Payment or Performance, Application of Payments Art. 1232-1254

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PAYMENT OR
PERFORMANCE,
APPLICATION
OF PAYMENTS

ART. 1232-1254
REPORTED BY: SUNKISSED LOLO
-CONTENTS-
ARTICLE 1232-1239
ARTICLE 1240-1247
ARTICLE 1248-1254
ART. Payment means not only the

delivery of money but also the
1232 performance, in any other
manner of an obligation.
PAYMENT
In ordinary parlance, payment

refers only to the delivery of
money.
In law, payment and performance
are alike. Payment may consist not
only in the delivery of money but
also the giving of a thing other than
money, the doing or not doing of an
act.
EXAMPLE
Mary owes Mariel P100, but

cannot pay the full amount
in cash. However, Mariel
agreed to Mary’s offer of a 1
kilo of mangoes to fulfill her
obligation instead of paying
cash.
ART. A debt shall not be

understood to have been paid
unless the thing or service in
1233 which the obligation consists
has been completely delivered
or rendered, as the case may
be.
WHEN DEBT IS CONSIDERED PAID
Integrity of prestation - This

requisite means that the prestation
be fulfilled completely.
EXAMPLE
A grab driver is obliged to deliver 1

Cream Cheese Oreo Milk Tea, 1
Matcha Milk Tea and 1 Cocoa Milk
Tea to Gabriel. The grab driver
delivered only Matcha and Cocoa
Milk Tea. Gabriel can refuse to pay
for the two delivered items if the
grab driver does not deliver what is
lacking.
WHEN DEBT IS CONSIDERED PAID
Identity of the prestation - This

second requisite means that the
very prestation due must be
delivered or performed.
ART. If the obligation has been

substantially performed in
good faith, the obligor may
1234 recover as though there had
been a strict and complete
fulfillment, less damages
suffered by the obligee.
REQUISITES OF ARTICLE 1234 EXAMPLE
Frodo has been hired to build a house

There must be substantial and has made a good faith effort to
performance; and complete the work, but has failed to
fully complete some minor aspects of
The obligor must be in the project. Under Article 1234, Frodo is
good faith. entitled to receive partial payment, but
the amount is reduced to account for
any damages suffered by Samwise due
to the incomplete work.
ART. When the obligee accepts the

performance, knowing its
1234
incompleteness or irregularity,
and without expressing any
protest or objection, the
obligation is deemed fully
complied with.
REQUISITES OF ARTICLE 1235 EXAMPLE
John owes Mary P50,000 but he can

The obligee knows that the only pay her P40,000. Mary accepts the
performance is incomplete P40,000 without objection or protest,
or irregular; and knowing that it is an incomplete
He accepts the performance payment. In this scenario, the
without expressing any obligation is considered as fully
protest or objection. satisfied, even though the debtor did
not fully pay what was owed.
ART. The creditor is not bound to

accept payment or
performance by a third person
1236 who has no interest in the

fulfillment of the obligation,
unless there is a stipulation to
the contrary
ART. Whoever pays for another may

demand from the debtor what he has
paid, except that if he paid without
1236 the knowledge or against the will of

the debtor, he can recover only
insofar as the payment has been
beneficial to the debtor.

PERSONS FROM WHOM THE

CREDITOR MUST ACCEPT PAYMENT.
The debtor;
Any person who has an interest in
the obligation (like a guarantor); or
A third person who has no interest
in the obligation when there is
stipulation that he can make
payment.
CREDITOR MAY REFUSE PAYMENT BY

A THIRD PERSON.
He dislikes or distrust the third

person.
He doesn’t desire to have business
dealings with the third person.
Under the old Civil Code, the creditor cannot refuse

payment by a third person but the Code Commission
believes that the creditor should have a right to insist on
the liability of the debtor.
EFFECT OF PAYMENT BY A THIRD

PERSON
Situation: Dane owes Jacques an amount of

P2,000. If Ruth, a stranger to the obligation,
offers to pay Jacques, Dane may or may not
accept the offer of payment. Suppose Jacques
accepts, the right of Ruth to recover from Dane
depends upon whether the payment is with or
without the knowledge or consent of Dane.
IF MADE WITHOUT THE KNOWLEDGE IF MADE WITH THE KNOWLEDGE OF THE

