Loss of the thing pertains to objects that do not exist anymore

It is understood that a thing is lost when it:

1. Perishes (physical loss);

2. Goes out of commerce of man (legal loss); or
3. Disappears in such a way that its existence is unknown or cannot be
recovered (civil loss).
 Specific Generic
or or
Determinate Indeterminate
genus never
perishes
Before perfection Creditor bears all of the risks

At perfection Contract is without effect

After perfection, before delivery Art. 1480. Any injury to or benefit

from the thing sold, after the
contract has been perfected, from
the moment of the perfection of the
contract to the time of delivery, shall
be governed by Articles 1163 to
1165, and 1262.
“Every person obliged to give something is also obliged to take care
of it with the proper diligence of a good father of a family, unless the
law or the stipulation of the parties requires another standard of care.
(1094a)”

-Art. 1263-
 “The creditor has a right to the fruits of the thing from the time the
obligation to deliver it arises. However, he shall acquire no real right
over it until the same has been delivered to him. (1095)”

-Art. 1164-
“When what is to be delivered is a determinate thing, the creditor, in
addition to the right granted him by Article 1170, may compel the
debtor to make the delivery.”

-Art. 1165-
 “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 it has incurred delay.”

-Art. 1262-
 • Thing to be delivered is determinate
• Debtor is not at fault
• Thing is lost before debtor has incurred delay
 Obligation Obligation
extinguished NOT
extinguished
Obligation extinguished Obligation NOT extinguished
1. The thing to be delivered is 1. The thing to be delivered
specific or determinate, is generic or indeterminate
debtor not in fault or delay
Illustration (1)

Facts: S promised to deliver 100 cavans of rice to B.

First issue: The 100 cavans of rice which S intended to deliver were lost in a
flood. Should the obligation be extinguished?

Second issue: Suppose the obligation of S is to deliver 100 cavans of rice from
his harvest and such harvest is completely lost or destroyed, is
the obligation extinguished?
Cases when the loss of the specific thing even in the absence of fault
and delay will not exempt debtor from liability:

1. When the law so provides;

2. When the stipulation so provides;
3. When the nature of the obligation requires the assumption of risk;
and
4. When the debt arises from criminal offense.

- Article 1262 par. 2-

 “When the debt of a thing certain and determinate proceeds from a
criminal offense, the debtor shall not be exempted from the payment
of its price, whatever may be the cause for the loss, unless the thing
having been offered by him to the person who should receive it, the
latter refused without justification to accept it.”

-Article 1268-
Illustration (2)

Facts: D stole the jeep of C. Hence, D has the obligation to return the
jeep to C.

First issue: The jeep was lost and destroyed due to flood. What is its effect on
the obligation?

Second issue: What if C refuses to accept the jeep?

Obligation extinguished
1. The thing to be delivered is
specific or determinate,
debtor not in fault or delay
Obligation NOT extinguished
1. The thing to be delivered
is generic or indeterminate
2. Obligation arises from a
criminal offense
“The courts shall determine whether, under the circumstances, the
partial loss of the object of the obligation is so important as to
extinguish the obligation.”

-Article 1264-
Obligation extinguished
1. The thing to be delivered is
specific or determinate,
debtor not in fault or delay
2. Through court’s discretion:
partial loss of thing
Obligation NOT extinguished
1. The thing to be delivered
is generic or indeterminate
2. Obligation arises from a
criminal offense
Illustration (3)

Facts: S obliged himself to deliver to B a specific race horse.

First issue: The horse met an accident as a result of which it suffered a

broken leg. The injury is permanent. Should it extinguish the
obligation?

Second issue: Suppose the horse was only to be slaughtered by B, should it

extinguish the obligation?
 Presumption: Loss due to debtor’s fault

Exception: There is proof to the contrary

Loss is due to natural calamities

-Article 1265-
Obligation extinguished
1. The thing to be delivered is
specific or determinate,
debtor not in fault or delay
2. Through court’s discretion:
partial loss of thing
Obligation NOT extinguished
1. The thing to be delivered
is generic or indeterminate
2. Obligation arises from a
criminal offense
3. Loss is due to debtor’s fault
Illustration (4)

Facts: B borrowed the car of L.

First issue: On due date, B told L that the car was stolen and that he was not
at fault. Is it enough as to extinguish his obligation to L?

Second issue: Suppose the house of B was destroyed by fire and it was
accidental that the car was in the house at the time it occurred.
Is B still liable?
“Debtor who is not at fault may still be liable in case he is guilty of
delay or he has promised to deliver the same thing to two or more
persons who do not have the same interest.”

-Article 1165 par. 3-

Obligation extinguished
1. The thing to be delivered is
specific or determinate,
debtor not in fault or delay
2. Through court’s discretion:
partial loss of thing
Obligation NOT extinguished
1. The thing to be delivered
is generic or indeterminate
2. Obligation arises from a
criminal offense
3. Loss is due to debtor’s fault
4. Debtor incurs in delay
Illustration (5)

Facts: B borrowed the car of L.

First issue: On due date, B told L that the car was stolen and that he was not
at fault. Is it enough as to extinguish his obligation to L?

Second issue: Suppose the house of B was destroyed by fire and it was
accidental that the car was in the house at the time it occurred.
Is B still liable?

