Genesis Meneses LAW20013

BSA 1-3 Atty. Campanilla,

Pearlito

Section 2. Loss of the Thing Due

Article 1262. An obligation which consists in the delivery of a

determinate thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous
events, the loss of the thing does not extinguish the obligation, and he
shall be responsible for damages. The same rule applies when the nature
of the obligation requires the assumption of risk. (1182a)

Article 1262 Requisites

1. The thing due must be a determinate thing
2. The loss of the thing due is without the fault of debtor
3. There must be no delay in the part of debtor

Losing the Thing Due will not Extinguish Obligations

1. If the law provides.
2. If the stipulation provides
3. If the nature of the obligation requires risk
4. If the obligation arises from a crime

Article 1263. In an obligation to deliver a generic thing, the loss or

destruction of anything of the same kind does not extinguish the
obligation.

Losing a Generic Thing

Losing a generic thing will not extinguish the obligation even if it was lost due to a
fortuitous event. By the rule of genus nunquam perit (genus never perishes), the debtor could
still be compelled to deliver because there are many of the same kind.
Example
S obliged to give B an iPhone 9s but it was lost due to a robbery. B can
still compel S to give him an iPhone 9s but if S obliged himself to give B his
iPhone 9s and was lost due to a flood, the obligation is extinguished.
Situation Example
X obtained a loan from Y secured with a mortgage on the wheats in his
field. The flood destroyed his land and killed the crops. Was X’s obligation
extinguished?
No. The wheat in his field may be considered as a determinate thing but it
is not the thing due. The thing due is the loan payable and the wheat only stands
as a security in case he can’t pay the loan.

Article 1264. The courts shall determine whether, under the

circumstances, the partial loss of the object of the obligation is so
important as to extinguish the obligation. (n)

Partial Loss of a Specific Thing

 The partial loss may refer to deterioration, depreciation or a portion was destroyed. In
such cases, the courts will be the one to determine if the damages is sufficient for extinguishing
the obligation.
Example
X obliged to give Y a specific donkey. The donkey was involved in an
accident that resulted to its leg being fractured. The injury is permanent thus the
obligation is extinguished. If the accident was due to the fault of X, he is to pay
the equivalent value to Y plus damages. If Y’s intention for the donkey is merely
for studying its internal organs then the injury is not so deep the it will extinguish
the obligations. If the accident was due to the fault of X, he still needs to deliver
the horse but he will pay damages.

Article 1265. Whenever the thing is lost in the possession of the debtor,
it shall be presumed that the loss was due to his fault, unless there is proof
to the contrary, and without prejudice to the provisions of Article 1165. This
presumption does not apply in case of earthquake, flood, storm or other
natural calamity. (1183a)

Fault of Debtor is Presumed

The fault of debtor is presumed when the thing due is lost while still in his possession.
The assumption was based on the fact that the thing due is in the custody of the debtor and
therefore shall take care of the thing due (accessory obligation). The debtor has the burden of
proving that the thing is loss without his fault. Even if the debtor is not at fault, he can still be
guilty if he incurred delay or promised the specific thing to multiple creditors.

Presumption not Applicable

The presumption that the debtor is in fault when the thing due is still lost while still in his
possession is not applicable in case of natural disasters. It is unjust to assume negligence on
his part.
Example
X borrowed Y’s truck. On the day the truck was to be retrieved, the truck
was stolen without the fault of X. X must prove that he is without fault before the
obligation is extinguished. Suppose that the X’s house was burnt with the Y’s
truck in the garage. X is not liable until Y proved that it was X’s fault that caused
the fire.

Article 1266. The debtor in obligations to do shall also be released when

the prestation becomes legally or physically impossible without the fault of
the obligor. (1184a)

Impossibility of Performance
The impossibility of performance must be without the debtor’s fault. However, in order
that the debtor be freed from his obligation, the impossibility of performance must take place
after the birth of obligation. If the performance is impossible at the first place, then there is no
obligation to be extinguished. The extinguishment of obligation would lead to restitution if there
is.

Kinds of Impossibility
1. Physical Impossibility – physically impossible to render.
2. Legal Impossibility – performance is contrary to the law.
Situation Example
 1. B down paid 10,000Php and will pay the remaining 10,000Php in monthly
installments. In his first installment, B became insolvent and plead for
impossibility of performance. Is the plead of B tenable?
No. Commercial transactions shall protect the rights of the seller just as
effectively as protecting the rights of the buyer. The inability to pay will not
discharge be from his obligations to pay.
2. S sold his half of interest of his boat to B. B down paid 10,000Php and
was to pay another 10,000Php agreeing that it shall be applied in
installing another engine in the boat. The boat was submerged due to a
storm (fortuitous event). Was the obligation of B extinguished as to install
an engine becomes impossible?
No. The obligation of B was to pay the unpaid balance and shall be
applied to the installation of the engine. In other words, the installation of
engine becomes impossible not the obligation to pay the unpaid balance.
3. The terms of bond stipulated that C, a surety will answer for the judgment
of D in case he failed to return to the Philippines. The Department of
Foreign Affairs banned D from returning to the Philippines. Due to
banning of D, the principal obligation is extinguished (D must return to the
Philippines) and of course, the accessory obligation (C shall answer) too
is extinguished.
4. D (an agent) agreed to buy the goods of N (barter agreements) and to
import it somewhere else for profit. Almost half of the goods were bought
and paid for. However, due to the change of administrations, barter
transaction was suspended. D was not able to import resulting to non-
payment of the other half. Is the D liable for expectation damages for
failure to buy the goods of N?
No. As the barter transactions are suspended, so is the obligation. The
obligation to import became legally impossible. Also, it was N’s job to
make the necessary representations to the Government to enable D to
import the remaining goods and until it happened, there’s no terms on the
contract contravened.