OR AGAINST THE WILL OF THE DEBTOR. DEBTOR.
The payer can recover from The payer shall have the rights
the debtor only insofar as of reimbursement and
the payment has been subrogation, that is, to
beneficial to the latter. recover what he has paid (not
necessarily the amount of the
debt) and to acquire all the
rights of the creditor.
ART. Whoever pays on behalf of the

debtor without the knowledge or
1237 against the will of the latter, cannot

compel the creditor to subrogate
him in his rights, such as those arising
from a mortgage, guaranty or
penalty.
EXAMPLE
Assume that owes a debt of P50,000

to Union Bank, and her friend, Lee,
decides to pay off Moria’s debt to
the bank without Moria’s knowledge
or consent. Lee pays the full amount
to Union Bank, believing that she is
helping her friend out of financial
trouble.
ART. Payment made by a third person

who does not intend to be
reimbursed by the debtor is deemed
1238 to be a donation, which requires the

debtor’s consent. But the payment
is in any case valid as to the
creditor who has accepted it.
EXAMPLE
Czarina owes P10,000 to Lending

Enterprises Corp. and her sister
Czalea, decides to pay off Czarina’s
debt to the bank without any
expectation of being reimbursed by
Czarina. Czalea believes that she is
making a generous gift to her older
sister and does not intend to ask for
the money back.
In obligations to give,
ART. payment made by one who

does not have the free
disposal of the thing due
1239 and capacity to alienate it

shall not be valid, without
prejudice to the provisions
of Article 1427 under the
Title on “Natural
Obligations.’’
DEFINITION
Free disposal of the thing due -

means that the thing to be
delivered must not be subject to
any claim
Capacity to alienate - means

that the person is not
incapacitated to enter into
contracts
EXAMPLE
Helena has a debt to pay Kaitlyn an

amount of P1Million. Helena offers
to pay the debt by giving her a
American Muscle that she does not
legally own. Helena has been using
the car, but it is actually registered
under someone else's name, and she
does not have the legal right to sell
or transfer it.
Your turn,
Moria
ART. Payment shall be made to the
1240 person in whose favor the

obligation has been constituted,
or his successor in interest, or
any person authorized to receive
it. (1162a)
EXAMPLE:
Helena owes Michael P1,000. Helena

being the debtor and Michael being
the creditor. In the event that a
creditor passes, Helena is your
obligation to Michael extinguished?
ANSWER:
No. In this situation the payment shall be

made to either his successor in interest or
any person authorized to receive it.
Payment shall be made to:
1. Creditor or obligee (person

in whose favor obligation
has been constituted)
2. His successor in interest
(like an heir or assignee)
3. Any person authorized to
receive it
ART. Payment to a person who is

incapacitated to administer his property
1241 shall be valid if he has kept the thing

delivered, or insofar as the payment has
been beneficial to him. Payment made to
a third person shall also be valid
insofar as it has redounded to the
benefit of the creditor.
EXAMPLE:
Ruth pays P1,000 to Lee who is 17, as

payment of a debt. Lee loses P1,000
of the money in gambling. Is the
payment of Ruth to Lee considered
complete?
ANSWER:
No.
As a general rule, payment to

an incapacitated person like a
minor, or someone under
guardianship is invalid.
EXAMPLE:
On the other hand, if Lee has spent

the money that Ruth has delivered for
useful purposes and bought Potato
Corner and kept the rest of the
money. Is the payment considered
complete?
ANSWER:
Yes.
exception of the general rule,

unless the person has kept the
thing delivered or payment
made has been beneficial to
him, only then is it valid.
Such benefit to the creditor need not
ART. be proved in the following cases:

(1) If after the payment, the third
1241 person acquires the creditor’s rights;

(2) If the creditor ratifies the payment
to the third person;
(CONT.) (3) If by the creditor’s conduct, the
debtor has been led to believe that the
third person had authority to receive
the payment. (1163a)

