Reviewer for OBLICON FINALS Atty.

Joselito Mendoza
Chapter 4 EXTINGUISHMENT OF OBLIGATIONS

Integrity of Prestation a debt to deliver a thing is understood to have been paid unless it has been completely delivered as the case may be partial performance will not produce extinguishment. Identity of Prestation the prestation which is due must be delivered or must be performed

1231. Obligations are extinguished: 1. By payment or by performance; 2. By the loss of the thing due; 3. By the condonation or remission of the debt; 4. By the confusion or merger of the rights of creditor or debtor 5. By compensation 6. By novation. Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this code. Death of a party incase the obligation is a personal one Mutual desistance or withdrawal Arrival of Resolutory period Compromise Impossibility of fulfillment Happening of a fortuitous event

1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damage suffered by the obligee. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. REQUISITES: 1. The obligee knows the irregularity or incompleteness. 2. He accepts the performance without expressing any protest. 1236. The creditor is bound to accept payment or performance from the following: The debtor Any person who has interest in the obligation Third person who has no interest in the obligation

If made without the knowledge or against the will of the debtor The payer can recover from the debtor only insofar as the payment has been beneficial to the latter. In other words, the recovery is only up to the extent or amount of the debt at the time of payment. If made with the knowledge of the debtor The payer shall have the rights of reimbursement and subrogation, that is, to recover what he has paid and to acquire all the rights of the creditor 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter cannot compel the creditor to subrogate him in his rights, such as those arising from mortgage, guaranty, or penalty. REIMBURSEMENT right to be refunded to the extent provided in the above provision. SUBROGATION The payor acquires not only the right to be reimbursed for he has paid but also all other rights which the creditor could have been exercised pertaining

1232. SECTION 1 PAYMENT OR BY PERFORMANCE a. In ordinary parlance payment refers only to the delivery of money b. legally speaking, payment shall not only be understood as delivery of money but also the doing of an act, the giving of a thing and not doing of an act 1233. DEBT may refer to an obligation to deliver money, to deliver a thing, to do an act or not to do an act.

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to the credit either against the debtor or against third persons, be they guarantors or possessor of mortgages. 1238. Embodies the idea that no one should be compelled to accept the generosity of another. 1239. Free disposal of the due thing: that the thing to be delivered is not subject to any claim or lien or encumbrance. Capacity to alienate: means that the person is not incapacitated to enter into contracts. 1240. Payment shall be made to Creditor Successor in interest Any authorized person to receive it 1245. Special Forms of payment Dation in payment Application of Payments Payment by cession Tender of payment and consignation

the place where the thing was, at the perfection of contract If there is no stipulation and the thing to be delivered is generic, the place of payment shall be in debtors place. Venue: Place where a court suit or action must be filed or instituted. Domicile: is the habitual residence, the intention of returning home. Residence: Temporary stay, it is only an element of domicile

APPLICATION OF PAYMENTS: is the designation of the debt to which should be applied the payment made by a debtor who has various debts of the same kind in favor of one and the same creditor. REQUISITES: There must be one debtor and one creditor There must be two or more debts

DATION IN PAYMENT Conveyance of ownership of a thing as an accepted equivalent of performance. 1247. Judicial Costs: are the statutory amounts allowed to a party to an action fro his expenses incurred in the action. Legal Tender: is the currency which a debtor can legally compel a creditor to accept in payment of a debt in money when tendered by the debtor in the right amount. Inflation: sharp sudden increase of money or credit or both without corresponding increase in business transactions. Deflation: reduction in volume and circulation of the available money or credit. 1251. It gives the rules regarding the place for the payment of an obligation without prejudice to venue under the rules of court. Stipulated designated place If there is a stipulation and the thing to be delivered is specific, payment shall be made at

Debts must be of the same kind The debts to which the payment made by the debtor has been applied must be due The payment made must not be sufficient to cover all the debts The application of payments to debts which are not yet due cannot be made unless: There is a stipulation that the debtor may apply so. It made by debtor or creditor, as the case may be, for whose benefit the period has been constituted. When a debt is more onerous than another 1. Interest bearing is more onerous than non-onerous bearing 2. Sole debtor is more onerous than solidary debtor 3. Secured debts or by pledge is onerous than unsecured debts

1249.

1250.

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4. Two bearing interest debts, the one with higher rate is more onerous. 5. Obligation with penalty clause is more burdensome than one without penalty. PAYMENT BY CESSION: is another form of special payment. It is the assignment or abandonment of all the properties of the debtor for the benefit of his creditors. REQUISITES: There must be two or more debts There must be partial insolvent Assignment must involve all the properties of the debtor Cession must be accepted

5. Subsequent notice of consignation made to the interested parties. REQUISITES OF TENDER OF PAYMENT 1. Must comply with the rules of payment 2. Unconditional and for the whole amount 3. It must be actually made. SECTION 2 LOSS OF THE THING DUE Legal loss, Physical loss, and Civil Loss. A thing considered lost when it perishes, goes out of commerce, or disappears in such a way that its existence cannot be recovered. Loss of a thing will extinguish an obligation to give: The obligation is to deliver a specific thing

