4.

Conventional period - agreed

by the parties. Ex. payment of
loan.
SECTION 2 5. Judicial period - fixed by the

Article 1193. Obligations court. Ex. when to move out

for whose fulfillment a day of the leased premises.

certain has been fixed, shall be 6. Definite period - fixed period

demandable only when that day 7. Indefinite period - not fixed

comes. period.

Obligation with a period – is one

whose effects or consequences are Article 1194. In case of loss,
subjected in one way or another to deterioration or improvement of
the expiration or arrival of said the thing before the arrival of the
period or term. day certain, the rules in article

Period – is a future and certain upon 1189 shall be observed.

the arrival of which the obligation

subject to it either arises or is
Article 1195. Anything paid or
terminated.
delivered before the arrival of
Kinds of period or term: the period, the obligor being

1. Suspensive period - obligation unaware of the period or

begins only from a day certain believing that the obligation has

upon arrival of the period. Ex. become due and demandable,

Pay the tuition fee when the may be recovered, with the fruits

student reached college. and interests.

2. Resolutory period - obligation Payment by mistake as the period

is valid up to a day certain and has not yet arrived.
terminates upon arrival of the
a. Debtor is entitled to recover
period. Ex. Giving of financial
the payment plus fruits and
support until reaching
interest. But debtor is
majority age.
presumed to know the period
3. Legal period - provided by
and must prove that he was
law. Ex. payment of taxes.
unaware of the period.
 b. NO RECOVERY in personal arrival of such period. Ex.
obligation (obligation to do) as Acceleration clause.
it is physically impossible to
recover services rendered.
Article 1197. If the obligation
does not fix a period, but from its
Article 1196. Whenever in an
nature and the circumstances it
obligation a period is designated,
can be inferred that a period was
it is presumed to have been
intended, the courts may fix the
established for the benefit of
duration thereof.
both the creditor and the debtor,
unless from the tenor of the Obligation has no period but period

same or other circumstances, it was intended.

should appear that the period Court is authorized to fix the period:
has been established in favor of
1) No period was fix but period is
one or of the other.
intended. Ex. construction of a house
Rebuttable presumption as to benefit
2) Duration of the period depends
of period
upon the will of the debtor. Ex.
Presumed for the benefit of both obligation to pay money.
creditor and debtor. Creditor cannot
collect or debtor cannot pay before
the arrival of the period. Article 1198. The debtor shall
lose every right to make use of
Ex. Banks imposed a penalty for
the period:
early termination of loan.
(1) Debtor becomes
Exceptions to the General Rule:
insolvent unless he
a. For the benefit of the debtor gives guaranty or
alone - debtor can pay early. security for the debt
Ex. “on or before” (2) Debtor does not furnish
b. For the benefit of the creditor the promised guaranty
alone - may demand fulfilment or security
even before the arrival of the (3) Debtor impairs the
term but cannot be forced to guaranty or security
accept payment before the
 unless he gives a new
one
(4) Breach of contract
(5) Attempts to abscond

OUTLINE NOTES

Date: March 19, 2020

Topic: Alternative Obligations and the performance of one
Joint & Solidary Obligations is sufficient.
2. Facultative obligation –
CHAPTER 3
one where only one
SECTION 3 prestation is due but

Article 1199. A person the debtor may

alternatively bound by different substitute another.

prestations shall completely

perform one of them.
Article 1200. The right of
Alternative obligation – is one choice belongs to the debtor,
wherein various prestations are due unless it has been expressly
but the performance of one of them granted to the creditor.
is sufficient as determined by the
Right of choices:
choice which, as a general rule,
belongs to the debtor. - Belongs to the debtor unless
expressly granted to the creditor.
Kinds of obligation according to
object: - No right to choose impossible
obligations, unlawful or not
1. Simple obligation – one where
the object of the obligation.
there is only one prestation.
2. Compound obligation – one - No more right to choose if
where there are two or more only one is practicable (Art. 1202).
prestations. It may be:
a. Conjunctive obligation –
one where there are Article 1201. The choice

several prestations and all shall produce no effect except

of them are due. from the time it has been

b. Distributive obligation – communicated.

one where two or more Choice must be communicated,

prestations is due. It may otherwise obligation remains
be: alternative.
1. Alternative obligation –
- Concurrence of creditor is not
one where several
required.
prestations are due but
- Notice either oral or in writing. been lost, or the compliance of
the obligation has become
impossible.
Article 1202. The debtor
Effects of loss of objects of obligation
shall lose the right of choice
(right of choice belongs to debtor)
when among the prestations
whereby he is alternatively a) All are lost - indemnity for
bound, only one is practicable. damages; basis of indemnity is the
value of the last thing which is
Effect when only one prestation is
disappeared plus other damages.
practicable. The obligation is still
alternative because the debtor has b) Some are lost - no liability since
still the right of choice. the debtor can still performed the
obligation.