ART.
1242 Payment made in good faith to any

person in possession of the credit
shall release the debtor. (1164)

EXAMPLE:
Dane is indebted to Kaitlyn in the

amount of P1,000.00 which
indebtedness is evidenced by a
promissory note signed by Dane in
favor of Kaitlyn. Kaitlyn lost the
promissory note which was later found
by Angela who demanded payment
from Dane. Is Dane obliged to pay
Angela?
ANSWER:
Payment to Angela is not valid because

Angela is the possessor merely of the
document evidencing the credit and not of
the credit itself.
ART.
1243 Payment made to the creditor by
the debtor after the latter has
been judicially ordered to retain
the debt shall not be valid. (1165)
EXAMPLE:
Aara owes Jacques P1,000. Eduard in

turn owes Aara P1,000. In an action
against Jacques, Eduard, upon
petition of Jacques, may be ordered
by the court to not pay Aara and to
retain the debt in the meantime. Is it
valid if Eduard pays Aara?
ANSWER:
No. The debt of Eduard is said to be

“garnished” or seized. Any payment made by
Eduard to Aara in violation of the judicial
order is considered invalid.
ART. The debtor of a thing cannot
1244 compel the creditor to receive a

different one, although the latter
may be of the same value as, or
more valuable than that which is
due.
A thing different from that

due cannot be offered or
demanded against the will of
the creditor or debtor, as the
case may be.
ART.
1244 In obligations to do or not to do,
an act or forbearance cannot be
(CONT.) substituted by another act or
forbearance against the obligee’s
will. (1166a)
The act to be performed or

the act prohibited cannot be
substituted against the
obligee’s will. (see Art. 1167.)
EXAMPLE:
Michael obliged himself to deliver to

Helena a specific pair of headphones.
Can Michael require Helena to accept
another pair of headphones that
holds a higher price?
ANSWER:
No.
EXAMPLE:
(cont.)

But what if Helena consents to a

substitution of the thing being
delivered? Is this obligation now
valid?
ANSWER:
Yes.
ART.
1245 Dation in payment, whereby
property is alienated to the
creditor in satisfaction of a debt
in money, shall be governed by the
law of sales. (n)
Dation is one of the special forms

of payment, some are namely:
(2) application of payments (Art.

1253),
(3) payment by cession (Art. 1255)
(4) tender of payment and
consignation (Arts. 1256-1261)
EXAMPLE:
Lee owes Ms Lim P50,000. To fulfill

the obligation, Lee with the consent of
Ms Lim, delivers a 300 carat diamond
worth less than P50,000. Is this
obligation valid?
ANSWER:
No. The conveyance must be deemed to

extinguish the obligation only to the
extent of the value agreed upon
So what is the Dation in

payment?
It is the special form of

payment as not in an ordinary
way of extinguishing and
obligation.
In this case, if Miss Lim accepts

the payment with the
knowledge that the thing
delivered is worth less than
the obligation what she
should receive, it is valid and
called Dation in payment.
ART. When the obligation consists in the
1246 delivery of an indeterminate or

generic thing, whose quality and
circumstances have not been
stated, the creditor cannot
demand a thing of superior
quality.

ART.
1246 Neither can the debtor deliver a
thing of inferior quality. The
purpose of the obligation and
(CONT.) other circumstances shall be
taken into consideration. (1167a)
EXAMPLE:
Gab promised himself to deliver

concert tickets to Ms Lim. If Gab
delivers tickets with the seat furthest
from the stage. Is this obligation
valid? Can Ms Lim accept it?
ANSWER:
No. However, the substitution can be

made only if the obligee consents.
ART. Unless it is otherwise stipulated,
1247 the extrajudicial expenses

required by the payment shall be
for the account of the debtor.
With regard to judicial costs, the
Rules of Court shall govern.
(1168a)
EXAMPLE:
Jacques is the owner of an apartment

that entered into a lease agreement
with Kaitlyn for the amount of PHP
10,000 to be paid every 5th of the
month.
As a general rule, the debtor

