allowed in
deliver a thing of inferior quality. expense incurred in the action
The purpose of the obligation and
- cost of an action is to be paid by
other circumstances shall be taken
losing partner/party.
into consideration
- court may adjudge or make it
Specific thing. - must be
equitable
delivered
- no cost are allowed against the
Generic thing - principle of
gov, unless provided by law
equity
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
unliquidated, the creditor may
demand and the debtor may affect
the payment of the former w/out
waiting for the liquidation of the
latter
 the provision only
contemplates one creditor
and debtor
 there should be a complete
performance of prestation
for the obligation to be
extinguished
 creditor can accept the
partial performance but
cannot be compelled
 debtor is required to comply
but not required to make
partial fulfillment If he does
not wish
Partial performance is allowed
if :
(1) expressed in stipulation
(2) debt is liquidated and
unliquidated
(3) prestation of obligation have
diff. terms of conditions which
affect some of them, prestations
cannot executed simultaneously
but should be complete
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
Abeyance - temporary inactivity
Legal Tender
-cannot refuse to accept
-currency offered by debtor in
right amount, creditor must accept
it
 Debts in money shall be paid
in the currency stipulated, if
cannot pay in currency then
 the currency that is legal supervene, the value of the
tender in the Philippines currency at the time of the
must be followed establishment of the obligation
 All the money or notes issued shall be the basis of payment,
by BSP is a legal tender unless there is an agreement to
 Legal tender; - the contrary
-.25 not exceeding to go 50 Inflation
-.10 not exceeding to 20
- sudden increase of money w/out
- all coins 1 peso above is
increase in business transactions
valid
-causes a drop level of money and
Payment by means of
rise of general price level
instrument of credits
Deflation
(1) Right of creditor to refuse or
accept -reduction of money available,
decline general price level
 Promissory notes, Checks,
bills of exchange are not - opposite of inflation
legal tender, so creditor
 The basis of payment should
should not be compelled to
be based on purchasing
accept it
value at that time, subject to
(a) he can accept, w/out
agreement by parties
acceptance or effect of
payment. Demandability of
original obligation is
suspended
Art. 1251
(2) Effect on obligate on
Payment shall be made in
-mercantile documents does the place designated in the
not extinguish obligation, obligation. There being no express
unless: stipulation and if the undertaking

a. they are cashed is to deliver a determinate thing,

the payment shall be made
b. Impaired by creditors
wherever the thing might be at the
Art. 1250 moment the obligation was
constituted. In any other case the
In case an extraordinary
place of payment shall be the
inflation or deflation of the
domicile of the debtor.
currency Stipulated should
If the debtor changes his domicile Art. 1252
in bad faith or after he has
He who has various debts of
incurred in delay, the additional
the same kind in favor of one and
expenses shall be borne by him.
the Same creditor, may declare at
The provisions are without
the time of making the payment, to
prejudice to venue under the Rules
which of the same must be
of Court
applied. Unless the parties so
Obligation shall be paid on stipulate, or when the application
of payment is made by the party
(1) stipulated place
for whose benefit the term has
(2) place where the thing was, been constituted, application shall
perfection of contract not be made as to debts. which are

- specific thing not yet due. If the debtor accepts

from the creditor a receipt in
(3) domicile of debtor or place of
which an application of the
debtor
payment is made, the former
- generic thing cannot complain of the same,
unless there is a cause for
 Venue is a place where court
invalidating the contract
suit or action must be filed
 Domicile is the place of a  the application by the debtor
person's habitual residence; must be done (2) making of
fixed home the payment, if after cannot
 Residence is an element of longer apply.
domicile
Application of payment
Residence Domicile
- designation of debt that should
*Requires bodily *requires bodily be applied the payment made by
debtor who have various debts in
presence presence and
favor of one and the same creditor
*actual intention to
Requisites of application of
actual
payments
make it one's
domicile (1) 1 debtor, 1 creditor

