Business Law

Compensation as a Mode of Extinguishing Obligations Quiz

Quizzes

(a) Ella Hake borrowed, P 50,000 as character loan (no security) from a bank. Despite
demands for payment after the loan fell due, Ella Hake did not pay the bank. Ella
Hake has a savings deposit of P 40,000 with the bank. Has the bank the right to
apply the deposit to the payment of Ella Hake’s debt?
Answer: Yes, the bank has the right to apply the deposit to the payment of
Ella Hake’s debt. The bank has the right to take out the money from an account to
cover a debt of the other account. However, this will only be applicable if Ella Hake
has two or more than accounts on the same bank.

(b) Bella Padilla owes Yam Concepcion P 10,000 payable on November 20, 2020. Yam
Concepcion owes Christine Reyes P10,000 payable on October 20. Can
compensation also take place although the debts are not payable on the same date?

Answer: Compensation can take place although the debts are not payable on
the same date. This is a partial compensation because both debts have the same
amount but different in the dates payable.

(c) After contracting a debt in the amount of P 10,000 in favor of Jen Revilla, Debbie
Garcia succeeded through fraudulent means to make Jen Revilla liable to him in the
same amount. Assuming that both obligations are now due, may the two debts be
compensated against each other? What is the effect if the debt of Jen Revilla is later
annulled in court at the instance of Debbie Garcia?
Answer: According to Art. 1284, the two debts may be compensated against
each other.
If the debt of Jen Revilla is later annulled in court at the instance of Debbie
Garcia, Jen will be considered liable. The annulment is retroactive and would be the
same as if there had been no compensation at all.