has to pay for the
extrajudicial expenses like
insurance fee, or service fee
during the payment.
EXAMPLE:
What if Kaitlyn failed to make the

payment for 4 months despite oral
demands. Jacques wishes to have
Kaitlyn vacate the property and collect
the unpaid rental fee. He then seeks the
service of Atty. Angela that requires a
fee of P5,000, two demand letters sent
via registered mail and P350 for such.
Now who would incur expenses?
ANSWER:
Jacques should bear the legal service fees. Because

the losing party pays the judicial costs, these are fees
connected with the consideration of the case by the
commercial court.
Your turn,
Michael
ART. Unless there is an express

stipulation to that effect, the
creditor cannot be compelled
1248 (forced) partially to receive the

prestations in which the
obligation consists. Neither may
the debtor be required to make
partial payments
EXAMPLE: DOES TAKENORI HAVE

THE POWER TO REFUSE
TO ACCEPT THE
PAYMENT?

SAKURAGI OWES TAKENORI

P5,000,000 DUE TODAY. HOWEVER,
SAKURAGI SAID THAT HE CAN ONLY
PAY P2,500,000 TO TAKENORI AS
PARTIAL PAYMENT. SAKURAGI INSISTS
THAT TAKENORI ACCEPT HIS PAYMENT
EVEN THOUGH TAKENORI REFUSES TO
ACCEPT IT.

ANSWER:
YES, BECAUSE AS STATED UNDER

ARTICLE 1248: “THE CREDITOR
CANNOT BE FORCED TO ACCEPT
PARTIAL PAYMENT.”

HOWEVER, WHEN THE DEBT IS IN PART

LIQUIDATED AND IN PART
UNLIQUIDATED, THE CREDITOR MAY
DEMAND AND THE DEBTOR MAY EFFECT
THE PAYMENT OF THE FORMER WITHOUT
WAITING FOR THE LIQUIDATION OF THE
LATTER.

EXAMPLE:
WAS IT RIGHT THAT
TAKENORI DEMANDED THE IF SAKURAGI OWES TAKENORI P5,000,000,
P5,000,000 WITHOUT PLUS THE SHARES OF TAKENORI FROM A
WAITING FOR THE BUSINESS
TO LIQUIDATE? BUSINESS THAT WAS BEING LIQUIDATED.

BUT IT WAS SAID BY SAKURAGI THAT THE
BUSINESS WAS YET TO BE LIQUIDATED AND
IT WILL TAKE A COUPLE OF MONTHS FOR IT
TO LIQUIDATE. KNOWING THIS, TAKENORI
STILL DEMANDED THE P5,000,000 EVEN
THOUGH THE BUSINESS WAS YET TO BE
LIQUIDATED.
ANSWER:
YES, AS STATED IN ARTICLE 1248, THE

CREDITOR CAN DEMAND PAYMENT
FROM THE DEBTOR WITHOUT
WAITING FOR THE LIQUIDATION OF
THE LATTER OBLIGATION.

OTHER SITUATION OF PARTIAL PERFORMANCE OF

OBLIGATION IS ALLOWED

WHEN OBLIGATIONS CONSIST OF

DIFFERENT PRESTATIONS THAT
SUBJECT TO DIFFERENT TERMS OR
CONDITIONS
WHEN THE PARTIES HAVE THE
KNOWLEDGE THAT THE OBLIGATION
CANNOT BE DONE AT ONE TIME
WHEN THERE IS AN ABUSE OF RIGHT
OR IF GOOD FAITH REQUIRES
ACCEPTANCE
M O N E Y
ART.
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1249
STIPULAT D E L IV E R S U CH
POSSIB L E T O EN CY
N IN T H E C U R R
RE N C Y , TH E H E
CUR G A L T E N D E R IN T
WHICH IS L E
PH IL I P P IN ES

ANSWER:
WHAT IS “LEGAL TENDER?”:
YES, ASWHICH
THE CURRENCY STATED IN ARTICLE
A DEBTOR 1248,
CAN THE
LEGALLY
CREDITORTO
COMPEL A CREDITOR CAN DEMAND
ACCEPT PAYMENT OF
IN PAYMENT
FROM THE DEBTOR WITHOUT
A DEBT IN MONEY WHEN TENDERED BY THE
WAITING
DEBTOR FORRIGHT
IN THE THE LIQUIDATION
AMOUNT. OF
THE LATTER

OBLIGATION.

