Art.

1231 Causes of extinguishment of obligations

1)Payment or performance
2)Loss
3)Condonation or remission
4)Confusion or merger
5)Compensation
6)Novation
7)Other causes i.e. annulment, rescission,
fulfilment of a resolutory condition, &
prescription

Art. 1232 Meaning of payment

1.Delivery of money or
2.performance of the obligation
a)giving of a thing
b) doing an act
c)not doing an act
Art. 1233 – Extinguishment of debt
1.Debt includes to deliver money, to deliver a
thing, to do an act, or not to do an act.
2.Debt is extinguished if thing or service is
completely delivered or rendered.
Art. 1234 – Effect of substantial performance in
good faith
1.Obligor can recover as if completely performed
less damages suffered by the obligee.
2.Justification: Based on fairness.
3.1st requisite: There is substantial performance.
4.2nd requisite: Obligor is in good faith.
5.Ex. seller was able to deliver only 400 sacks of
rice out of 500 due to government restriction
(good faith). Seller can demand payment of the
price for 400 sacks.
Art. 1235 – Effect of acceptance (or without protest
or objection) despite incomplete or irregular
performance
1.Based on estoppel.
2.Obligation is deemed fully complied with.
3.Ex. Delivery of a car without tire jack. Buyer
accepted as he has an extra tire jack.

Art. 1236 – From whom creditor must accept

payment
1.Creditor is bound to accept payment or
performance from the following:
a.Debtor
b.Any person interested in the fulfilment of the
obligation (guarantor)
c. A third person authorized to make payment.

2.If a third person pays without the knowledge or

against debtor’s will – he can recover only the
 amount paid (right of reimbursement). No right
of subrogation.
3.If a third person pays with the knowledge of the
debtor – he can recover the amount paid plus
right of subrogation or acquires the rights of a
creditor, i.e. mortgage, guaranty or penalty (Art.
1237)

Art. 1238 No intention to be reimbursed –

considered a donation.
1.Donation requires debtor’s consent.
2.Whether with consent or not, payment is valid
as far as the creditor is concerned.

Art. 1239 – payment by a person who has no right

to freely dispose of the thing or capacity to alienate
is VOID
1.Free disposal – not subject to any claim, lien or
encumbrance. Ex. mortgage or pledge.
 2.Capacity to alienate – incapacitated to contract.
Ex. minor.
3.Payment can be recovered.

Art. 1240 – to whom payment is made.

1.Creditor
2.Successor in interest. Ex. heirs.
3.Authorized representative

Art. 1241 – Effect of payment to an incapacitated

person (minor) and effect of payment to a third
person.
1.Valid if thing is kept or beneficial to him
(incapacitated person)
2.Valid if it redounded to the benefit of the
creditor. Ex. creditor is indebted to the third
person.
3.No proof of benefit is required:
a)Third person acquires creditor’s rights
 b) Ratification by the creditor
c)Estoppel (debtor is made to believe third
person is authorized to receive payment)

Art. 1242 – Effect of payment in good faith to third

person in possession of credit
1.Payment is valid. Obligation is extinguished.
2.Ex. check payable to cash or promissory note
payable to bearer.

Art. 1243 Effect of payment by a debtor judicially

ordered not to pay.
1.NOT VALID.
2.Ex. two persons claim ownership of the thing
leased. The court ordered the lessee not to pay
the lessor. If the lessee pays, his payment is not
valid. If the other person (not the lessor) is
declared the owner, the lessee must again
make payment to him.
Art. 1244 – Creditor cannot be forced to accept
another object even if it is more valuable.
(determinate thing)
1.Ex. obliged to deliver a Kia vehicle. Debtor
cannot be compel creditor to accept a Ferrari.
Art. 1246 – Creditor cannot demand a superior
quality or debtor deliver an inferior quality than
agreed (generic thing)

Art. 1247 – Extrajudicial expenses of payment.

1.Payable by the debtor. Ex. notarial fees.
2.Judicial expenses are paid by the losing party.
Art. 1248 – No partial performance.
1.Creditor cannot be forced to accept partial
payment. Ex. Debtor begs creditor that he pays
on installment.
2.Debtor cannot be required to make partial
payments. Ex. Due one year after and creditor
demands payment every month.

Art. 1249 – Payment must be legal tender.

1.Legal tender – creditor can be compelled to
accept as payment.
2.Parties can agree on the currency other than
Philippine peso.
3.There is also legal tender for coins.

Art. 1250 – Effect of extraordinary inflation or

deflation
1.Payment shall be based on the value of the
currency at the time of the establishment of the
obligation
2.Payment is based on the current value of the
currency if there is an agreement.
3.Ex. loan by the corp. in US dollars and payable
in US dollars.

Art. 1251 – Where payment is made

1.Place designated.
2.Where the thing is situated.
3.Domicile of the debtor.

SPECIAL FORMS OF PAYMENT

A. Art. 1245 – Dation in payment

1.Payment by conveying ownership of a thing.
Debtor is not insolvent. Only one creditor.

B.Art. 1252 – Application of payment

1.Debtor has two or more debts of the same kind
to one creditor and all debts are due.
2.Debtor can choose what debt is paid if his
payment is not enough.
3.If debtor does not choose, creditor can specify
in the receipt what debt is paid.
4.If creditor does not specify, the most onerous
debt is paid (Art. 1254). If the same burden,
proportionately (Art. 1254).

Art. 1253 – Interest is paid ahead of the principal

amount.

C.Art. 1255 – Payment by cession.

1.Payment by conveying ownership of a thing.
2.Difference with dation in payment, in cession
debtor is insolvent, two or more creditors.
D. Art.1256 – Tender of payment and
consignation

1.Tender of payment – debtor offering the

creditor payment of the obligation.
2.Consignation – depositing the payment in court
(Art. 1258) if creditor does not accept payment.
3.Effect of consignation – obligation is
extinguished.
4.When no need to make a tender of payment
a)Creditor is absent or unknown
b) Creditor is incapacitated.
c)Creditor refuses to give a receipt
d) Two or more persons claim the same right
to collect
e) Title of the obligation has been lost.
Art. 1257 – Requirement of Notice to persons
interested in the fulfilment of the obligation.
1.Persons interested in the fulfilment of the
obligation are: guarantors, mortgagees, solidary
debtors, solidary creditors.
2.Absence of notice – consignation is void.

Art. 1259 – expenses of consignation chargeable to

the creditor.
Art. 1260 – Rights of the debtor after consignation
1.Ask the judge to order the cancellation of the
obligation.
2.May withdraw the amount consigned if not yet
withdrawn by the creditor or before the judge
declared the cancellation of the obligation.
Art. 1261 – Effect of withdrawal of thing consigned
with authority from creditor.
1.Creditor losses preferential right over the thing.
2.Co-debtors, guarantors and sureties are
released from liability.