Art.

1278 Meaning of compensation

1.Two persons are debtor and creditor of each
other.

Art. 1279 Requisites of compensation

1.The parties are bound principally to each other.
2.Either debt is sum of money or thing of the
same kind and quality.
3.Both debts are due.
4.Liquidated (determine) and demandable.
5.No controversy (3rd party claim) commenced by
third persons.

Art. 1280 Effect of compensation to the guarantor

1.Compensation extinguishes the accessory
liability of the guarantor.
Art. 1281 Two kinds of compensation
1.Total compensation - debts of same amount
2.Partial compensation – debts of different
amounts

Art. 1282 Compensation of debts not due

1.Voluntary compensation – by agreement of the
parties.

Art. 1283 Judicial compensation

1.The party claiming compensation must prove
his right to damages and amount thereof.

Art. 1284 Compensation of rescissible or voidable

contracts
1.Reason: Rescissible or voidable contracts are
valid until annulled.
Art. 1285 Effect of compensation when debt is
assigned.
1.Compensation before assignment – the
debtor can raise the defense of
compensation; assignee’s remedy is against
the assignor of the debt.
2.Compensation after assignment –
a)With consent of the debtor – debtor cannot
claim compensation against the assignee or
debtor is liable for the full amount against
the assignee
b) With the knowledge but without
consent of the debtor – debtor can claim
compensation only on debts that are due;
as to debts not yet due, debtor cannot
claim compensation
c)Without knowledge of the debtor – debtor
can claim compensation on debts due and
not yet due.
Art. 1286 Compensation of debts payable at
different places
1. Applies to legal compensation.
2. There shall be indemnity for expenses of
exchange (currency) or transportation to the
place of payment.

Art. 1287 When legal compensation is not

allowed:
1.Depositum
2.Commodatum
3.Claim for support
4.Civil liability arising from penal offense

Art. 1289 Compensation of several debts

1.Rules on application of payment applies to
compensation
 Art. 1290 Requisites of legal compensation
1.All requisites in Art. 1279 are present.
2. No consent is required from the parties.