Article 1203. If through the

creditor’s acts, the debtor cannot Article 1205. When the
make a choice according to the choice has been expressly given
terms of the obligation, the latter to the creditor, the obligation
may rescind the contract with shall cease to be alternative from
damages. the day when the selection has
been communicated to the
Debtor can rescind contract if
debtor.
through creditor’s fault, debtor
cannot make a choice. Rules in case of loss when the right
of choice belongs to the creditor.
Ex. Car or cash. Creditor sold the car
to another person. Debtor may a) Lost through fortuitous event -
choose car plus damages. creditor can choose from the
remaining. If all are lost, obligation
is extinguished (determinate thing)
Article 1204. The creditor
- Lost through debtor’s fault -
shall have a right to indemnity
choose the lost item or the existing
for damages when, through the
items plus damages in either case.
fault of the debtor, all the things
which are alternatively the
object of the obligation have
 Article 1206. When only the thing due to extinguishes
one prestation has been agreed the obligation.
upon, but the obligor may render
SECTION 4
another in substitution, the
obligation is called facultative Article 1207. The

obligation. concurrence of two or more

creditors or of two or more
Facultative obligation – is one where
debtors in one and the same
only one prestation has been agreed
obligation does not imply that
upon but the obligor may render
each one of the former has a
another in substitution.
right to demand, or that each
Alternative and facultative one of the latter is bound to
obligations distinguished render, entire compliance with
the prestation.
1. Number of prestations – In
the first, several prestations
are due but compliance with
Article 1208. If from the
one is sufficient, while in the
law, or the nature or the wording
second, only one prestation is
of the obligations to which the
due although the debtor is
preceding article refers, the
allowed to substitute it.
contrary does not appear, the
2. Right of choice – In the first,
credit or debt shall be presumed
the right of choice may be
to be divided into as may equal
given to the creditor or third
shares as there are creditors and
person, while in the second,
debtors.
the right to make the
substitution is given only to Kinds of obligations according to the

the debtor. number of parties:

3. Loss through a fortuitous 1. Individual obligation – one

event – In the first, the loss of where there is only one
one or more of the obligor or one oblige.
alternatives through a 2. Collective obligation – one
fortuitous event does not where there are two or more
extinguish the obligation, debtors and or two or more
while in the second, the loss of creditors.
Joint obligation – one where the Article 1209. If the division
whole obligation is to be paid or is impossible the right of the
fulfilled proportionately by the creditors may be prejudiced only
different debtors and is to be by their collective acts, and the
demanded proportionately by the debt can be enforced only by
different creditors. proceeding against all the
debtors.
Solidary obligation – one where each
one of the debtors is bound to Joint indivisible obligation – the
render, and each one of the creditors parties are merely
has a right to demand from any of proportionately liable.
the debtors, entire compliance with
- Indivisible - object is not
the prestation.
physically divisible into parts.
- Solidarity exists only when (a)
- Enforced by collective acts of
agreed, (b) law, (c) nature of
the creditors or proceeding
the obligation requires
against all the debtors.
solidarity.
- If there are damages claim,
- If not clear, presume joint
the other debtors are not
obligation as it imposes lesser
liable for the share of
burden.
insolvent debtors.
- Words to indicate joint
obligation: pro rata,
proportionately, “we promise Article 1210. The

to pay” signed by 2 or more indivisibility of an obligation

persons. does not necessarily give rise to

solidarity. Nor does solidarity of
- Words to indicate solidary
itself imply indivisibility.
obligation: jointly and/or
severally, solidaria, in Indivisibility and solidarity

solidum, together and/or distinguished:

separately, individually and/or 1. Indivisibility refers to the

collectively, “I promise to pay” prestation, while solidarity
signed by 2 or more persons. refers to the juridical or legal
tie that bind ties.
 2. In indivisible obligations, only subject to the same
the debtor guilty of breach of stipulations.
obligation is liable for
Solidarity not affected by diverse
damages, while in solidary
stipulations;
obligations, all of the debtors
are liable for the breach of the The essence of solidarity

obligation committed by a consists in the right of each creditor

debtor. to enforce the rights of all and the

3. Indivisibility can exist liability of each debtor answer for the

although there is only one liabilities to all. Therefore, there may

debtor and one creditor, while be a solidary obligation although the

in solidarity, there must be parties may not be bound in the

atleast two debtors or two same manner and by the same

creditors. periods and conditions.

4. In indivisible obligations, the

others are not liable in case of
Article 1212. Each one of
insolvency of one debtor,
the solidary creditors may do
while in solidary obligations,
whatever may be useful to the
the other debtors are
others, but not anything which
proportionately liable.
may be prejudicial to the latter.

Solidary creditors may do acts that

Article 1211. Solidarity may are useful and not prejudicial to the
exist although the creditors and other creditors:
the debtors may not be bound in
1) Ex. collect from 1 debtor
the same manner and by the
the whole obligation (useful)
same periods and conditions.
2) To waive action against a
Kinds of solidary obligation according
debtor (prejudicial)
to the legal tie:
3) Assign his rights to
a.) Uniform – when the parties
another (Art. 1213)
are bound by the stipulations
b.) Non – uniform or varied –
when the parties are not
Article 1213. A solidary
creditor cannot assign his rights
without the consent of the
others.
Solidary creditors cannot assign his
rights without the consent of the
others.
Ex. A is indebted to solidary
creditors B and C, C, cannot assign
his rights to D, without the consent
of B. the reason rest on the extra
ordinary mutual trust and confidence
among solidary creditors and it may
happen that the other creditor may
not want dealings with the person to
whom the debts will be assigned.
Article 1214. The debtor
may pay any one of the solidary
creditors; but if any demand,
judicial or extrajudicial, has been
made by one of them, payment
should be made to him.
To whom payment is made:
1) To any solidary creditor
2) Otherwise, to one who
made a judicial or extrajudicial
demand (avoid confusion or
acknowledge a diligent
creditor)
Article 1215. Novation,
compensation, confusion or
remission of the debt, made by
any of the solidary creditors or
with any of the solidary debtors,
shall extinguish the obligation,
without prejudice to the
provision of article 1219.
Liability in case of novation,
compensation, confusion or merger
(extinguishment of obligation) by a
solidary creditor
1) Solidary creditor is liable
to the others to give their
share in the credit
corresponding to them.
Article 1216. The creditor
may proceed against any one of
the solidary debtors or some or
all of them simultaneously. The
demand made against one of
them shall not be an obstacle to
those which may subsequently
be directed against the others,
so long as the debt has not been
fully collected.
Right of creditor to proceed against
any solidary debtor.
1) If one solidary debtor has not
paid in full, creditor can still
proceed against the other
solidary debtor.
 Article 1217. Payment made Effect of payment after obligation
by one of the solidary debtors becomes illegal or prescribed.
extinguishes the obligation. If
1) Solidary debtor is not
two or more solidary debtors
entitled to reimbursement
offer to accept.

