EXTINGUISHED OBLIGATION
or destroyed without the fault of the debtor, the
1. Payment or Performance:
- Definition: The most common way for an
obligation to be extinguished is through the actual
fulfillment of the obligation, such as the payment
of money or the performance of a specific act as
required by the contract.
- Example: An individual borrows money from a
bank and then repays the loan according to the
terms of the agreement. Once the full amount is
paid, the obligation is extinguished.
2. Novation
- Definition: This occurs when the original
obligation is extinguished by the substitution or
replacement of a new obligation between the
same parties. Essentially, a new contract is formed
that replaces the old one.
- Example: Company A has a contract with
Company B to provide a certain service. Company
A and Company B agree to replace the original
contract with a new one that involves different
terms and conditions, effectively extinguishing the
original obligation.
3. Compensation
- Definition: Obligations can be extinguished
through compensation, where two persons in
their own right are creditors and debtors of each
other, the two obligations are set off against each
other to the concurrent extent, even if the debts
are not of the same kind or nature.
- Example: Person X owes $1,000 to Person Y,
and Person Y owes $800 to Person X. They agree
to set off their mutual debts, and Person X pays
the remaining $200 to Person Y. The obligations
are extinguished through compensation.
4. Confusion or Merger
- Definition: When the qualities of creditor and
debtor are united in the same person, the
obligation is extinguished. This can happen, for
example, when a debtor inherits the creditor's
rights.
- Example: A debtor inherits the rights of the
creditor. For example, if a person owes a debt to
their own company and then inherits the
company, the obligation is extinguished due to
the merger of the qualities of creditor and debtor
in the same person.
5. Remission or Waiver
- Definition: An obligation can be extinguished by
the creditor's acceptance of a lesser performance
than that which was originally promised.
- Example: A landlord waives a portion of the
rent owed by a tenant due to financial hardship.
The tenant is only required to pay the reduced
amount, and the waived portion of the rent is
extinguished.
6. Loss of the Thing Due
- Definition: If the object of the obligation is lost
obligation is extinguished.
- Example: A person is obligated to deliver a
specific piece of artwork as part of a contract, but
the artwork is destroyed in a fire without the fault
of the person. The obligation to deliver the
artwork is extinguished due to the loss of the
object.
7. Annulment
- Definition: Obligations can be extinguished
through annulment, such as when a contract is
declared void or voidable.
- Example: A contract is declared void due to a
legal defect, such as a contract entered into with a
minor. Once the contract is annulled, the
obligations under it are extinguished.
CONTRACTS
1. Void Contracts
- Definition: These contracts are considered
invalid from the beginning, as if they never
existed. This could be due to the subject matter
being illegal, the contract being made with a
person lacking legal capacity, or the contract
being against public policy.
- Example: A contract to commit a crime or a
contract with a person who lacks legal capacity,
such as a minor, would be considered void.
2. Voidable Contracts
- Definition: These contracts are initially valid
but can be voided at the option of one of the
parties. This could be due to factors such as
misrepresentation, undue influence, duress, or
lack of capacity.
- Example: A contract entered into under duress
or by a person lacking mental capacity may be
voidable at the option of the affected party.
3. Unenforceable Contracts
- Definition: These contracts may have been
validly formed, but due to some legal principle,
they cannot be enforced by a court. For example,
a contract that is not in writing as required by law
may be unenforceable.
- Example: A verbal agreement to sell land,
which is required to be in writing under the
statute of frauds, would be unenforceable.
4. Rescissible Contracts
- Definition: A rescissible contract is one where
there is a defect in the consent of the parties,
making it susceptible to being rescinded or set
aside.
- Example: A contract entered into based on
fraudulent misrepresentations that induce one
party to agree to terms they would not have
otherwise accepted could be rescissible.