KYLE KARYLLE A.

TIBRE
BSBA MM 2-3
BUSINESS LAW (OBLIGATION AND CONTRACTS)
CBM 0002-9

MODES OF EXTINGUISHMENT OF OBLIGATIONS

1. By payment or performance

 The obligation is extinguished when it is paid or performed.

 According to Article 1232, payment is the mode of extinguish obligations
that includes the following:

1. The delivery of money

2. The performance of the obligation.

It is stated here that the various ways of payment of an obligation can take many
forms, including offering something in exchange for money or other goods. It can
be either delivery of money or performance of the obligation. Where
performance, guarantees the contractor’s promise to abide by the agreed terms
of the contract, at the agreed-upon pricing cost.

EXAMPLE:

1. Mode of Payment or Performance

- Allan fixed his friend Peter's washing machine. Peter's

obligation now is to pay Allan, this is done by performing Allan's
service.

- Kyle agreed to purchase Joan's K-pop merchant for 50,000

pesos. The day of delivery and the amount he would pay were
specified in their contract. Upon receiving the K-pop merchant,
Kyle will be required to pay 500,000 pesos. Following the terms
of their contract, payment is made upon delivery of the items.

2. By the 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.”

In this case, the loss of an item puts an end to the obligation, allowing the
creditor to pursue claims against third parties. However, no obligation arises if
the item has vanished or cannot be supplied due to no fault of the debtor. If
 the item has depreciated without the debtor's fault, the creditor must accept it
in its current condition without reducing its value.

EXAMPLE:

1. Mark borrowed his car from John in order for him to pick up his brother
Joshua from the airport. Joshua drove the car because he wanted to
experience having his own car, but he damages it. John has the right
to sue Joshua for the cost of the car as well as damages.

2. Kath borrowed a vehicle from her friend Clara. Kath’s car was engaged
in a car accident, and the car that Kath had borrowed from Clara was
also damaged. She informed Clara what had happened and that she
was not at fault because she had been accidentally involved. That is
not enough to discharge Kath's obligation. It is assumed that the
accident was her responsibility. As a result, she is responsible for
damages unless she shows otherwise.

(2) In this scenario, assume Kath's borrowed a car from Clara and was
damaged by a building rock as a result of an earthquake. It is admitted
that there was an earthquake that was unintentional and that the car
involved was in the parking lot at the time. Kath is not responsible in
this case unless Cath establishes negligence on Kath's behalf.

3. By the condonation or remission of the debt

 In Article 1270, “Condonation or remission is essentially gratuitous, and

requires the acceptance by the obligor. It may be made expressly or
impliedly.

So, accordingly the Condonation or Remission is defined as the gratuitous

abandonment by the creditor of his right against the debtor. It is actually a form of
donation.

When we say condonation or remission it means that the creditor doesn’t

anymore require or demand the performance of obligation by the debtor.

It is a form of donation because he abandonment his gratuitous it means that

there is no consideration where there is no payment in exchange of the
abandonment of the obligation. In short it is free.

In this case, Condonation is the act of forgiving a debtor of a loan; it is regarded

as a reward to an individual and is required to obtain what he is required to pay.
This can be demonstrated by hints or statements. On the other hand, remission,
is a release from debt or claim by will. A remission is an act of generosity in
which the obligee, without obtaining any payment or equivalent, renounces the
 execution of the obligation, as a result of which it is extinguished in its whole or in
the part or feature to which the remission pertains.

EXAMPLE:

1. Jose owns Andres 600,000 thousand pesos payable on April 19, 2020. On
due date, Andres told Jose that he need not to pay him a 600,00 thousand
pesos since he is condoning Jose’s debt.

- In this case, the obligation was discharged by condonation or

remission. It is the abandonment of creditors' rights in favor of
the debtor.

4. By the confusion or merger of the rights of creditor and debtor

 In Article 1275, “The obligation is extinguished from the time the

characters of creditor and debtor are merged in the same person.”

Article 1275 refers to rights confusion or merger. Confusion or merger of

rights is the meeting of the traits of obligee and obligor with regard to the
same duty in one individual. The creditor and debtor personalities are
blended into the same person.

Whereas Merger is defined as the meeting of one person with the

qualifications of creditor and debtor in relation to the same obligation
under Article 1276. There are two kinds of merger:

1. Merger in the person of the principal debtor or principal creditor;

2. Merger in the person of the guarantor.
However, there is a joint obligation here in Confusion, under Article 1277.
A joint obligation has as many debts as debtors and as many credits as
creditors, with the debts and/or credits being distinct and independent
from one another.

3. D is indebted to C with G as
guarantor. The merger of the
4. characters of debtor and
creditor in D shall free G from
liability as
 5. guarantor. Similarly, merger
which takes place in the
person of C
6. benefits G because the
extinction of the principal
obligation carries
7. with it that of the accessory
obligation of guaranty.
EXAMPLE:

1. Bobby owes Celine 200,000 thousand pesos for which Bobby executed a
negotiable promissory note in favor of Celine. Where Celine indorsed the note
to Echo who, in turn, indorsed it to Alex. Now, Alex bought goods from the
store of Bobby.

- Here, Bobby owes himself. Consequently, his obligation is

extinguished by merger.

2. Jane owed Janella 80,000 thousand pesos, guaranteed by Joshua. Janella

assigns her rights to Julia who assigns her right to Gerald, and Gerald
assigns his right to Jane.

- Here, Jane’s obligation is extinguished. Joshua is released from

her obligation. Joshua, the guarantor, was benefited. It is effect
of merger in the person of principal debtor or creditor.

(2) Jane owed Janella 80,000 thousand pesos, guaranteed by Joshua.

Janella assigns her rights to Julia who assigns her right to Gerald, and
Gerald assigns his right to Jane.

- Here, the effect of merge as the person of Guarantor, Jane still

have to pay Joshua. However, the contract of guaranty is
extinguished, but not Jane’s obligation to pay the amount of
80,00 thousand pesos. Joshua, as the new creditor can demand
payment from Jane.
5. By compensation

 In Article 1278, “Compensation shall take place when two persons, in

their own right are creditors and debtors of each other”

Compensation could be complete or could also be partial land and these two
debts are extinguished without actual transfer of money between the parties. It
takes by place operation of law.

EXAMPLE:

1. Carla owes Carlo the amount if 5,000 pesos and in another transaction Carlo
owes Carla the amount of 2,000 pesos. Both debts assuming are due and
payable today

- Here the compensation takes place immediately by operation of

law and it takes place partially, that is to the concurrent only
amount of 2,000 pesos because there has already been
compensation. So, Carla shall be liable to Carlo for only 3,000
pesos as his balance for Carlo.

If the two debts are of the same amount, there is total

compensation. The two debts are extinguished without actual
transfer of money between parties.

6. By novation

 In Article 1275, “