Effects of payment by a solidary

debtor: Article 1219. The remission
made by the creditor of the share
(1) Between the solidary
which affects one of the solidary
debtors and creditors –
debtors does not release the
payment made by one of
latter from his responsibility
the solidary debtors
towards the co – debtors, in case
extinguishes the obligation.
the debt had been totally paid by
(2) Among the solidary debtors
anyone of them before the
– after payment of the
remission was effected.
debt, the paying solidary
debtor an demand Effect of remission of obligation of

reimbursement from his one solidary debtor made by the

co- debtors for their solidary creditor

proportionate shares with 1) If payment is made first by

(legal) interest only from the other solidary debtor,
the time of payment. the remission has no
(3) Among the solidary effect. Paying debtor is
creditors – the receiving entitled to reimbursement.
creditor is jointly liable to
the others for their
corresponding shares. Article 1220. The remission
of the whole obligation obtained
by one of the solidary debtors,
Article 1218. Payment by a does not entitle him to
solidary debtor shall not entitle reimbursement from his co –
him to reimbursement from his debtors.
co – debtors if such payment is
Remission of the whole obligation
made after the obligation has
through one solidary debtor
prescribed or become illegal.
 1) Solidary debtor is not (2) Defenses personal to, or
entitled to ask for which pertain to share of,
reimbursement from his debtor sued
co-debtors. (3) Defenses personal to other
solidary debtors

Article 1221. If the thing

has been lost or if the prestation
has become impossible without
the fault of the solidary debtors,
the obligation shall be
extinguished.

Rules in case of loss or prestation

becomes impossible

1) Same rules in case of loss

2) Solidary debtors who are

not guilty can recover from
the guilty co-debtor.

Article 1222. A solidary

debtor may, in actions filed by
the creditor, avail himself of all
defenses which are derived from
the nature of the obligation and
of those which are personal to
him, or pertain to his own share.

Defenses available to a solidary

debtor:

(1) Defenses derived from the

nature of the obligation
 things which are the object
of the obligation.
(2) Quantitative division – one
OUTLINE NOTES based on quantity rather

Date: March 24, 2020 than on quality.

(3) Ideal or intellectual division
Topic: Divisible and Indivisible
– one which exists only in
Obligations and Obligations with a
the minds of the parties.
Penal Clause
Kinds of indivisibility:
CHAPTER 3
1. Legal indivisibility – where a
SECTION 5
specific provision of law
Article 1223. The declares as indivisible,
divisibility or indivisibility of the obligations, which by their
things that are the object of nature, are divisible.
obligations in which there is only 2. Conventional indivisibility –
one debtor and only one creditor where the will of the parties
does not alter or modify the makes as indivisible,
provisions of Chapter 2 of this obligations which, by their
title. nature, are divisible.
3. Natural indivisibility – where
Divisible Obligation – is one the
the nature of the object or
object of which, in its delivery or
prestation does not admit of
performance, is capable of partial
division.
fulfillment.

Indivisible Obligation – is one the

object of which, in its delivery or Article 1124. A joint
performance, is not capable of indivisible obligation gives rise
partial fulfillment. to indemnity for damages from
the time anyone of the debtors
Kinds of division:
does not comply with his
(1) Qualitative division – one undertaking.
based on quality, not on
Effect of non-compliance by a debtor
number or quantity of the
in a joint indivisible obligation.
 1) Ex. delivery of car. Obligations deemed divisible:

2) Creditor can demand (1) Obligations which have for

damages to the debtor who their object the execution
does not comply with the of a certain number of days
obligation. of work
(2) Obligations which have for
3) Debtors who are willing to
their object the
comply are not liable beyond
accomplishment of work by
the corresponding portion of
metrical units
the price of the thing or the
(3) Obligations which by their
value of the services.
nature are susceptible of
partial performance

Article 1225. For the

purposes of the preceding SECTION 6
articles, obligations to give
Article 1226. In obligations
definite things and those which
with a penal clause, the penalty
are not susceptible of partial
shall substitute the indemnity for
performance shall be deemed to
damages and the payment of
be indivisible.
interests in case of non –
Obligations deemed indivisible: compliance, if there is no

(1) Obligations to give definite stipulation to the contrary.

things Principal Obligation – is one which

(2) Obligations which are not can stand by itself and does not
susceptible of partial depend for its validity and existence
performance upon another obligation.
(3) Obligations provided by law
Accessory obligation – is one which
to be indivisible even if
is attached to a principal obligation
thing or service is
and, therefore, cannot stand alone.
physically divisible
(4) Obligations intended by the Obligation with a penal clause – is
parties to be indivisible one which contains an accessory
even if thing or service is undertaking to pay a previously
physically divisible stipulated indemnity in case of
breach of the principal prestation, (b) Punitive penal clause
intended primarily to induce its – when the penalty
fulfillment. is imposed merely as
punishment for
Penal clause – is an accessory
breach
undertaking attached to an
(3) As to its demandability or
obligation to assume greater liability
effect:
in case of breach.
(a) Subsidiary or
Purposes of general penal clause: alternative penal

1. To insure their performance by clause – when only

creating an effective against the penalty can be

breach, making the enforced

consequences of such breach (b) Joint or cumulative

as onerous as it may be penal clause – when

possible. both the principal

2. To substitute a penalty for the obligation and the

indemnity for damages and penal clause can be

the payment of interests in enforced

case of non – compliance.