ANSWER:CURRENCY IN THE PHILIPPINES?

WHAT ARE LEGAL TENDER
YES, AS STATED IN ARTICLE 1248, THE
ALL COINS AND NOTES
CREDITOR CAN ISSUED BY THE
DEMAND PAYMENT
BANGKO SENTRAL
FROM THENGDEBTOR
PILIPINAS
WITHOUTARE
CONSIDERED WAITING
LEGAL FOR THE LIQUIDATION
TENDER FOR OF
ALL
THE LATTER OBLIGATION.
DEBTS, BOTH PUBLIC OR
PRIVATE.

EXAMPLE:
CAN RUKAWA ACCEPT

MIYAGI IS OBLIGATED TO PAY
MIYAGIS’ PAYMENT? RUKAWA $10,000. HOWEVER,
MIYAGI RESIDES IN THE
PHILIPPINES AND CANNOT PAY IN
US DOLLARS, BUT HE SAID THAT
HE CAN PAY P599,770 TO RUKAWA,

ANSWER:
YES, IT WAS STATED THAT IF CANNOT
DELIVER SUCH CURRENCY STATED IN THE
OBLIGATION, YOU CAN PAY IN THE
CURRENCY WHICH IS LEGAL TENDER IN THE
PHILIPPINES.

THE DELIVERY OF PROMISSORY NOTES

PAYABLE TO ORDER, OR BILLS OF
EXCHANGE OR OTHER MERCANTILE
DOCUMENTS SHALL PRODUCE THE EFFECT
NOTE! OF PAYMENT ONLY WHEN THEY HAVE BEEN
CASHED, OR WHEN THROUGH THE FAULT
OF THE CREDITOR THEY HAVE BEEN
IMPAIRED.
RIGHT OF CREDITOR TO REFUSE PAYMENT - IF THE

CREDITOR RECEIVES PROMISSORY NOTES, CHECKS, BILLS
OF EXCHANGE, AND OTHER COMMERCIAL DOCUMENTS AS
PAYMENT, HE CAN LEGALLY REFUSE THESE TYPES OF
PAYMENTS BECAUSE THESE ARE NOT LEGAL TENDER AND, THINGS TO REMEMBER
THEREFORE, THE CREDITOR CANNOT BE COMPELLED TO WHEN PAYMENT IS BY
MEANS OF INSTRUMENTS
ACCEPT THEM. OF CREDITS.

PAYMENT FOR THE PURPOSE OF REDEMPTION -

REDEMPTION OF SOLD PROPERTY UNDER EXECUTIONS IS
NOT INVALID DUE TO THE REASON THAT PAYMENT TO THE
SHERIFF FOR THE PURPOSE OF REDEMPTION IS EFFECTED
BY MEANS OF A CHECK FOR THE AMOUNT DUE.
EFFECT ON OBLIGATION - PAYMENT BY MEANS OF
MERCANTILE DOCUMENTS DOES NOT EXTINGUISH THE
OBLIGATION.
ART. IN CASE AN EXTRAORDINARY INFLATION OR

DEFLATION OF THE CURRENCY STIPULATED
1250 SHOULD SUPERVENE, THE VALUE OF THE

CURRENCY AT THE TIME OF THE
ESTABLISHMENT OF THE OBLIGATION
SHALL BE THE BASIS OF PAYMENT, UNLESS
THERE IS AN AGREEMENT TO THE
CONTRARY.

