271. I. As a general rule, a check constitutes legal tender, but a creditor may validly refuse it.

II. A check does not constitute legal tender but it does not prevent a creditor from accepting a check as
payment.

A. Only I is true

B. Only II is true

C. Both are true

D. Both are false

B. True, jurisprudence holds that, in general a check does not constitute a legal tender, and that a
creditor may validly refuse it. It must be emphasized, however, that this dictum does not prevent a
creditor from accepting a check as payment. In other words, the creditor has the option and discretion
of refusing or accepting it (Far East Bank & Trust Company vs. Diaz Realty, Inc. G.R. No. 138588, August
23, 2001).

272. The sharp increase of money or credit, or both, without a corresponding increase in business
transaction.

A. Deflation

B. Extraordinary deflation

C. Extraordinary inflation

D. Inflation

D. Inflation has been defined as the sharp increase of money or credit, or both, without a corresponding
increase in business transaction. There is inflation when there is an increase in the volume of money and
credit relative to available goods, resulting is substantial and continuing rise in the general price level
(Equitable PCI Bank, et.al. vs. Ng Sheung Ngor, et.al. G.R. No. 171545, December 19, 2007).
273. For extraordinary inflation (or deflation) to affect an obligation, the following requisites must be
proven, except:

A. That there was an official declaration of extraordinary inflation or deflation from the Bangko Sentral
ng Pilipinas (BSP).

B. That the obligation was contractual in nature.

C. That the parties expressly agreed to consider the effects of the extraordinary inflation or deflation.

D. That the obligation was not contractual in nature.

D. For extraordinary inflation (or deflation) to affect an obligation, the following requisites must be
proven:

1. That there was an official declaration of extraordinary inflation or deflation from the Bangko Sentral
ng Pilipinas (BSP);

2. That the obligation was contractual in nature; and

3. That the parties expressly agreed to consider the effects of the extraordinary inflation or deflation
(Equitable PCI Bank, et.al. vs. Sheung Ngor, et.al., G.R. No. 171545, December 19, 2007).

274. I. In case of extraordinary inflation or deflation, the value of the currency at the time of the
establishment of the obligation shall be the basis for the payment when no agreement to the contrary
is stipulated, has strict application only to contractual obligations.

II. A contractual agreement is not needed for the effects of extraordinary inflation to be taken into
account to alter the value of the currency.

A. Only I is true

B. Only II is true

C. Both are true

D. Both are false

A. The Supreme Court held that Article 1250 of the Civil Code, providing that, in case of extraordinary
inflation or deflation, the value of the currency at the time of the establishment of the obligation shall
be the basis for the payment when no agreement to the contrary is stipulated, has strict application only
to contractual obligations. In other words, a contractual agreement is needed for the effects of
extraordinary inflation to be taken into account to alter the value of the currency (Maria Paz V.
Nepomuceno and Fermin A. Nepomuceno vs. City of Surigao and Salvador Sering, G.R. No. 146091, July
28, 2008).

275. I. As a general rule, payment shall be made in the place of business of the debtor.

II. 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.

A. Only I is true

B. Only II is true

C. Both are true

D. Both false

B. The rules on the place of payment of the obligation are the following:

1. Payment shall be made in the place stipulated by the parties.

2. If there is no stipulation and the obligation is to deliver a determinate thing, payment shall be made
wherever the thing might be at the moment the obligation was constituted.

3. In any other case the place of payment shall be the domicile of the debtor. If the debtor changes his
domicile in bad faith or after he has incurred in delay, the additional expenses shall be born by him.

276. These are the rules on the place of payment of the obligation, except:
A. Payment shall be made in the place stipulated by the parties.

B. If there is not stipulation and obligation is to deliver a determinate thing, payment shall be made
wherever the thing might be at the moment the obligation was constituted.

C. In any other case the place of payment shall be the domicile of the debtor.

D. In any other case the place of payment shall be at the municipal trial court where the obligation was
perfected.

277. The designation of the debt to which the payment must be applied when the debtor has several
obligations of the same kind in favor of the same creditor.