Kinds of penal clause: Article 1227. The debtor

cannot exempt himself from the
(1) As to its origin:
performance of the obligation by
(a) Legal penal clause –
paying the penalty, save in the
when it is provided
case where this right has been
by law
expressly reserved for him.
(b) Conventional penal
clause – when it is Penalty not a substitute for

provided for by performance.

stipulation of the - Debtor cannot pay penalty

parties as a substitute for
(2) As to its purpose: performance except when
(a) Compensatory penal reserved for him.
clause – when the
Ex. Remove the
penalty takes the
garbage after vacating
place of damages
 the leased premises or When Penalty may be reduced by
pay penalty taken from the courts
the security deposit.
1) When there is partial or
- Creditor cannot demand irregular performance.
fulfilment and penalty at
2) When the penalty is
the same time unless it is
iniquitous or unconscionable. Ex.
clearly granted to him. Ex.
75% penalty
construction of a house
with penalty for delay.

Article 1230. The nullity of

the penal clause does not carry
Article 1228. Proof of
with it that of the principal
actual damages suffered by the
obligation.
creditor is not necessary in order
that the penalty may be Effect of nullity of the penal clause

demanded. If only the penal clause is

Penalty demandable without proof of void, the principal obligation remains

actual damages valid and demandable. The penal

clause is just disregarded.
In an obligation with a penal
clause all that the creditor has to Effect of nullity of the principal

prove, to enforce the penalty, is the obligation

violation of the obligation by the If the principal obligation is

debtor. It is not necessary to adduce void, the penal clause is likewise
evidence to prove losses and void. The reason is that the clause
damages suffered by the creditor or cannot stand alone without the
the extent of the same. principal obligation to which it is
subordinated.

Article 1229. The judge

shall equitably reduce the
penalty when the principal
obligation has been partly or
irregularly complied with by the
debtor.
 but also the performance, in any
other manner, of an obligation.

Payment – may consist of not only in

the delivery of money but also giving
of a thing, the doing of an act, or not

OUTLINE NOTES doing of an act.

Date: March 26, 2020 Article 1233. A debt shall

not be understood to have been
Topic: Extinguishment of Obligations
paid unless the thing or service
“General Provisions” and “Payment
in which the obligation consists
or Performance” (Article 1231 –
has been completely delivered or
1251)
rendered, as the case may be.
CHAPTER 4
Extinguishment of debt
SECTION 1
1. Debt includes to deliver
Article 1231. Obligations money, to deliver a thing, to do an
are extinguished: act, or not to do an act.

(1) Payment or 2. Debt is extinguished if

performance thing or service is completely
(2) Loss delivered or rendered.
(3) Condonation or
remission
(4) Confusion or merger Article 1234. If the

(5) Compensation obligation has been substantially

(6) Novation performed in good faith, the

(7) Other causes i.e. obligor may recover as though

annulment, rescission, there had been a strict and

fulfilment of a resolutory complete fulfillment, less

condition, & prescription damages suffered by the obligee.

Requisites for the application:

Article 1232. Payment means (1) There must be substantial

not only the delivery of money performance

 (2)The obligor must be in good b. Any person interested in
faith the fulfilment of the obligation
(guarantor)

c. A third person authorized to

Article 1235. When the
make payment.
obligee accepts the performance,
knowing its incompleteness or
irregularity, and without
2. If a third person pays
expressing any protest or
without the knowledge or against
objection, the obligation is
debtor’s will - he can recover only
deemed fully complied with.
the amount paid (right of
Requisites for the application: reimbursement). No right of
subrogation.
(1) The oblige knows that the
performance is incomplete or 3. If a third person pays with
irregular the knowledge of the debtor - he can
(2) He accepts the performance recover the amount paid plus right of
without expressing any protest subrogation or acquires the rights of
or objection a creditor, i.e. mortgage, guaranty
or penalty.

Article 1236. The creditor is

not bound to accept payment or Article 1237. Whoever pays
performance by a third person on behalf of the debtor without
who has no interest in the the knowledge or against the will
fulfillment of the obligation, of the latter cannot compel the
unless there is a stipulation to creditor to subrogate him in his
the contrary. rights.

From whom creditor must accept Subrogation and reimbursement

payment distinguished:

1. Creditor is bound to accept (1) In subrogation, the person

payment or performance from the who pays for the debtor is put
following: into the shoes of the creditor.
(2) In reimbursement, the third
a. Debtor
person entitled by reason of
 payment has merely the bare Capacity to alienate – means that
right to be refunded to the the person is not incapacitated to
extent provided in the second enter into contracts and for that
paragraph of Article 1236 matter, to make a disposition of the
without the right to the thing due.
guarantees and securities of
the original obligation.
Article 1240. Payment shall
Article 1238. Payment made
be made to the person in whose
by a third person who does not
favor the obligation has been
intend to be reimbursed by the
constituted, or his successor in
debtor is deemed to be a
interest, or any person
donation, which requires the
authorized to received it.
debtor’s consent.
To whom payment is made.
No intention to be reimbursed -
considered a donation. 1. Creditor

1. Donation requires debtor’s 2. Successor in interest.

consent. 3. Authorized representative

2. Whether with consent or

not, payment is valid as far as the
Article 1241. Payment to a
creditor is concerned.
person who is incapacitated to
administer his property shall be