*legal (2) 2 or more debts

SUBSECTION I (3) debts must be the same kind

APPLICATION OF PAYMENTS
(4) payment must be applied to
must be due
Art. 1253
(5) payment must not be sufficient
If the debt producer interest,
to cover all the debts
payment of the principal shall not
Application as to debts not yet be deemed to have been made
due until the interest have been
covered
cannot made unless;
Interest earned paid ahead
(1) stipulation
- rule in this article is mandatory
(2) made by debtor or creditor, for
whose benefit the period has been - debtor cannot choose to credit
constipated his payment to principal before the
interest is paid
Rules
- payment to interest must be first
(1) debtor has 1st choice, he must
applied.
indicate when he pay
- creditor may refuse if it is
(2) if the right to make application
contrary to the provision
is exercised then it is irrevocable
unless the creditor consents to the  This article is merely
chance directory, if there is an
agreement between parties
(3) debtor does not apply payment,
the rule may be subject or be
creditor can make designation by
followed bare on stipulation
specifying in the receipt which
debt is being paid Art. 1254

(4) creditor has not made ` When the payment cannot be

application or application is not
valid, the debt which is
onerous to the debtor shall be
deemed to be satisfied
(5) If debts due are tame of nature
and burden the payment shall be
proportionately
applied in accordance with the
most preceding rules, or if application
cannot be inferred from other
circumstances, the debt which is
most onerous to the debtor, among
those due shall 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
  If no application of payment the net proceeds of the thing
has been made, the payment assigned. The agreements which,
shall be applied to most on the effect of the cession, are
onerous debt. If debt are on made between the debtor and his
same nature and burden, creditors shall be governed by
divide it proportionately. special laws.

When a debt more onerous Payment by cession

than another
-special form of payment
-no fixed rule
-abandonment of debtor properties
-more burdensome to benefit his creditor, to satisfy
their credits
Determining more burdensome
debt Requisites of payment by
cession;
(1) interest-bearing debt
(1) two or more creditor
(2) debt as sole debtor
(2) debtor is partially insolvent
(3) secured by a mortgage or by
pledge (3) involves all the property of the
debtor
(4) one with a higher rate
(4) must be accepted by creditor
(5) debt w/ penalty clause
 If the proceeds of sales is
Debts subject to diff. burdens
completed the debtor is free
- it cannot be definitely determined from liability, if not, then he
which debt is most onerous to the is still liable of the balance
debtor then it should be paid
dation cussion
proportionately
*one creditor *several
SUBSECTION 2
creditor
PAYMEN BY CESSION
*hot presupposes *debtor is
Art. 1255 insolvent at

The debtor may cede or the insolvency assignment

assign his property to his creditors
of the debtor
in payment of his debts. This
cession, unless there is stipulation *not involve all the *involves
to the contrary, shall only release all the
the debtor from responsibility for
debtor property property (2) When he is incapacitated to
receive the payment at the time it
*debtors gives the *creditor
is due
acquire right
(3) When w/out just cause, he
creditor the to sell; and
refuses to give a receipt;
apply the
(4) When two or more persons
ownership credits in
claim the right to collect
proportion
(5) When the title of the obligation
*act of novation *not act of
has been list
novation
Tender of payment

- an act offering the ting of amount

due.

-debtor must show that he has

possession to deliver on time

Consignation
SUBSECDON 3 -act of depositing the thing due to
Tender of Payment and proper court when creditor does
consignation not receive it.

Art. 1256 - applicable if there is an

obligation to pat
If the creditor to whom
tender of payment has been Requisites of valid
refused w/out just cause to accept Consignation (Memorize)
it, the debtor shall be released (1) valid debt that is due
from responsibility by the
(2) tender of payment by the
consignation of the thing or sum
debtor and refusal w/out justifiable
due consignation alone shall
reason by the creditor to accept it.
produce the same effect in the
following cases. (3) previous notice of consignation
to persons Interested in the
(1) When the creditor is absent or
fulfillment of the obligation
unknown, or does not appear at
the place of payment (4) Consignation of the thing or
sum due
(5) subsequent notice of
consignation made to the
interested parties

When tender of payment not

required

- tender of payment is not

necessary before the debtor can
consign due with the court.

-creditor, w/out legal justification

that informs his debtor that the
Payment of a debt will not be
accepted thereby waives payment
on the date due; In consequence
the debtor is excuse from making a
formal tender of money on such
date.

-debtor will not be in default in ma

failing to make a fuitless tender

Requirements for valid fender

of payment

(1) must comply with rules on

payment or on the contract.
Tender, even valid does not
produce legal payment, unless it is
completed by consignation

(2) unconditional and for the whole

amount due in the legal tender

(3) must actually made. debtor

must show the ability to perform
an actual thing or money