Course Code: BAM 128

Module #12

Name: Class number:

Section: Schedule: Date:

Lesson Title: EXTINGUISHMENT OF OBLIGATION Part 3 Materials:

Payment or Performance Part C: Dation in Payment and Student Activity Sheet
Payment by Cession
Lesson Objectives: References: Law on
At the end of this module, I can: Obligations and Contract by
1. Define dation in payment and payment by cession. WIN LU BALLADA
2. State the effect of payment by cession.

Productivity Tip:

“We are what we repeatedly do; excellence, then, is not an act but a habit.” - Aristotle

A. LESSON PREVIEW/REVIEW

1) Introduction (2 mins)

This is your 3rd module for the second period. We will still be discussing about the special forms of
payment, but this time, we will focus on dation in payment and payment by cession.

These legal terms maybe new to you, but after our discussion, you will see that these terms are not that difficult to
understand at all.

2) Activity 1: What I Know Chart, part 1 (3 mins)

Try answering the questions below by writing your ideas under the first column What I Know.

What I Know Questions: What I Learned

1. Define dation in payment.

1
FLM
 Course Code: BAM 128
Module #12

Name: Class number:

Section: Schedule: Date:

2. Define payment in cession.

3. What are the requisites of payment

by cession?

B. MAIN LESSON I don’t have any cash! Good thing Martin said he will accept my cellphone as payment fo

1) Activity 2: Pre-Printed Content Notes (13 mins)

DATION IN PAYMENT (Dation en Pago):

Article 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.

Property is alienated to the creditor in satisfaction of a debt in money.

It is governed by the law on sales because dation in payment may be
considered as a sale in which the amount of the debt becomes the price
of the thing given.
It is a special form of payment because it is not the ordinary way of
extinguishing an obligation.

Example:
Brent owes Martin Php20,000.00. To fulfill the obligation, Martin with the consent of
Brent, delivers a cellphone.

2
FLM
 Course Code: BAM 128
Module #12

Name: Class number:

Section: Schedule: Date:

PAYMENT BY CESSION:

Article 1255. The debtor may cede or assign his property

to his creditors in payment of his debts. This cession,
unless there is stipulation to the contrary, shall only
release the debtor from responsibility for the net proceeds
of the thing assigned.

The agreements which, on the effect of the

I don’t have enough cash
cession, are made between the debtor and his to pay all of my debts.
creditors shall be governed by special laws. But I still have properties
and if you agree, I am
assigning them to you my
In other words, payment by dear creditors!
cession is the assignment or
abandonment of all the properties of
the debtor for the benefit of his
creditors in order that the latter may sell
the same and apply the proceeds thereof to the
satisfaction of their credits. (8 Manresa 321)

Requisites of Payment by Cession:

We agree to enter in payment by
cession! Take note, however, that
1. There must be two or more creditors if the proceeds from the sale of
your properties is not enough to
2. The debtor does not have enough funds to pay all of his debts cover all of your debts, you are
3. The assignment must involve all the properties of the debtor still liable for the balance!
4. The cession must be accepted by the creditors

Effect of Payment by Cession:

The assignment does not make the creditors the owners of the properties of the debtor.
The debtor is released from his obligations only up to the net proceeds of the sale of the property assigned.
The debtor is still liable if there is any balance.

Example:

Greg is indebted to Andy, Bryan and Charlie in the total amount of Php5 Million. His properties are not
sufficient to pay all his debts.
With the consent of his creditors, Greg may assign his properties to them to be sold, to satisfy their credits.
If the net proceeds of the sale amount only to Php3 Million, Greg is still liable for the balance of Php2 Million
unless there is a stipulation that the assignment shall be in full satisfaction of all of his debts.

3
FLM
 Course Code: BAM 128
Module #12

Name: Class number:

Section: Schedule: Date:

Dation in Payment vs Payment in Cession:

Dation in Payment Payment in Cession

As to Number of Creditors
As to Insolvency
As to Properties Involved
As to Ownership of the Thing Given
Usually only one creditor
Debtor does not need to be
insolvent
Does not involve all the property of
the debtor
The creditor becomes the owner of
the thing given
Several creditors
Debtor is insolvent at the time of
assignment
Extends to all the property of the
debtor
The creditors only acquired the right
to sell the property and apply
the proceeds to their credits
proportionately

2) Activity 3: Skill-building Activities (with answer key) (18 mins + 2 mins checking)

Exercise I

1. Give at least 3 illustrations of dation in payment.

2. Give at least 2 illustrations of cession in payment.

3. D is indebted to several creditors in the total amount of Php500,000. He is currently insolvent but has properties with
fair market value of Php250,000. If you are one of the creditors of D, what is the best way to collect from D? Explain.

4
FLM
 Course Code: BAM 128
Module #12

Name: Class number:

Section: Schedule: Date:

3) Activity 4: What I Know Chart, part 2 (2 mins)

It’s time to answer the questions in the What I know chart in Activity 1. Log in your answers in the table.

4) Activity 5: Check for Understanding (5 mins)

Exercise I. TRUE or FALSE

1. Payment by cession is governed by Law on Sales.

2. Dation in payment is also known as dacion en pago.
3. Dacion en pago is the conveyance of ownership of a thing as an accepted equivalent of
performance.
4. Payment by cession is a special form of payment that does not involve all the properties of the
debtor.
5. In payment by cession, the creditors acquire the right to sell to themselves the properties assigned
to them by the debtor.
6. In payment by cession, if the proceeds of the sale of the properties of the debtor is not enough
to cover the entire obligation, the debtor is not liable to the balance.
7. The debtor may effect payment by cession even without the consent of his creditors.
8. Dation in payment usually involves only one creditor.
9. In dation in payment, the debtor need not to be insolvent before it can ask to pay the creditor
a thing other than money.
10. In dation in payment, the creditor becomes the owner of the thing given by the debtor.

A.LESSON WRAP-UP

Activity 6: Thinking about Learning

Congratulations for finishing this module! Shade the number of the module that you finished

5
FLM
 Course Code: BAM 128
Module #12

Name: Class number:

Section: Schedule: Date:

Did you have challenges learning the concepts in this module? If none, which parts of the module helped you learn the
concepts?

Some question/s I want to ask my teacher about this module is/are:

Learning Scores Action Plan

Date
Target/Topic

What module# did you What contributed to the quality of your

What were your
What’s the do? What were the performance today? What will you do next
scores in the
date today? learning targets? session to maintain your performance or
activities?
What activities did you improve it?
do?

FAQs

When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and
circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor
deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into
consideration

6
FLM