Article 1239. In obligations valid if he has kept the thing

to give, payment by one who delivered, or insofar as the

does not have the free disposal payment has been beneficial to

of the thing due and capacity to him.

alienate it shall not be valid. Effect of payment to an incapacitated

Free disposal of the thing due – person (minor) and effect of

means that the thing to be delivered payment to a third person.

must not be subject to any claim or 1. Valid if thing is kept or

lien or encumbrance of a third beneficial to him (incapacitated
person. person)
 2. Valid if it redounded to the Payment made subsequently
benefit of the creditor. Ex. creditor is by the debtor – stranger shall not be
indebted to the third person. valid if the plaintiff wins the case and
cannot collect from the debtor to
3. No proof of benefit is
whom the payment is made.
required:

a) Third person acquires

creditor’s rights Article 1244. The debtor of a
thing cannot compel the creditor
b) Ratification by the creditor
to receive a different one,
c) Estoppel (debtor is made although the latter may be of the
to believe third person is authorized same value as, or more valuable
to receive payment) than that which is due.

Creditor cannot be forced to accept

Article 1242. Payment another object even if it is more

made in good faith to any person valuable. (Determinate thing)

in possession of the credit shall Example: Obliged to deliver a

release the debtor. Kia vehicle. Debtor cannot be

Effect of payment in good faith to compel creditor to accept a Ferrari.

third person in possession of credit

1. Payment is valid. Article 1245. Dation in

Obligation is extinguished. payment whereby property is

Ex. check payable to cash or alienated to the creditor in

promissory note payable to bearer. satisfaction of a debt in money,

shall be governed by the law of
sales.
Article 1243. Payment
Special forms of payment:
made to the creditor by the
debtor after the latter has been a.) Dation in payment

judicially ordered to retain the b.) Application of payments

debt shall not be valid. c.) Payment by cession

d.) Tender of payment and
When payment to creditor not valid:
consignation
Dation in payment (adjudication or regard to judicial costs, the Rules
dacion en pago) – is the conveyance of Court shall govern.
of ownership of a thing as an
Extrajudicial expenses of payment.
accepted equivalent of performance.
-Payable by the debtor.
Governing law – the law of sales
Example: notarial fees.
governs because dation in payment
may be considered a specie of sale in -Judicial expenses are paid by

which the amount of the money debt the losing party.

becomes the price of the thing Judicial costs – are the statutory
alienated. amounts allowed to a party to an
action for his expenses incurred in
the action.
Article 1246. When the
obligation consists in the
delivery of an indeterminate or Article 1248. Unless there
generic thing, whose quality and is an express stipulation to that
circumstances have not been effect, the creditor cannot be
stated, the creditor cannot compelled partially to receive the
demand a thing of superior prestations in which the
quality. obligation consists.

Rule of the medium quality; When partial performance allowed

Article 1246 is a principle of There are cases, however,

equity in that it supplies justice in when partial performance may be
cases where there is lack of precise either required or insisted. Among
declaration in the obligation. It is these cases are:
always hard to find one thing that is
1) When there is an express
exactly similar to another.
stipulation to that effect;
2) When the debt is in part

Article 1247. Unless it is liquidated and in part

otherwise stipulated, the unliquidated; and

extrajudicial expenses required 3) When the different prestations

by the payment shall be for the in which the obligation

account of the debtor. With consists are subject to

 different terms or conditions
which affect some of them.
Article 1250. In case an
extraordinary inflation or
deflation of the currency
Article 1249. The payment
stipulated should supervene, the
of debts in money shall be
value of the currency at the time
made in the currency
of the establishment of the
stipulated, and if it is not
obligation shall be the basis of
possible to deliver such
payment, unless there is an
currency, then in the currency
agreement to the contrary.
which is legal tender in the
Philippines. Inflation – is a sharp sudden
increase of money or credit or both
Legal tender – is that currency which
without a corresponding increase in
if offered by the debtor in the right
business transactions.
amount, the creditor must accept in
payment of a debt in money. Deflation – is the reduction in
volume and circulation of the
Payment by means of instruments of
available money or credit, resulting
credits;
in a decline of the general price
(1) Right of creditor to refuse or level; it is the opposite of inflation.
accept – promissory notes,
Effect of extraordinary inflation or
bills of exchange and other
deflation:
commercial documents are not
legal tender and, therefore, 1. Payment shall be based on
the creditor cannot be the value of the currency at the time
compelled to accept them. of the establishment of the obligation
(2) Effect on obligation –
2. Payment is based on the
payment by means of
current value of the currency if there
mercantile documents does
is an agreement.
not extinguish the obligation:
 Until they have been Example: loan by the corp. in

cashed; US dollars and payable in US dollars.

 Unless they have been

impaired through the
fault of the creditor.
 Article 1251. Payment shall
be made in the place designated
in the obligation.

There being no express

stipulation and if the
undertaking is to deliver a
determinate thing, the payment
shall be made wherever the
thing might be at the moment
the obligation was constituted.

Where payment is made:

1. Place designated

2. Where the thing is situated

3. Domicile of the debtor

 Requisites of application of
payments:

(1)There must be one debtor and

one creditor;
(2)There must be two or more
debts;
(3)The debts must be of the
same kind;
OUTLINE NOTES (4)The debts to which payment
made by the debtor has been
Date: March 31, 2020
applied must be due; and
Topic: Application of Payments, (5)The payment made must not
Payment by Cession and Tender of be sufficient to cover all the
Payment and Consignation (Article debts.
1252 – 1261)
Application as to debts not yet
CHAPTER 4 due:

SUBJECTION 1:  There is a stipulation that

‘APPLICATION OF PAYMENTS’ the debtor may so apply;

or
Article 1252. He who has
 It is made by the debtor or
various debts of the same kind in
creditor, as the case may
favor of one and the same
be, for whose benefit the
creditor, may declare at the time
period has been
of making the payment, to which
constituted.
of them the same must be
applied.