INFLATION - SUDDEN INCREASE IN THE

VOLUME OF MONEY AND CREDIT RELATIVE
TO AVAILABLE GOODS, RESULTING IN A
RISE IN GENERAL PRICES.
EXAMPLE:
ON JAN 1, 2023, HAZEGAWA PURCHASED A GAS
TANK WORTH P800, THEN HE PURCHASED THE
SAME GAS TANK ON FEB 1, 2023 AT A COST OF
P840. THIS MEANS THAT THERE WAS A 5%
INCREASE ON THE PRICE OF GAS TANK’S FROM
JAN 1, 2023 TO FEB 1, 2023.

DEFLATION - REDUCTION IN VOLUME AND

CIRCULATION OF AVAILABLE MONEY OR
CREDIT, RESULTING IN A DECLINE IN
GENERAL PRICES.
EXAMPLE:
ON APR 1, 2023, MITSUI PURCHASED SHOES FOR
AROUND P8000 A PAIR, THEN HE PURCHASED
ANOTHER PAIR OF SHOES ON AUG 1, 2023, AT A
COST OF P7,520. THIS MEANS THAT THERE WAS A
6% DECREASE/DEFLATION ON THE PRICES OF
SHOES FROM APR 1, 2023 TO AUG 1, 2023

THERE IS AN OFFICIAL DECLARATION OF

REQUISITES FOR EXTRAORDINARY INFLATION OR
APPLICATION OF DEFLATION FROM THE BSP (BANKO
ARTICLE 1250 SENTRAL NG PILIPINAS).
THE OBLIGATION IS CONTRACTUAL IN
NATURE
THE PARTIES AGREE TO CONSIDER THE
EFFECTS OF EXTRAORDINARY INFLATION
OR DEFLATION
BASIS OF PAYMENT INCASE OF EXTRAORDINARY

INFLATION OR DEFLATION

THE PURCHASING VALUE OF THE

CURRENCY AT THE TIME OF
ESTABLISHMENT OF THE OBLIGATION IS
THE BASIS FOR PAYMENT, INCASE OF
EXTRAORDINARY INCREASE OR DECREASE
IN THE BUYING POWER OF THE CURRENCY.
THIS IS SUBJECTED TO THE AGREEMENT OF
THE PARTIES.
EXAMPLE:
EREN BORROWED P10,000 FROM MIKASA

PAYABLE IN 5 YEARS. ON MATURITY OF THE
OBLIGATION, THE VALUE OF P10,000, DUE
TO EXTRAORDINARY INFLATION,
INCREASED TO P15,000. THE BASIS OF
ERENS’ PAYMENT IS THE CURRENT VALUE
OF THE CURRENCY TODAY, RATHER THAN 5
YEARS AGO, UNLESS THERE WAS AN
AGREEMENT ON THE CONTRARY.
EXAMPLE:
EREN WILL PAY MIKASA P10,000
REGARDLESS OF ANY EXTRAORDINARY
INCREASE OR DECREASE TO THE VALUE OF
THE CURRENCY.

DEVALUATION - OFFICIAL REDUCTION OF

THE VALUE OF ONE CURRENCY FROM AN
OFFICIALLY FIXED LEVEL IMPOSED BY THE
MONETARY AUTHORITIES

DEPRECIATION - THE DOWNWARD CHANGE

IN THE VALUE OF ONE CURRENCY
COMPARED TO OTHER COUNTRIES
CURRENCIES

EXAMPLE:
THE VALUE OF ONE US DOLLAR TO

PHILIPPINE PESO WAS P54.58 LAST APRIL 7,
2023. NOW THE VALUE OF ONE US DOLLAR
TO PHILIPPINE PESO IS P56.06 APR 17, 2023.
THAT IS A TOTAL OF 2.698% INCREASE IN 10
DAYS.
ART.
1251
PAYMENT SHALL BE MADE
IN THE PLACE DESIGNATED
IN THE OBLIGATION

IF THERE IS A PLACE STIPULATED, PAYMENT SHALL

BE MADE IN THE DESIGNATED PLACE
IF THERE IS NO STIPULATION AND THE THING TO
BE DELIVERED IS SPECIFIC, THE PAYMENT SHALL BE
PLACES WHERE MADE AT THE PLACE WHERE THE THING WAS, AT
OBLIGATION THE COMPLETION OF THE CONTRACT
SHALL BE PAID

