Payment or performance is defined by the law as the delivery of money or any other

manner of an obligation.
So the first principle we have to understand is that it is the debtor who has the burden to
prove that payment has been made.
So when do we know payment has been made?
Here are the following principles.
First, the payment has two requisites, identity and integrity.
When it comes to identity it must be the object or prestation itself which has to be
delivered by the debtor to the creditor. If the object is a specific thing the debtor cannot
compel the creditor to receive a different object even if such different object is of the
same or higher quality. Now if the thing is indeterminate or generic then the creditor
cannot ask for a thing of superior quality and the debtor cannot compel the creditor to
receive a thing of inferior quality.
Now there is a special rule of payment where the object itself need not be delivered
It is the conveyance or transfer of ownership in payment or satisfaction of a debt in
money
When you say integrity payment must be complete in order to be valid. In other words
a creditor cannot be compelled to accept partial payments however this general rule is
subject to exceptions.
First, if there is an express stipulation such as when the obligation is to be paid in
installments then necessarily that is payment in partial installments.
Second, if there has been substantial performance but the substantial performance by
the debtor must have been done first in good faith and should only involve a slight
deviation meaning the difference is only negligible or so very small that it does not affect
the main obligation and there has been no intentional departure by the debtor from the
intent or cause of the obligation.
Final, is when the creditor accepts the partial performance with actual knowledge of the
defect. In such case it is a kin to a waiver wherein the character says “okay, that is good
enough”.
Second principle, payment must be made by the person who is obligated under
the obligation and who is this?
Payment must be made by the debtor. In other words the creditor is not bound to accept
payment by a third person was no interest in the obligation. This general rule is subject
to an exception.
If there is an express stipulation to the contrary. In other words, if the parties have
agreed that payment can be made by a third person then it will be valid.
So, what are the rules incase creditor accepts payment from a third person.
First, if payment by the third person was with the knowledge of the debtor then the third
person can compel the creditor to subrogate him in the creditor’s right and the third
person can ask reimbursement from the debtor.
What is this subrogation? It simply means that the third person can ask the creditor or
compel the creditor to transfer whatever rights the creditor has over the obligation such
as if the creditor has a mortgage or a guarantee constituted in his favor then the third
person by virtue of payment with knowledge of the debtor can compel that creditor to
subrogate him or to transfer those right to him.
Now, what if payment by the third person was without the knowledge of the debtor then
the third person can only recover in recovery imbursement only in so far as it has
redounded to the benefit of the debtor. He cannot ask for more, kung saan lang nag-
benefit si debtor.
But the more important implication is the third person cannot compel the creditor to
subrogate him in his rights. Di na makukuha ni third person yung rights ni creditor over
the mortgage, over the guarantee or any other right.
Now, payment must be made to the person who is entitled to receive it under the
obligation. That’s the next principle.
In other words, who is the person entitled to receive payment? It is only either the
creditor himself, his successors in interests or the person auhorized by the creditor to
receive payment.
Now, this implies that payment by the debtor to a third person is in general not valid.
However there is an instance when the payment to a third person will be valid and this
is when the benefit has redounded to the benefit of the creditor. When payment has
redounded to the benefit of the creditor.
So again, the general rule is the payment must be made to the creditor and payment
cannot be made to a third person unless it has redounded the benefit of the creditor.
So how do we know that the creditor has benefited? The law establishes presumptions
in our favor to make it easier.
First, when the third person acquires the creditor’s rights.
Second, when the creditor ratifies or recognizes the payment the third person.
Next, when by the creditors conduct the debtor had been led to believe that the third
person had the authority to receive the payment. In those cases, payment to a third
person may be valid.
Finally, the law says that payment in good faith to a person in possession of the credit
will extinguish the obligation.
Third major principle, how must payment be made?
First, we follow the stipulation of the parties. If the parties had agreed that payment will
be made in a certain certain currency “let’s say payment should be made in Japanese
yen, then that stipulation must be followed.
Now in the absence of an express stipulation, payment must be made in legal tender
and what is legal tender? Simply put, it is the currency which the debtor must pay and
the creditor must accept. The debtor can be compelled to pay and which the creditor
can be compelled to accept. That is legal tender in a nutshell.
Moving on, what about checks or bills or promissory notes? Thus, do these instruments
produce the effect of payment as a general rule no they do not accept payment unless
they have been encash or through the creditors acts they have been impaired. So mere
acceptance by the creditor does not produce payment it is only when the creditor has
been able to encash the same regardless of it is whether designated as manager’s chair
or whatever other designation. They will not produce the effect of payment until they
have been encash.
So one more important point is under the law of BSP no coins constitute legal tender.
Coins below 25 cents are valid as legal tender up to one hundred pesos only. While
coins of one peso dominations above are valid up to one thousand pesos so if a cashier
refuses your payment of a thousand pesos consisting of one peso coins you may have
legal ground to claim that that is legal tender and she was accepting.
Now let’s move on to where payment must be made. In general, we follow the
stipulations of the parties, it the parties had agreed on a certain place where payment
must be made then that is the place of payment. In the absence of stipulation then the
payment must remain where the determinate thing is situated. Nasaan yung bagay na
yon.
And finally in the absence of the first two, then payments shall be made at the domicile
of the debtor