Natural Impossibility vs Impossibility in Fact

1. Natural Impossibility (Contract Void) – the obligation itself can’t be done.
2. Impossibility in Fact (Contract Valid) – the obligation is outside the power of the party.
Example
1. The government seized the factory during the world war and this
extinguished the obligation of the manufacturer to supply to the civilian
trade. This is a natural impossibility.
2. If the manufacturer failed to supply the civilian trade due to its insolvency
to manufacture then it is an impossibility in fact.

Article 1267. When the service has become so difficult as to be

manifestly beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part (n)

Difficulty of Performance
When the performance has become difficult beyond the capability of parties, then the
court is authorized to released the debtor from its obligation; whole or part.
Example
 X is to build a road trekking to the mountain. A typhoon caused the
ground of the mountain unstable and prone to landslide. X may be released from
the obligation to build a road, in whole or partly.

Situation Example
X is a telephone company while Y is a company operating electrical light
post in the same city. They entered into a contract where X will use the electricity
of Y free of charges in exchange of X installing 10 telephone booths for Y in
specific places. There is a stipulation where X shall use the electricity as long as
X needs it. After the contract of 10 years, X filed a complaint stating that it was
too hard on his part due to the rise of subscribers thus more wires and cables
have been strung by the electrical post which is frequently broken due to
typhoon. Y counterclaimed that X has been using electricity free while the
telephone booths deteriorated and therefore, Y suffered damages.
The court then decided that X is to pay monthly electricity bills and Y shall
pay for the said booths. Y disagreed to the judgement and pleaded to the Court
of Appeals. The court then affirmed that Article 1267 is applicable and contract
was subject to a potestative condition which is void. Is Article 1267 applicable?
In cases wherein the performance has become so difficult, courts have
the authority to extinguish the obligation with consideration to the intention of the
parties in the contract. The court has rendered the performance of both
companies unfavorable to X. As the subscribers increases, more cable and wires
has been strung by the electrical post and the fact that the typhoon can destroy
the phone post easily is a lot of expense in the part of X but none in the part of Y.
Therefore, it has become too one sided and further enforcement of obligation has
gone far beyond what X can contemplate thus X shall be released from its
obligation to avoid the unjust enrichment of Y in his expense.

Modification of Performance
The courts may be authorized to release the debtor from its obligation but it may not
modify the terms and conditions of the contract in order for the performance to be compliable. If
the party pleaded for modification instead of extinguishment, it shall be dismissed if the party
failed to state a sufficient cause of action.
Situation Example
X, a developer filed a suit against Y his landlord for the modification of the
terms of contract specifically the profit and loss of ratio which is 60% and 40%
stating that the worldwide increase in prices. Is the complaint of X tenable?
No. Article 1267 can’t modify the terms and conditions of the contracts
because the contract itself has the law between the parties. If X’s complain was
to be freed instead of modification, courts may examine if the performance is too
difficult to render that his performance is not proportionate (Article 1207 debtor
shall only render what is proportionate to his share). Without the said Article, X
still bound in the contract.

Article 1268. When the debt of a thing certain and determinate proceeds
from a criminal offense, the debtor shall not be exempted from the payment
of its price, whatever may be the cause for the loss, unless the thing having
been offered by him to the person who should receive it, the latter refused
without justification to accept it. (1185)

Obligation Arise from Criminal Offense

 Even if the debtor loss the thing due to a fortuitous event, he will not be exempt from his
liability when his obligation arises from a criminal offense. If the creditor however, refuse to
accept the thing due without any reasonable reasons, creditor is guilty of delay. The debtor may
consign or not, still due diligence must be observed.
Article 1269. The obligation having been extinguished by the loss of the thing,
the creditor shall have all the rights of action which the debtor may have against
third person by reason of the loss. (1186)

Right of Debtor to Creditor

If the loss of the thing due extinguished the obligation (creditor has exhaust his principal
rights – specific performance, rescission etc.), the rights of debtor are transferred to the creditor
(subrogation of rights) to protect the creditor for its loss. This means that if X can’t pay Y but Z
owes X, Y can demand from Z.
 Section 3. Condonation or Remission of Debt

Article 1270. Condonation or remission is essentially gratuitous, and

requires the acceptance by the obligor. It may be made expressly or
impliedly.
One and the other kind shall be subject to the rules which govern
inofficious donations. Express condonation shall, furthermore, comply with
the forms of donation. (1187)

Condonation and Remission defined

Condonation and remission refer to the donation of creditor to the debtor. This means
that the creditor waived his right to demand payment in which the obligation might wholly fulfilled
or in part.