IF THERE IS NO STIPULATION AND THE THING TO
BE DELIVERED IS GENERIC, THE PLACE OF PAYMENT
SHALL BE THE DOMICILE OF THE DEBTOR. IN THIS
CASE, THE CREDITOR BEARS THE EXPENSES OF
GOING TO THE DEBTOR’S PLACE TO ACCEPT
PAYMENT.
DOMICILE - THE PLACE OF A PERSON’S

HABITUAL RESIDENCE.
ART. HE WHO HAS VARIOUS DEBTS OF THE

SAME KIND IN FAVOR OF ONE OR THE
SAME CREDITOR MAY DECLARE AT THE
1252 TIME OF PAYMENT, TO WHICH OF THEM

MUST BE APPLIED. UNLESS THE
PARTIES SO STIPULATE, THE
APPLICATION SHALL NOT BE MADE AS
TO DEBTS THAT ARE NOT YET DUE.

APPLICATION OF PAYMENTS
WHAT DOES
IT MEAN?
APPLICATION OF PAYMENTS
THE DESIGNATION OF THE DEBT THAT

SHOULD BE APPLIED THE PAYMENT MADE OHHHH
BY A DEBTOR WHO HAS VARIOUS DEBTS
OF THE SAME KIND IN FAVOR OF ONE AND
OR SAME CREDITOR.

THERE MUST BE ONE DEBTOR AND ONE

CREDITOR
THERE MUST BE TWO OR MORE DEBTS
THE DEBTS MUST BE OF THE SAME KIND
THE DEBTS TO WHICH PAYMENT MADE
REQUISITES OF BY THE DEBTOR HAS BEEN APPLIED
APPLICATION OF MUST BE DUE
PAYMENTS

THE PAYMENT MADE MUST NOT BE
SUFFICIENT TO COVER ALL THE DEBTS.
DEBTOR HAS FIRST PRIORITY

THE RIGHT TO MAKE THE APPLICATION
IF THE DEBTOR DOES NOT APPLY FOR PAYMENT, THE
RULES IN CREDITOR HAS THE SUBSIDIARY RIGHT TO MAKE THE
DESIGNATION BY SPECIFYING IN THE RECEIPT WHICH DEBT IS
APPLYING THE BEING PAID
APPLICATION OF IF THE CREDITOR DOES NOT MAKE APPLICATIONS, OR IF THE
PAYMENTS APPLICATION IS INVALID, THE DEBT SHALL BE DEEMED TO

HAVE BEEN SATISFIED
IF THE DEBTS DUE ARE IN THE SAME CLASS, THE PAYMENT
SHALL BE APPLIED TO ALL PROPORTIONATELY
IF NEITHER THE CREDITOR NOR THE DEBTOR HAS EXERCISED
OPTIONS, THE COURT WILL APPLY FOR THE PAYMENT
ACCORDING TO THE JUSTICE AND EQUITY OF THE CASE,
CONSIDERING ALL THE CIRCUMSTANCES.
ART. IF THE DEBT PRODUCES

INTEREST, PAYMENT
1253 SHALL NOT BE DEEMED
MADE UNTIL THE
INTEREST HAS ALSO BEEN
PAID.
EXCEPTIONS TO THE PROVISIONS

IF A CONTRACT HAS INSTALLMENT
PAYMENTS WITH INTEREST, THE CREDITOR
HAS THE DUTY TO INFORM THE DEBTOR
THE AMOUNT OF INTEREST THAT IS DUE,
AND IF HE WILL APPLY THE INSTALLMENT
PAYMENTS TO COVER THE INTEREST.
IF A PARTY THAT IS UNQUALIFIED ACCEPTS
THE SETTLEMENT OF HIS CLAIMS OR
DAMAGES WITHOUT RESERVATION TO
INTERESTS, THAT PARTY SHALL BE
ESTOPPED FROM RECEIVING INTEREST.
ART. WHEN PAYMENT CANNOT BE