Application of payments – is the Article 1253. If the debt

designation of the debt to which produces interest, payment of

should be applied the payment made the principal shall not be deemed

by a debtor who has various debts of to have been made until the

the same kind in favor of one and interests have been covered.

the same creditor. Interest is paid ahead of the

principal amount:
 The rule laid down in the ‘PAYMENT BY CESSION’
article is mandatory. Hence, the
Article 1255. The debtor
debtor cannot choose to credit his
may cede or assign his property
payment to the principal before the
to his creditors in payment of his
interest is paid. The payment must
debts. This cession, unless there
be applied first to the interest and
is stipulation to the contrary,
whatever balance is left can be
shall only release the debtor
credited to the principal. The creditor
from responsibility for the net
can refuse an application of the
proceeds of the thing assigned.
debtor made contrary to the
provision of Article 1253. Payment by cession – is another
special form of payment. It is the
assignment or abandonment of all
Article 1254. When the the properties of the debtor for the
payment cannot be applied in benefit of his creditors in order that
accordance with the preceding the latter may sell the same apply
rules, or if application cannot be the proceeds thereof to the
inferred from other satisfaction of their credits.
circumstances, the debt which is
 Payment by conveying
most onerous to the debtor,
ownership of a thing.
among those due, shall be
 Difference with dation in
deemed to have been satisfied.
payment, in cession debtor is
Application of payment to most insolvent, two or more
onerous debt: creditors.

In case no application of
payment has been made by the SUBJECTION 3:
debtor and the creditor, then the
‘TENDER OF PAYMENT AND
payment shall be applied to the most
CONSIGNATION’
onerous debt, and if the debts are of
the same nature and burden, to all Article 1256. If the creditor

of them proportionately. to whom tender of payment has

been refused without just cause
to accept it, the debtor shall be
SUBJECTION 2: released from responsibility by
the consignation of the thing or Requirement of Notice to persons
sum due. interested in the fulfilment of the
obligation:
Tender of payment – is the act, on
the part of the debtor, of offering to 1. Persons interested in the
the creditor the thing or amount due. fulfilment of the obligation are:
guarantors, mortgagees, solidary
Consignation – is the act of
debtors, solidary creditors.
depositing the thing or amount due
with the proper court when the 2. Absence of notice -
creditor does not desire or cannot consignation is void.
receive it, after complying with the
formalities required by law.
Article 1258. Consignation
shall be made by depositing the
When no need to make a tender of things due at the disposal of
payment: judicial authority, before whom
the tender of payment shall be
a) Creditor is absent or
proved, in a proper case, and the
unknown
announcement of the
b) Creditor is incapacitated. consignation in other cases.

c) Creditor refuses to give a Consignation must be with proper

receipt judicial authority:

d) Two or more persons claim Consignation, by depositing

the same right to collect the thing or sum due with the proper

e) Title of the obligation has judicial authority, is necessary to

been lost. effect payment.

Article 1257. In order that Article 1259. The expenses

the consignation of the thing due of consignation, when properly

may release the obligor, it must made, shall be charged against

first be announced to the the creditor.

persons interested in the When consignation deemed properly

fulfillment of the obligation. made:
 (1) When the creditor accepts the Article 1261. If, the
thing or sum deposited, consignation having been made,
without objection, as payment the creditor should authorize the
of the obligation; debtor to withdraw the same, he
(2) When the creditor questions shall lose every preference which
the validity of the he may have over the thing.
consignation, and the court,
Effect of withdrawal of thing
after hearing, declares that it
consigned with authority from
has been properly made; and
creditor:
(3) When the creditor neither
accepts nor questions the 1. Creditor losses preferential

validity of the consignation, right over the thing.

and the court after hearing, 2. Co-debtors, guarantors

orders the cancellation of the and sureties are released from
obligation. liability.

Article 1260. Once the

consignation has been duly
made, the debtor may ask the
judge to order the cancellation of
the obligation.

Rights of the debtor after

consignation

 Ask the judge to order the

cancellation of the obligation.
 May withdraw the amount
consigned if not yet withdrawn
by the creditor or before the
judge declared the
cancellation of the obligation.
 a) Provided by law

b) Agreed by parties

c) Nature requires
assumption of risk

d) Arises from a crime. Ex.

return of stolen item.
OUTLINE NOTES

Date: April 2, 2020

Article 1263. In an
Topic: Loss of the Thing Due, obligation to deliver a generic
Condonation or Remission of the thing, the loss or destruction of
Debt (Article 1262 – 1274) anything of the same kind does

CHAPTER 4 not extinguish the obligation.