Third issue: What if only after the due date had B told L that the car was
caught by fire? Should it extinguish the obligation?
 “The debtor in obligations to do shall also be released when the
prestation becomes legally or physically impossible without the fault
of the obligor.”

-Article 1266-
 • Obligation becomes legally or physically impossible
• Impossibility not through the fault of the debtor
• Impossibility takes place after the constitution of the obligation
 Natural impossibility and impossibility in fact

• Natural impossibility consists in the nature of the thing to be done

and not in the inability of the party to do so
• Impossibility in fact is only improbable or out of the power of the
obligor
Obligation extinguished
1. The thing to be delivered is
specific or determinate,
debtor not in fault or delay
2. Through court’s discretion:
partial loss of thing
3. Service performance is
rendered impossible
Obligation NOT extinguished
1. The thing to be delivered
is generic or indeterminate
2. Obligation arises from a
criminal offense
3. Loss is due to debtor’s fault
4. Debtor incurs in delay
5. Impossibility is due to
debtor’s fault
6. Impossibility only arises
from an impossibility in fact
Illustration (6)

Facts: S obliges himself to deliver certain goods to B.

First issue: The goods perished in a shipwreck.

Second issue: Suppose S is unable to deliver the goods promised and his
inability arises not from their destruction but from, say, his
inability to raise money to buy them due to sickness.
“When the service has become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor may also be released
therefrom, in whole or in part.

-Article 1267-
Obligation extinguished
1. The thing to be delivered is
specific or determinate,
debtor not in fault or delay
2. Through court’s discretion:
partial loss of thing
3. Service performance is
rendered impossible
4. Through court’s discretion:
service difficulty
Obligation NOT extinguished
1. The thing to be delivered
is generic or indeterminate
2. Obligation arises from a
criminal offense
3. Loss is due to debtor’s fault
4. Debtor incurs in delay
5. Impossibility is due to
debtor’s fault
6. Impossibility only arises
from an impossibility in fact
Illustration (7)

Facts: X agreed to construct a road near a mountain.

First issue: A very strong typhoon caused an avalanche making the

construction of the road dangerous to human lives.
Creditor is given the right to proceed against the third person
responsible for the loss.

• Rights of action of debtor transferred to creditor

• No need for assignment by debtor

-Article 1269-
Illustration (8)

Facts: S is obliged to deliver to B a specific horse.

First issue: The horse is lost through the fault of T.

Held: The obligation of S is extinguished and he is not liable to B. Such

being the case, S would not be interested in going after T. The law
however, protects B by giving him the right to bring an action
against T to recover the price of the horse with damages.
• Condonation or remission is the gratuitous abandonment by the
creditor of his right against the debtor.
• An act of liberality, and therefore requires an evidence in order
that it be proven
 As to its extent
• Complete
• Partial

As to its form
• Expressed
• Implied

As to its date of effectivity

• Inter vivos
• Mortis causa
 1. It must be gratuitous.
2. It must be accepted by the obligor.
3. The parties must have capacity.
4. It must not be inofficious.
5. If made expressly, it must comply with the forms of donation.

-Art. 1270-
“The provisions of Article 750 notwithstanding, no person may give
or receive, by way of donation, more than he may give or receive by
will.
The donation shall be inofficious in all that it may exceed this
limitation. (636)”

-Article 752-
prima facie
 Waiver proved to be invalid

• Debtor or his successors in interest may uphold the remission by

establishing that the delivery of the credit document was done as
evidence of payment of the debt.
 Extent of Remission

Joint obligation Solidary obligation

Pertains only to the Pertains to the total

share of the debtor who obligation
is in possession of the
private document
Presumption only applicable to private document.
Presumption: Voluntarily delivered by creditor
However, if it is known that indeed there is no payment
should there be a presumption of remission.
 Illustration

Suppose Christian borrowed Php100,000 from James evidenced by a

promissory note and is signed by Christian which he later on gave to
James.

What presumption arises if:

(a) The promissory note is voluntarily given by James to Christian?

(b)If it is known that Christian hasn’t paid James yet?
(c) Suppose it is not known how James came into possession of the
promissory note?
 “The renunciation of the principal debt shall extinguish the
accessory obligations; but the waiver of the latter shall leave the
former in force.”

-Article 1273-
accessory follows
principal
 “It is presumed that the accessory obligation of pledge has been
remitted when the thing pledged, after its delivery to the creditor, is
found in the possession of the debtor, or of a third person who owns
the thing.”

-Article 1274-
Confusion or merger is the meeting in one (1) person
of the qualities of creditor and debtor with respect to
the same obligation.
 Basis of Confusion

1. The law treats confusion or merger as a mode of extinguishing

obligations because if a debtor is his own creditor, enforcement of
the obligation becomes absurd since a person cannot claim
payment from himself.

2. Furthermore, when there is a confusion of rights, the purposes for

which the obligation may have been created are deemed realized.
1. It must take place between the principal debtor
and creditor; and
2. It must be complete and definite.
consolidation of
ownership
 Confusion in Joint Obligations

• Will extinguish only the share corresponding to the creditor

or debtor in whom the two characters concur
Confusion in Solidary Obligations

• Shall extinguish the entire obligation