DONE IN ACCORDANCE WITH
1254 THE PRECEDING RULES, THE
DEBT WHICH IS MOST
ONEROUS TO THE DEBTOR,
SHALL BE DEEMED TO HAVE
BEEN SATISFIED.
WHAT DEBTS ARE

MORE ONEROUS
THAN OTHERS?
ONEROUS = BURDENSOME
IF THE DEBT IS INTEREST-BEARING, IT IS MORE ONEROUS THAN A

NON-INTEREST-BEARING DEBT, EVEN IF THE DEBT IS OLDER.
A SOLE DEBTOR IS MORE ONEROUS THAN A SOLIDARY DEBTOR
ALL THINGS BEING EQUAL, OLDER DEBTS ARE MORE ONEROUS
DEBTS SECURED BY A MORTGAGE OR PLEDGE ARE MORE
ONEROUS THAN UNSECURED DEBTS.
UNPAID RENTALS FROM A PURCHASER OF PROPERTY OCCUPIED
BY HIM ARE MORE ONEROUS THAN THE BALANCE PRICE OF THE
WHY SO PROPERTY.
MANY WHEN THERE ARE TWO INTEREST-BEARING DEBTS, THE ONE

WITH A HIGHER RATE IS MORE ONEROUS
A DEBT WITH A PENALTY CLAUSE IS MORE ONEROUS THAN ONE
WITHOUT A PENALTY CLAUSE
NOTE: WHEN DEBTS ARE

SUBJECT TO DIFFERENT
BURDENS, PAYMENT SHALL BE
APPLIED TO ALL OF THEM
PROPORTIONATELY.

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REFERENCES
https://www.academia.edu/43396598/Oblig
ation_and_Contracts_with_commentary_
by_De_Leon

https://jurisdoctor1a.wordpress.com/201
9/02/21/section-1-pure-and-conditional-
obligations/

https://www.pinayjurist.com/wp-
content/uploads/2020/07/ObliCon.pdf

Payment or Performance, Application of Payments Art. 1232-1254

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Payment or Performance, Application of Payments Art. 1232-1254

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ART. Payment means not only the

In ordinary parlance, payment

Mary owes Mariel P100, but

ART. A debt shall not be

WHEN DEBT IS CONSIDERED PAID

Integrity of prestation - This

A grab driver is obliged to deliver 1

WHEN DEBT IS CONSIDERED PAID

Identity of the prestation - This

ART. If the obligation has been

REQUISITES OF ARTICLE 1234 EXAMPLE

Frodo has been hired to build a house

ART. When the obligee accepts the

REQUISITES OF ARTICLE 1235 EXAMPLE

John owes Mary P50,000 but he can

ART. The creditor is not bound to

1236 who has no interest in the

ART. Whoever pays for another may

1236 the knowledge or against the will of

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PERSONS FROM WHOM THE

CREDITOR MAY REFUSE PAYMENT BY

He dislikes or distrust the third

Under the old Civil Code, the creditor cannot refuse

EFFECT OF PAYMENT BY A THIRD

Situation: Dane owes Jacques an amount of

IF MADE WITHOUT THE KNOWLEDGE IF MADE WITH THE KNOWLEDGE OF THE

ART. Whoever pays on behalf of the

1237 against the will of the latter, cannot

Assume that owes a debt of P50,000

ART. Payment made by a third person

1238 to be a donation, which requires the

Czarina owes P10,000 to Lending

ART. payment made by one who

1239 and capacity to alienate it

Free disposal of the thing due -

Capacity to alienate - means

Helena has a debt to pay Kaitlyn an

ART. Payment shall be made to the

1240 person in whose favor the

Helena owes Michael P1,000. Helena

No. In this situation the payment shall be

Payment shall be made to:

1. Creditor or obligee (person

ART. Payment to a person who is

1241 shall be valid if he has kept the thing

Ruth pays P1,000 to Lee who is 17, as

As a general rule, payment to

On the other hand, if Lee has spent

exception of the general rule,

Such benefit to the creditor need not

ART. be proved in the following cases:

(1) If after the payment, the third

1241 person acquires the creditor’s rights;

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1242 Payment made in good faith to any

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