SECTION 2 Loss of the thing (generic or

indeterminate):
Article 1262. An obligation
which consists in the delivery of  Obligation is not extinguished

a determinate thing shall be even due to fortuitous event.

extinguished if it should be lost  Based on the principle

or destroyed without the fault of “generic thing never perishes.”

the debtor, and before he has

incurred in delay.
Article 1264. The courts shall
Obligation is extinguished: determinate whether, under the

a) Loss is without fault of the circumstances, the partial loss of

debtor the object of the obligation is so

important as to extinguish the
b) Debtor is not guilty of
obligation.
delay
Effect of partial loss of a specific
c) Loss due to fortuitous
thing:
event
There is partial loss when only
Obligation is not extinguished (even
a portion of the thing is lost or
without fault or delay):
destroyed or when it suffers
depreciation or deterioration. Partial obligation becomes legally or
loss is equivalent of difficulty of physically impossible. The
performance in obligations to do. impossibility of performance will
result in the extinction of the
obligation.
Article 1265. Whenever the
Kinds of impossibility:
thing is lost in the possession of
the debtor, it shall be presumed (1) Physical impossibility – takes
that the loss was due to his fault, place when the obligor dies or
unless there is proof to the becomes physically
contrary. incapacitated to perform the
obligation.
Presumption of fault in case of loss
(2) Legal impossibility – occurs
of the thing in possession of debtor:
when the obligation cannot be
The article establishes a performed because it is
disputable presumption of fault rendered impossible by
whenever the thing to be delivered is provision of law, although
lost in the possession of the debtor. physically it may be possible
This presumption is reasonable of performance.
because the debtor who has the
custody and care of the thing can
easily explain the circumstances of Article 1267. When the
the loss. service has become so difficult
as to be manifestly beyond the
contemplation of the parties, the
Article 1266. The debtor in obligor may also be released
obligations to do shall also be therefrom, in whole in part.
released when the prestation
Effect of difficulty of performance:
becomes legally or physically
impossible without the fault of When the performance of the
the obligor. service has become so difficult as to
be manifestly beyond the
Effect of impossibility of
contemplation of both parties, the
performance:
court is authorized to release the
This article refers to a case obligor in whole or in part.
when, without the debtor’s fault, the
 Article 1268. When the SECTION 3
debt of a thing certain and
Article 1270. Condonation
determinate proceeds from a
or remission is essentially
criminal offense, the debtor shall
gratuitous and requires the
not be exempted from the
acceptance by the obligor. It
payment of its price, whatever
may be made expressly or
may be the cause for the loss.
impliedly.
Effect of fortuitous event where
Condonation or remission – is the
obligation proceeds from a criminal
gratuitous abandonment by the
offense:
creditor of his right against the
Article 1268 is another debtor.
instance where a fortuitous event
Requisites o condonation or
does not exempt the debtor from
remission:
liability. The obligation subsists
except when the creditor refused to (1) It must be gratuitous;

accept the thing without justification, (2) It must be accepted by the

after it had been offered to him. obligor;

(3) The parties must have
capacity;
Article 1269. The obligation (4) It must be not be inofficious;
having been extinguished by the and
loss of the thing, the creditor (5) If made expressly, it must
shall have all the rights of action comply with the forms of
which the debtor may have donations.
against third persons by reason
of the loss.
Article 1271. The delivery of a
Right of creditor against third
private document evidencing a
persons:
credit, made voluntarily by the
 Against third persons who creditor to the debtor, implies
cause the loss or destruction. the renunciation of the action
Example: To sue for which former had against the
damages. latter.
Delivery of document evidencing the
credit:
a) Debt is presumed renounce.
b) Disputable presumption.
c) Debtor or his heirs can prove
that delivery of document was
due to payment. Ex. when
heirs of creditor questioned
the donation.
Article 1272. Whenever the
private document in which the
debt appears is found in the
possession of the debtor, it shall
be presumed that the creditor
delivered it voluntarily, unless
the contrary is proved.
Presumption in case document found
in possession of debtor:
If the document is later found
in the hands of the debtor and it is
not known how he came
possession of the same,
presumption is that it was voluntarily
delivered by the creditor.
Article 1273.
renunciation of the principal debt
shall extinguish the accessory
obligations; but the waiver of the
latter shall leave the former in
force.
Effect of renunciation of the principal
debt of the accessory obligation:
The above provision follows
the rule that the accessory follows
the principal. While the accessory
obligations cannot exist without the
principal obligation, the latter may
exist without the former.
Article 1274. It is
presumed that the accessory
obligation of pledge has been
remitted when the thing pledged,
after its delivery to the creditor,
is found in the possession of the
debtor, or of a third person who
owns the thing.
Presumption in case thing pledged
found in possession of debtor:
In a contract of pledge, it is
into
necessary that the thing pledged be
the
place in the possession of the
creditor, or of a third person by
common agreement. A third person
who is not a party to the principal
obligation may secure the latter by
The
pledging his own property.
 Article 1276. Merger which
takes place in the person of the
principal debtor or creditor
benefits the guarantors.

Effect of merger in the person of

principal debtor or creditor:

Merger in the person of the

principal debtor or creditor
extinguishes the obligation. Hence,
OUTLINE NOTES the accessory obligation of guaranty
is also extinguished in accordance
Date: April 7, 2020
with the principle that the accessory
Topic: Confusion or Merger of Rights follows the principal.
and Compensation (Article 1275 –
1290)
Article 1277. Confusion
CHAPTER 4
does not extinguish a joint
SECTION 4 obligation except as regards the

Article 1275. The obligation share corresponding to the

is extinguished from the time the creditor or debtor in whom the

characters of creditor and debtor two characters concur.

are merged in the same person. Effect of merger in joint obligation:

Confusion or merger – is the  Affects the co-debtor only

meeting in one person of the whom the two characters of
qualities of creditor and debtor with creditor and debtor are
respect to the same obligation. merged.

