1.

By Payment or performance;
2. By loss of the thing due;
3. By the condonation or remission of the debt;
4. By the confusion or merger of the rights of
5. creditor and debtor;
6. By compensation;
7. By novation.
Payment means not only the delivery
of money but also the performance,
in any other manner, of an
obligation.
example:

If D is obliged to give E a specific car,

payment is made by delivering a car.
A debt shall not be understood to have
been paid unless the thing or service in
which the obligation consists has been
completely delivered or rendered, as the
case may be.
example:

S obliged himself to deliver 100 sacks of

rice to B, but S delivered only 90 sacks.
If the obligation has been substantially
performed in good faith, the obligor may
recover as though there had been a strict
and complete fulfillment, less damage
suffered by the obligee.
 SUBSTANTIAL PERFORMANCE

There is a substantial performance when the

important or essential part of the contract
has been performed and only a small or
minor part thereof has not been carried out.
John obliged himself to deliver 100 kilos of chicken meat to
Cris for a certain price. However, despite diligent efforts in
his part, John was able to deliver only 80 kilos because of
meat shortage. John wants to comply his obligation to
deliver the 100 kilos of chicken meat but he could not do so
for reasons beyond his control.
When the obligee accepts the performance,
knowing its incompleteness or irregularity,
and without expressing any protest or
objection, the obligation is deemed fully
complied with.
example:

X agreed to paint the house of Y.

According to the stipulation, X would use a
particular brand of paint.
The creditor is not bound to accept payment or performance by a third
person who has no interest in the fulfillment of the obligation, unless
there is a stipulation to the contrary.
_

Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of
the debtor, he can recover only insofar as the payment has been
beneficial to the debtor.
example:
Whoever pays on behalf of the debtor without
the knowledge or against the will of the latter
cannot compel the creditor to subrogate him in
his rights, such as those arising from a
mortgage, guaranty, or penalty.
example:

D borrowed from C P10,000. G, the

guarantor. Without the knowledge or
consent of D, S paid C P10,000.
Payment made by a third person who does not intend
to be reimbursed by the debtor is deemed to be a
donation, which requires the debtor’s consent. But
the payment is in any case valid as to the creditor
who has accepted it.
example:

David owes Charlie P1,000.00.

Without the intention of being
reimbursed, Sinio paid David’s
obligation. David had previously
accepted Sinio’s generosity.
In obligations to give, payment made by one who
does not have the free disposal of the thing due and
capacity to alienate it shall not be valid, without
prejudice to the provisions of article 1247 under the
title on “Natural Obligations”
example:

The free disposal of the thing due

If D is capacitated and he mortgaged his

piano to C to secure the payment of the
debt, and he gives the piano to T in payment
of another debt, the payment is not valid
because D cannot freely dispose of the
piano.
Payment shall be made to the person in
whose favor the obligation has been
constituted, or his successor in interest,
or any person authorized to receive it.
Person to whom payment shall be made

1. The creditor or obligee

2. His successor in interest
3. Any person authorized to received it
example:

D owes C P1,000. In this case, D must

pay C or any person authorized by C
or in case of his death, his heirs or any
person authorized by law.
Payment to a person who is incapacitated to
administer his property shall be valid if he
kept the thing delivered, or insofar as the
payment has been beneficial to him.
Payment made to a third person shall be valid insofar as it
has redounded to the benefit of the creditor. Such benefit
to the creditor need not be proved in the following cases:

1. If after payment, the third person acquires the

creditor’s rights;
2. If the creditor ratifies the payment to the third person;
3. If by the creditor’s conduct, the debtor has been led to
believe that the third person had authority to receive
the payment
Payment made in good faith to any
person in possession of the credit
shall release the debtor
Payment made to the creditor by the
debtor after the latter has been
judicially ordered to retain the debt
shall not be valid
The debtor of a thing cannot compel the creditor to
receive a different one, although the latter may be of
the same value as, or more valuable than that which
is due.
In obligations to do or not to do, an act or
forbearance cannot be substituted by another act or
forbearance against the obligee’s will.
Dation in payment whereby property is
alienated to the creditor in satisfaction of
a debt in money, shall be governed by
the law of sales
Four special payments:

Dation in payment
Application of payment
Payment by cession
Tender of payment and consignation