A. Application of payment

B. Dacion en pago

C. Cession in payment

D. Tender of payment and consignation

A. The special forms of payment are the following:

1. Application of payment (Art. 1252-Art. 1254, NCC)

2. Dation in payment (Art. 1254, NCC)

3. Payment by cession (Art. 1255, NCC)

4. Tender of payment and consignation (Art. 1256-1261, NCC

Application of payment may be defined as the designation of the debt to which the payment must be
applied when the debtor has several obligations of the same kind in favor of the same creditor (8
Manresa, 5th Ed., Bk. 1, p.598).

The requisites of application of payment are the following:

 1. There must be only one debtor and only one creditor.

2. There must be two or more debts of the same kind;

3. All of the debts must be due; and

4. The amount paid by the debtor must bot be sufficient to cover the total amount of all the debts.

Example:

X owes Y the following obligation:

1. P5,000 with due date of January 15, 2018;

2. P10,000 with due date of February 14, 2018;

3. P20,000 with due date of April 1, 2018;

4. 2 sacks of bordagol rice due on April 15, 2018;

5. P50,000 due on July 1, 2018.

Today is May 1, 2018 and X has P5,000 which he intends to pay his obligation. There is no application of
payment on the 4th obligation because it will only be extinguished later on by delivering a rice of the
same kind, quality and quantity. There is also no application of payment on the 5th obligation as it is not
yet due.

What if X wants to apply the P5,000 to the obligation which matured on January 15, 2018 but Y wants
that it will be deducted on the P20,000 obligation. This is the kind of situation which will be resolved by
the rules on application of payment.

Applying the rules on application of payment, X has a preferential right to apply. Thus, the P5,000 will be
deducted from the first obligation so as to totally extinguished the said obligation.

If X does not want to make use of the application of payment, then the 3rd rule maybe used and that is
it will be applied to the debt which is most onerous to the debtor. In this case, there is no debt that is
most onerous to the debtor because there is no factual circumstances to indicate that the obligation is
burdensome like guaranty, surety, pledge, real estate mortgage, chattel mortgage, or interest. Hence, if
the 1st obligation is secured by a pledge involving a cell phone, the 2nd obligation is secured by a
guaranty and the 3rd obligation contains a stipulation as to interest then it should be mentioned in the
facts of the case on what is most onerous obligation to the debtor. Like if the debtor wants to have cell
phone, then he might extinguish the first obligation so that he can acquire the cell phone which is in the
possession of Y being a real contract (perfected by delivery of the object to the pledgee). If he wants to
lessen his interest, then he might apply his apply his payment to the third obligation.

If there is no debt which is most onerous to the debtor, then last rule may apply, that is, the payment of
P5,000 shall be applied to all of the debts proportionately.
278. The following are special forms of payment, except:

A. Application of payment

B. Dation in payment

C. Check encashment

D. Payment by cession

279. The following are requisites of application of payment, except:

A. There must be only one debtor and only one creditor.

B. There must be one or more debts of the same kind.

C. All of the debts must be due.

D. The amount paid by the debtor must not be sufficient to cover the total amount of all the debts.

280. The rules on application of payment are the following, except:

A. The right to designate the debt to which the payment shall be applied belongs primarily to the
debtor.
B. If the debtor does not apply payment, the creditor may designate which debt is paid by specifying in
the receipt.

C. If the creditor did not apply or if applicable is void, the debt which is most onerous to the creditor,
among those due, shall be deemed to have been satisfied.

D. If the debts due are of the same nature and burden, the payment shall be applied to all of them
proportionately.

C. The rules on application of payments are the following:

1. The right to designate the debt to which the payment shall be applied belongs primarily to the
debtor. He may declare at the time of making the payment, to which of them the same must be applied.

2. If the debtor does not apply payment, the creditor may designate which debt is paid by specifying in
the receipt.

3. If the creditor did not apply or if application is void, the debt which is most onerous to the debtor,
among those due, shall be deemed to have been satisfied.

4. If the debts due are of the same nature and burden, the payment shall be applied to all of them
proportionately.