Requisites of confusion;  While in solidary obligation,

extinguishes the entire
(1) It must take place between
obligation.
the principal debt and
creditor; and
(2) It must be complete SECTION 5
 Article 1278. Compensation (1) That each one of the
shall take place when two obligors be bound
persons, in their own right, are principally, and that he be
creditors and debtors of each at the same time a
other. principal creditor of the
other;
Compensation – is the
(2) That both debts
extinguishment to the concurrent
consist in a sum of money,
amount of the debts of two persons
or if the things due are
who, in their own right, are debtors
consumable, they be of the
and creditors of each other.
same kind, and also of the
Compensation and confusion same quality if the latter
distinguished: has been stated;

(1) In confusion, there is only (3) That two debts be

one person who is a creditor due;

and debtor of himself, while in (4) That they be

compensation, there are two liquidated and

persons involved, each of demandable;

whom is a debtor and a (5) That over neither of

creditor of the other; them there be any

(2) In confusion, there is but one retention or controversy,

obligation, while in commenced by third

compensation, there are two persons and communicated

obligations; and in due time to the debtor.

(3) In confusion, there is Requisites of compensation:

impossibility of payment,
 The parties are bound
while in compensation, there
principally to each other.
is indirect payment.
 Either debt is sum of
money or thing of the

Article 1279. In order that same kind and quality.

compensation may be proper, it  Both debts are due.

is necessary:  Liquidated (determine) and

demandable.
  No controversy (3rd party Article 1282. The parties may
claim) commenced by third agree upon the compensation of
persons. debts which are not yet due.

Voluntary compensation - by
agreement of the parties.
Article 1280.
Notwithstanding the provisions
of the preceding article, the
Article 1283. If one of the
guarantor may set up
parties to a suit over an
compensation as regards what
obligation has a claim for
the creditor may owe the
damages against the other, the
principal debtor.
former may set it off by proving
Compensation benefits guarantor: his right to said damages and the
amount thereof.
This article is an exception to
the general rule that only the Judicial Compensation – may also
principal debtor can set up against take place when so declared by a
his creditor what the latter owes final judgement of a court in a suit.
him.

Article 1284. When one or

Article 1281. Compensation both debts are rescissible or
may be total or partial. When the voidable, they may be
two debts are of the same compensated against each other
amount, there is a total before they are judicially
compensation. rescinded or avoided.

Two kinds of compensation: Compensation of rescissible or

voidable debts:
(1) Total compensation – debts of
same amount. Recissible and voidable
(2) Partial compensation – debts obligations are valid until they are
of different amounts. judicially rescinded or avoided.

Article 1285. The debtor

who has consented to the
assignment of rights made by a
creditor in favor of a third
Article 1287. Compensation
person, cannot set up against the
shall not be proper when one of
assignee the compensation
the debts arises from a
which would pertain to him
depositum or from the
against the assignor.
obligations of a depositary or of
When compensation has taken place a bailee in commodatum.
after assignment:
Instances when legal compensation
1) Assignment with the consent is not allowed by law:
of debtor.
(1) Where one of the debts arises
2) Assignment with the
from a depositum.
knowledge but without the
(2) Where one of the debts arises
consent of debtor.
from a commodatum.
3) Assignment without the
(3) Where one of the debts arises
knowledge of the debtor.
from a claim for support due
by gratuitous title.
(4) Where one of the debts
Article 1286. Compensation
consists in civil liability arising
takes place by operation of law,
from a penal offense.
even though the debts may be
payable at different places, but
there shall be an indemnity for
Article 1289. If a person
expenses of exchange or
should have against him several
transportation to the place of
debts which are susceptible of
payment.
compensation, the rules on the
Compensation of debts payable at application of payments shall
different places: apply to the order of the
compensation.
1. Applies to legal
compensation. Compensation of several debts:

2. There shall be indemnity for  Rules on application of

expenses of exchange (currency) or payment applies to
transportation to the place of compensation.
payment.
 Article 1290. When all the
requisites mentioned in article
1279 are present, compensation
takes effect by operation of law,
and extinguishes both debts to
the concurrent amount, even
though the creditors and debtors
are not aware of the
compensation.

Consent of parties not required in

legal compensation:

(1) Compensation takes place

automatically by mere
operation of law.
(2) Full legal capacity of parties
not required.
 (1) According to origin:
a) Legal - by operation of law
b) Conventional - by agreement
of the parties
(2) According to subject:
a) Personal - object is changed
b) Real - parties are changed

Article 1292. In order that an

obligation may be extinguished
by another which substitutes the
OUTLINE NOTES
same, it is imperative that it be
Date: April 9, 2020 so declared in unequivocal

Topic: Novation (Article 1291 – terms.

1304) Requisites of novation:

CHAPTER 4  A previous valid obligation;

SECTION 6  Capacity and intention of the

parties to modify or extinguish
Article 1291. Obligations may
the obligation;
be modified by:
 The modification or
(1) Changing their object extinguishment of the
or principal conditions; obligation; and
(2) Substituting the  The creation of a new valid
person of the debtor; obligation.
(3) Subrogating a third
Novation is not presumed:
person in the rights of the
creditor. It must be clearly and
unmistakably established either by
Novation – is the total or partial
the express agreement of the parties
extinction of an obligation through
or acts of equivalent import.
the creation of a new one which
substitutes it.

Kinds of novation:
 Article 1293. Novation to any liability on the part of the
which consists in substituting a original debtor.
new debtor in the place of the
original one, may be made even
without the knowledge or
against the will of the latter, but
not without the consent of the
creditor.

Kinds of personal novation:

 Substitution – when the

person of the debtor is
substituted
 Subrogation – when a third
person is subrogated in the
rights of the creditor.

Kinds of substitution:

1) Expromission – which takes

place when a third person of
his own initiative and without
the knowledge.
2) Delegacion – which takes
place when the creditor
accepts a third person to take
place of the debtor at the
instance of the latter.

Article 1294. If the

substitution is without the
knowledge or against the will of
the debtor, the new debtor’s
insolvency or non-fulfillment of
the obligation shall not give rise