Condonation Requisites
1. It shall be gratuitous
2. The debtor shall accept the donation
3. Parties must have the capacity to remit
4. It shall not be inofficious
5. If expressly stipulated, it must comply to the rules of donation.

Evidence to Prove Remission

Remission requires heavier proving than payment itself.
Situation example
X borrowed a loan from Z with Y as a intermediary. X signed a promissory
note of 500Php to Y so that he can pay Z but Y died. After X was notified, he paid
Z the balance but Z told him that he will condone the debt. Upon the facts, is the
remission valid?
No. X was the only witness, there was no confirmation that Z had really
condoned the debt (there was no due process of donation). Also, Z did not
return the note, evidencing the debt to Y's estate (if the private document is still
on the possession of Z, payment is still presumed). If the remission is valid, it
shall benefit Y and not X.

Remission is Gratuitous
Remission must be gratuitous; it is the act of giving without receiving in return because
from the moment something is received, it will no longer be remission and it will be:
1. Dation in payment – Article 1245. Where a property of debtor is transferred to the
creditor instead of the amount due.
2. Cession – Article 1255. Where all property of debtor is transferred to the creditor
to the extent of the amount due.
3. Novation – Article 1291. Where the terms and conditions of the obligations are
changed.
4. Compromise – Article 2028. Settling the dispute instead of continuing it to a trial.

Remission Accepted by Debtor and Waiving of Credit

 One of the requisites of remission is that the debtor must accept the offer. Without the
acceptance of the debtor, the act of gratuitous may be show as an act of humiliation. However,
the creditor can still waive his credit even if it’s against the will of the debtor because no law is
forbidding him not to (Article 6).

Kinds of Remission
1. As to extent
a. Complete – remission of obligation is whole.
b. Partial – remission of obligation is partly.
2. As to form
a. Express – remission is expressly stipulated.
b. Implied – remission is inferred.
3. As to period of effectivity
a. Inter vivos – remission during lifetime.
b. Mortis causa – remission after the death.

Inofficious Remission
The word inofficious refers to the disposition of a property which may deprive heirs of
their shares (Article 887. Legitime). The court shall reduce any donations that is considered
inofficious. For example, the creditor has donated his house and lot without sufficient legal
cause will be considered inofficious because it will deprive the heirs (can be the debtor’s
children) their share in the property, thus the courts shall reduce his donation.

Article 1271. The delivery of a private document evidencing a credit,

made voluntarily by the creditor to the debtor, implies the renunciation of
the action which the former had against the latter.
If in order to nullify this waiver it should be claimed to be inofficious,
the debtor and his heirs may uphold it by proving that the delivery of the
document was made in virtue of payment of the debt. (1188)

Remission Presumed
1. Remission is impliedly presumed – the private document is needed for the creditor to
demand payment so, if the creditor has voluntary deliver the private document
evidencing the credit, it is presumed that he is renouncing his right to collect.
2. Presumption rebuttable – if the creditor only delivered the private document to the debtor
for the examination (like attorney’s fees etc.) then there was no intention that there will
be remission.
3. Extent of remission – if the obligation is joint, the remission presumed is only up to the
extent of the share of that specific debtor.
4. Presumption only to private document – Article 1271 refers to private document and not
public document.

Inofficious Remission
If the debtor or the creditor’s heirs proved that the remission is inofficious, then remission
is void. This means that the debtor or the heirs may prove that the delivery of the private
document is for payment not remission.

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. (1189)
Private Document in Debtor’s Possession
If the private document is in the debtor’s possession then it is presumed that the creditor
has delivered it to him voluntarily thus presuming remission of obligation, of course this is
rebuttable. The voluntary delivery of private document give rise to the presumption that the debt
is already paid, but if there’s no payment then it will be presumed remitted.
Example
X owes Y the amount of 1,000Php, evident by a promissory note which is
given to Y. If the promissory note was delivered to X, then it is presumed that X
has already paid. If X has not yet paid and the note was delivered, then it is
presumed that X’s debt is remitted. If it is now known why the note is in the
possession of X, then it is presumed that Y had voluntarily delivered it to him.

Article 1273. The renunciation of the principal debt shall extinguish the
accessory obligations; but the waiver of the latter shall leave the former in
force. (1190)

Remission of Principal Debt

The accessory obligation can’t exist without the principal obligation, so in cases where
principal debt has been remitted, the accessory obligation shall be deemed remitted too.

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. (1191a)

Accessory Obligation Remitted

In the contract of pledge, the thing pledged must be in the possession of the creditor a
third person by common agreement. If the thing pledged is in the possession of the debtor then
it is presumed that the accessory obligation is remitted.
Reference:
De Leon, H. S., & De Leon, J. H. (2014). The Law on Obligations and Contracts. Manila: REX
Book Store.