DATION 1 creditor No insolvency Do not involve all property

CESSION Several Creditors insolvent at the time of ass. involves all property

Loss occurs without debtors fault Debtor isnt guilty of delay Loss of a thing will not extinguish liability Law so provides Stipulation so provides Nature of obligation requires the presumption of risk Obligation to deliver a specific thing arises from a crime In an obligation to deliver a generic thing, the loss, deterioration, destruction of anything of the same king does not extinguish the obligation. Principle of GENUS NUNQUAM PERIT. Impossibility extinguishes an obligation Physical impossibility: purely personal obligation, it takes place when obligor dies or becomes physically incapacitated. Legal impossibility: Although it is physically possible but there is an express provision n law, it shall be deemed extinguish. Difficulty of performance when the performance becomes as difficult as to be manifestly beyond the contemplation of both parties, the court is authorized to release the obligor in whole or in part.

Creditor becomes the owner right to sell the thing Act of novation not an act of novation

BOTH SUBSTITUTIONS OF PAYMENT TENDER OF PAYMENT: act on the part of the part of the debtor of offering to the creditor the thing or amount due CONSIGNATION: act of depositing the thing or amount due with the proper court when the creditor does not desire or cannot receive it after complying with the formalities of law. REQUISITES OF CONSIGNATION: 1. Existence of valid debt which is due 2. tender of payment by the debtor and refusal without justifiable reason by the creditor to accept it. 3. Previous notice of consignation to persons interested in the obligation 4. Consignation of the thing or sum due

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The Creditor is given the right to proceed against the persons responsible for lost. CONDONATION OR REMISSION It is a gratuitous act of abandonment by the creditor of all his rights against the debtor. 1. It must be gratuitous 2. Accepted by the obligor 3. Party must have the capacity 4. Must not be inofficiously 5. Expressly made, must comply with the forms of donation Kinds of Remission AS TO EXTENT: Total Partial AS TO FORM: Express Implied AS TO EFFECTIVITY: Mortis Causa: becomes effective upon the death of the donor. will take effect during the lifetime of the donor.

1273. The renunciation of the principal debt shall extinguish the accessory obligations, but the waiver of the latter shall leave the former in force.

CONFUSION OR MERGER is the meeting in one person the qualities of debtor and creditor with respect to the same obligation. BASIS: Because if a debtor is his own creditor, enforcement of the obligation becomes absurd since a person cannot demand payment from himself. And the purposes may have been created are deemed realized. REQUISITES: 1. Must be complete 2. Must take place between principal debt and creditor.

COMPENSATION Is the extinguishment to the concurrent amount of debts of two or more persons who in their right are debtors and creditors of each other. REQUISITES: 1. Parties are principal debtors and creditors of each other 2. Both debts consist in a sum of money or of consumable things of the same kind and quality. 3. Two debts must be due and demandable

Intervivos:

LEGITIME: Testators property reserved for his heirs, and therefore it is not subject for disposal for it is reserved for his compulsory heirs.

Presumption of Implied Remission: If the debt is not yet paid, the creditor would need the document to enforce payment. Incase he voluntary delivers it to the debtor, the only logical inference is that he is renouncing his rights. The renunciation of the action which the creditor had against the debtor may be nullified or invalidated by showing that the waiver is inofficous. The heirs may prove that the delivery of the document was really made in virtue of payment.

4. Two debts must be liquidated 5. These should be no retention or controversy commenced by a third person Instances when legal compensation is not allowed by law: 1. One of the debts arises from commodatum 2. One of the debts arises from depositum 3. Debts Arises from a claim for support due by gratuitous title

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4. Debts consists in civil liability arising from penal offenses CONFUSION Only one person who is a creditor and debtor himself One obligation Impossibility of payment COMPENSATION Two persons involved, each of which is a creditor and debtor of each other Two obligations Indirect payment

TOTAL /EXTINCTIVE : Old was changed completely PARTIAL/ MODIFICATORY: old was modified REAL: Change of object PERSONAL: Change of person, substitutes the debtor Substitution: When the person of the debtor is substituted Expromission: when a third person on his own initiative and without the knowledge or against the will of the original debtor assumes the latters obligation with the consent of the creditor Delegacion: When creditor accepts third person to take place of the debtor at the instance of the latter. Subrogation: substitution of one person in the place of the creditor with reference to a lawful claim or right, giving the former all the rights of the latter includes the right to employ all remedies to enforce payment. Legal: express stipulation of law Conventional: Stipulation of parties

NOVATION Is the total or partial extinction of an obligation through the creation of a new one which substitutes it. 1291. Obligations may be modified by: 1. changing their object or principal conditions 2. substituting the person of the debtor 3. subrogating a third person in the rights of the creditor

DUAL FUNCTION: novation is a contract containing two stipulations 1. To extinguish or modify an existing obligation 2. And the other is to substitute it.

MIXED = REAL + PERSONAL General Rule: The old debtor is not liable to the creditor incase of the insolvency of the new debtor 1. Existing and known to public 2. Existing and known to debtor.

ESSENTIALS OF NOVATION 1. Previous valid obligation 2. Capacity and intention to modify and extinguish 3. Modification or extinguishment of an obligation 4. New valid obligation

KINDS OF NOVATION: LEGAL CONVENTIONAL EXPRESS IMPLIED

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